Tuesday, January 17, 2012


Pretentious title notwithstanding, John Medaille has written a very nice article about David Graeber's new book Debt: the first 5000 years.

I loved this story he tells
On his 21st birthday, the nature writer Francis Thompson was presented by his father with a bill for all the expenses of his upbringing including the costs of his birth and delivery. Francis paid the bill, but he never spoke to his father again.
As Medaille writes
There is no doubt that the father was correct to point out to his son the obligation that he had, but in quantifying that obligation, he converted it into a debt, for that is the difference between an obligation and a debt: an obligation becomes a debt when you can put a number on it. “I owe you one” is an obligation; “I owe somebody $10″ is a debt. Obligations bind people together even after they have been “paid.” But debts bind us only for as long as the debt exists. The relationship dies on payment of the debt. We might say that obligations bind us together, while debts drive us apart. By quantifying the obligation, Thompson’s father offered him the opportunity to dissolve it, to discharge it, and in doing so to end their relationship; his son took the offer and was no longer his son.
The story he summarizes is truly extraordinary: from the gift economies of the ancient world through the Shekels of Mesopotamia, through Rome and Medieval England, to today's money.

The whole story of how England stopped using tally sticks was completely new to me.
Tally sticks circulated in England for 500 years. It is worth noting that when the Bank of England was founded, in 1694, one quarter of its capital was in the form of tally sticks. But the bankers wished to monopolize the creation of money, and immediately set out on a long campaign to get the tally sticks outlawed. And they got their wish when the Liberal party came to power in 1832. One of their first acts was to fulfill the agenda of the Bank of England. All of the tally sticks were gathered together and burned in a stove in the House of Lords. However, the fire got out of hand and burned down the Houses of Parliament.
Money involves debt. Debt indeed predates money, and it is obvious that some debts will never be paid. He ends his article with a plea for amnesty, what I gather would be something like the "jubilees" of the ancient Hebrews, but he doesn't explain how he would do this.

Medaille may not be aware that this is essentially what many economists have been arguing for. Inflation is exactly that: a way to reduce the real burden of debt, transferring wealth from the creditors to debtors.

It may seem like a fraud, a kind of theft, but if the debts were incurred with a certain expectation of inflation (which seems plausible), then slow growth and unexpectedly low inflation is only a windfall gain for creditors, and higher inflation merely claws some of those gains back.

To me, that is a secondary point. Graeber's book challenges many of the assumptions we carry around with us. A subject like anthropology provides a valuable service when it looks at how we live today, and says to us "it need not be like this, you know. Other societies, at other times and in other places, have done things differently. We can tell you how some of them worked."

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