Debt is not a good product

Douglas Rushkoff, the author of Life Inc., is a guest blogger. I just had a great hour-long phone conversation with an old friend, Will Dana (now editor of Rolling Stone), who has strongly encouraged me to come up with one-liners that tell the truth about the economic/banking fiasco - but that do it in almost zen-koan fashion. He thinks this might be the only way to penetrate ongoing confusion and resistance to moving beyond our falsely held assumptions about money and business. So, I figured I'd start with the generally unrecognized fact that finance is America's biggest industry - our biggest business sector. How does banking make its money? In short - over-simplified, yes, but ultimately true - interest. It sells debt. And, like I'm arguing in my book, this whole scheme was arranged by 14th Century monarchs as a way of making money by having money, rather than providing value. So "Debt is not a good product" helps encourage that line of thinking, sound-byte style. Another one - I came up with as a way of pitching this same concept to Rolling Stone itself, was to apply the same basic principle to their area of interest: music can make money, but money can't make music. Which is just another way of explaining that money itself cannot fuel an economy (no matter what Obama currently believes). Only activity and value creation can fuel an economy. Do people have other ideas for easy-to-grasp, almost bumper-sticker-length statements that can help instigate good conversations, or force the unpacking of larger concepts about the fictional economy? Ways of helping people see that money is not a part of nature, but an invention? So far, it's worked a lot better than trying to get people to consider, say, "the biases of centralized currency," or "what metrics such as the GNP leave out." We tend to do better with things like "cancer is good for the GNP."


  1. “Debt…” — A little “guns don’t kill people,” but nicely done.

    “Putting a cartoon character on the box doesn’t add value.”

    You might enjoy the work of James Richardson, author of the line, “All work is the avoidance of harder work.”

  2. I disagree to some extent. While debt cannot directly create products it can enable the creation of products. The number one source of small business failure is being under funded. Funding comes through the credit markets. Unfreezing the credit markets was key to avoiding a complete economic collapse.

    Consumer credit practices, I agree completely. Corporate, no.

  3. “It sells debt. ”

    It might make more sense if you stated that it “buys risk” because this is actually what the market is supposed to be doing.

  4. Thanks.
    Of course, there’s also the conversation to be had of whether such efforts over-simplify concepts rather than spreading them via little dense, almost Lakoffian shells.

  5. Is this something we want to be doing, turning complex and chaotic situations affecting our lives, into simplistic bumpersticker blurts?

    Right or wrong, you’re basically trying to jerk the chains of people who don’t understand what’s going on.

  6. The good ones don’t over-simplify — they are aphorisms, not jingles or doublespeak. And who remembers a bad aphorist?

  7. You can’t throw money at a problem and expect it to go away — unless your problem is debt, of course.

  8. Inasmuch as you pretty much always have to spend money to make money, credit is the only way for people who are not already rich to fund their own businesses and thus prove Marx wrong. Credit is also the lubricant that lets already established businesses deal with one another on a daily basis. So yes, debt is a good product, when used properly.

    Also, deliberately lowering the discourse the soundbites? Sure, that always gets good results. ::comically exaggerated eyeroll::

  9. Without debt, only people who already have money can start businesses and buy the things needed to produce “real” products. While the financial sector has gotten out of hand in terms of size over the past two decades, this is because the industry tried used exotic derivatives to make something out of nothing. The concept of debt, banking and national currency are still the best way man has found to generate prosperity, technological advancement and material comfort.

  10. The finance “industry” makes money off more than interest. It preys on the greed of “investors” and siphons off a little chunk of every dollar that passes by.

  11. #5, I think you’re looking for deception where it might not necessarily exist. I don’t see any chain-jerking going on here. It sounds like the general idea (and I could be wrong) is to take what is complex and chaotic and render it more comprehensive and accessible. Simplifying something doesn’t have to mean that you’re making it stupid or distorted.

    Finding a way to explain the core issues and weaknesses in a simple fashion isn’t a bad thing. I often wish that in place of the dense, jargon-laden legalese that people/companies would try to explain their purpose or intentions or liabilities in more accessible language.

  12. Admirable goal, trying to simplify the recent catastrophe in usable terms….but…difficult. Many years down the road, in an almost StarTrek TNG sort of outcome, it will be clear that money is NOT of value, but instead, the goals of self-betterment, civilisation advancements, and care for fellow humans. If the true test of a civilised people is how they care for the sick, the youth, and the elderly, then money is of no consequence in the “grading.” Money, up to now, has been an enabler. It will continue to be so, but with the globe shrinking due to travel, cultural exchange and networking, we move toward being a family. And, I just don’t recall when I charged my sister for borrowing something. Or my dad, for that matter….. Ultimately this was all about greed, Gordon Gecko greed. I think our home life would be awkward if that was always the motivator. Civilising forces ultimately have to poke their heads through on this, maybe not in our generations, but perhaps in centuries.

    A bit long….sorry.

  13. @pearl jewelry That’s right. You can move an economy forward by making resources cheaper to acquire. And there’s no greater resource for business development than cheap money.

    The proposed sound-bite “Debt is not a good product” is therefore a little more misleading than helpful, because without debt–even without the earliest, safer versions of securitization of debt–there are no entrepreneurs, no, no economic flexibility at all.

  14. At nef, where we spend a lot of time thinking about the the economics of things that money isn’t good for ( – sorry for the plug) we’re quite fond the old Bobby Kennedy quote: GDP “measures everything, in short, except that which makes life worth living”.

    Stephen Whitehead

  15. Riffing off Pearl Jewelry a bit, how about “Debt is an enabler.”

    As usual, it’s all about context.

  16. I think the key here is the koan-like aspect. The argument is that it, “helps encourage that line of thinking,” not that it encapsulates the problem.

    So ambiguity is an asset for this kinda thing, not a drawback.

    I submit, “Before you change your light bulb, you ought to change your leaders.” (From Thomas Friedman)

  17. Iain M Banks (science fiction writer) had a good quote: “Money is a sign of poverty”.

    If you don’t get it: Money is a result of scarcity of resources, and scarcity of resources means you’re poor.

    The Singularity is supposed to herald the end of the Age of Scarcity, making all of us rich without money.

  18. This oversimplification is part of what got us here in the first place.

    It follows the “Don’t worry about it, just sign here!” mantra.

    This topicshould not be dumbed down, its a complex issue that requires critical thinking and the ability to differentiate between good debt and bad debt.

    Good debt; including mortgages and student loans have improved the lives of many. Bad debt… we know how that worked out.

  19. Right. It’s not a matter of simplifying issues in order to close them (as in, “are you for the war or against the troops?” but rather a koan-like construction that forces further thought. There’s a big difference. Not trying to frame issues, but rather transport them, seed them in a way that lets them unpack in the new brain.

    As for debt, I actually disagree. I don’t think that all businesses need to start with capital. That’s only since centralized currency. If you think of it on a really small scale, people moving to a little down to offer a service, like shoe repair, may need to borrow some favors from the town in order to get started. Someone may feed the shoemaker for a week or two, someone else may have a place for them to stay, or offer a week of free rent – and in a sense they are providing credit.

    But what about when credit is our biggest national export? What about when credit is our number one industry domestically as well? Then you end up with businesses whose debt structures dictate the rate at which they produce and sell – rather than supply or demand for the good or service.

  20. How about “Debt is like butter (use sparingly)” or something?

    No argument that our economy has become too debt fueled. But debt = bad is, as others have noted, simplistic and wrong.

    I own 60% of my house and borrowed for the other 40%. It’s our dream house; we wouldn’t have been able to afford it via savings alone until too late (i.e. after the kids were grown and out of the house).

    Capitalism has its issues, but the idea of people with extra money lending it to others who could make better use of it isn’t a bad one, within reason. It’s like… butter. A little butter really makes a baked potato taste better. A lot of butter eventually kills you prematurely.

  21. I’d go with “criminals create crime”, but that’s not here nor there.

    I’m just hoping that Mr. Rushkoff sees fit to mention the Rothschild family in his chapter on profit via debt and not focus on various second tier monarchs who implemented various policies on debt/usury because they were so in debt to the Rothschilds or other banking clans..

  22. Recipe for good governance:
    Listen to the lobbyists, then vote the opposite of what they ask.

  23. Debt = Slavery

    The Fed: Counterfeiting money since 1913

    Government: We spend – you pay.

    Neither a borrower nor a lender be.

    Simply being flat broke is the new American Dream.

    Your home isn’t yours.

  24. What if the banks had to have a bake sale

    Let them eat credit default swaps!

    Will work for interest-only mortgage payments

    It’s all fun and games till its your house that gets foreclosed

    You don’t really own your house. You own the debt.

  25. Derivatives market = giant casino

    Unregulated derivatives market = unregulated giant casino

  26. If no one wants to buy it, it is worthless.

    If everything you own is worthless you don’t own anything

    (I’m talking to you banks!)

  27. My favorite line was voiced decades ago by my friend RBT, “In the end there will be dollars and cheeseburgers.”
    There aren’t many things worth going into hock for. Suppose you were given 24 hours to leave the country with only one suitcase. With skills and knowledge you can be back in the game wherever you go. Stuff gets you nowhere.

  28. Yeah, great, it’s possible to start some businesses (mainly service) with little or no capital.

    But what would have happened if Google had tried to bootstrap itself, instead of taking $25M in VC money? What if you need to build a factory to produce microchips? What if you want to build a revolutionary photovoltaic design that you just developed?

    The issue here is excess, not debt per se. There are lots of things, like certain foods, that are benign or beneficial in some amounts, and harmful or lethal in others. I advocate something along those lines- “Debt is like cheap booze.”

  29. This reminds of the modern Russian saying:

    Everything Lenin taught us about socialism was wrong. Everything he taught us about capitalism was right.

    I agree 100% that it is sad and scary that America doesn’t seem to actually make anything anymore. When finance is our biggest “industry” we will get exactly what we deserve, in the end.

    However, in the real, grimy, dirty world that we inhabit — instead of some worker’s utopia where people actually take in cobblers and feed them for a few weeks and give them space to work and so on — finance is needed on some level. This is not out of economic principle, but rather human nature. Unless Mr. Rushkoff @ 17 is willing to donate his space, his food, his time to make our cobbler succeed, I suggest we leave such fantasy worlds behind.

  30. It’s really not that complicated.

    Debt-fueled consumption is bad. Debt-fueled production can be good.

    It’s just an extension of “give a man a fish”. “Loan a man the money for a fish, he’ll eat for a day and be in debt tomorrow. Loan a man the money for a fishing pole, he’ll eat until it breaks, and have a good chance of paying you back.”

  31. I always try to find a comforting Douglas Adams quote to help me solve crises:

    “Many solutions were suggested for this problem, but most of these were largely concerned with the movements of small, green pieces of paper, which is odd, because on the whole, it wasn’t the small, green pieces of paper which were unhappy.”

    It’s because the relationship is so fleeting, and unstable..
    I have opened up a retreat where your money can gain happiness.
    Once treated, I will release them into the wild in measured amounts.

  32. A few…

    Finance should never be a nations’ largest industry.

    If you cannot hold it, it is likely not a product.

  33. How about:

    “Marx was right”

    Definitely a conversation starter. Or maybe you prefer Lacan:

    “Money is shit”

  34. Give people a short line, and they will still misread it.
    Some of you seem to have shortened it to “Debt is not good.” Read it again, and ask yourself, “How can debt be a product?”
    Debt shouldn’t be a product, it’s a financial trick. It increases your buying power now at the sacrifice of future buying power, which means it has to be used correctly. Using it properly would mean you expect a better return on the money you borrow than the interest you’ll pay out. Buying that new plasma display using debt is not an investment.

  35. One of my Dad’s favourite financial aphorisms: “Debt is a tool, not a way of life.”

    Businesspeople and politicians who are actual fiscal conservatives understand this — there are very few of those around in America’s executive suites and Congressional cloakrooms.

  36. @32, yes, you’re totally on the mark. The key word is “product”, but people (like me) seem to get hooked on the phrase “not good”.

    So, based on empirical evidence I’d give this one low marks. How about “Debt is not a product?”

  37. Also, with at least one more generation of short-sighted, Bush-league MBAs left managing American business, I’m afraid that the only action that will change our unsustainable economic situation is stronger regulation (and better, or fewer, B-schools). Koans only get us so far.

  38. #19 ULAND Louis the XIV was hardly a second tier monarch-but your point is well made.Check out John Law and the Mississippi Bubble at law what goes round comes round!
    #20 NUTBASTARD.Ah!”‘Tis Mammon’s WAY,plastic specie for plastic minds,”America the Free”,the myth that binds”

  39. But what would have happened if Google had tried to bootstrap itself, instead of taking $25M in VC money? What if you need to build a factory to produce microchips? What if you want to build a revolutionary photovoltaic design that you just developed? “

    Surely, some kind villagers would take me in for the first few years, and we’d have a good old-fashioned factory-raisin’. I can’t help, though; I’ve already got 3 cobblers mooching off me.

  40. I’m glad to have reached the end of the comments without too much trouble, giving me hope that someone else will be able to read my stolen slogan. I picked it up from a youtube video I was watching of a near-hour-long presentation, but aside from going into how rents hadn’t changed much where he was living versus the prices of the houses (and then why renting was a great idea for him and buying was not), I do have one good line that stuck with me, and also explains how we can’t spend ourselves out of a deficit. This sentiment is echoed in some of the first comments to this story, about where and when debt is useful. I hope someone can distill the idea for me while retaining its potency:

    “You should only go into debt to produce, never to consume.”

    Perhaps more simply: “Use debt as a tool for production, not as a burden for consumption.”

    The lesson being that if you use debt to enable production, you have something to pay the debt back with, as opposed to thinking that a pure consumable will somehow pay for itself. The $40 pizza comes to mind (paying with a credit card, adding interest and fees, etc).

  41. How about “Debt is not a product?”

    Much better. However, the greedy and myopic i-bankers who got us into this mess believe otherwise, and have the receipts to “prove” it — and they pretty much call the shots with the politicians (which is why the word “insolvent” won’t appear in these stress-test results).

    Meanwhile, I’d wager that up until a few months ago most borrowers didn’t realise that their debt was being sold, tranched up, and re-sold again as “products.” And I don’t know if even now the true meaning of that slogan will register.

    1. I’d wager that up until a few months ago most borrowers didn’t realise that their debt was being sold, tranched up, and re-sold again as “products.”

      You must not have a mortgage. Mine was resold so many times in the first year that I only had to make eight payments out of twelve. It’s hard to ignore getting a billing from a company that you’ve never heard of every other month.

  42. “Product” isn’t synonymous with luxury. If I sell hammers, that’s my product, even if my customers then use those hammers in making furniture which they then sell at a profit.

  43. “You know what the trouble is, Brucey? We used to make shit in this country, build shit. Now we just put our hand in the next guy’s pocket.”
    — Frank Sobotka

    Sorta long for a bumper sticker, but I think “we used to make shit” is an admirable koan for our current mess.

  44. I like: “debt is not a product”

    I would propose we also circulate:

    “speculation kills” – A departure point to discuss ownership vs speculation

    “usury used to be a crime” – A place to start on debt.

    “Don’t give your wealth to strangers” – to talk about banking practices

    “Time is money. Money is not time.” – to talk about activity and value

    “What is the Gross National Wealth?” – to raise the issue of what’s left out of the GDP

  45. Debt – The dead hand upon production

    Credit is Debt

    Debt takes money from the man who has produced and gives it to the man who promises to produce.

    These aren’t original – they come from a book called “A World in Debt” by Freeman Tilden.

  46. We live in a time of ideas as much as things. In the last 10,000 years or so humans have found in ways that our ancestors would find incredible. This has been made possible largely by using ideas and abstractions instead of working just with the present reality. It’s meant we build houses and building using math and physics instead of ‘well this looks about right’. It means we plant crops with an understanding of chemistry and biology and so on.
    So just as our large brains (but oh, how I wish they were larger) ideas have transformed our physical relationships they have also made it possible to have ideas about ideas. Thus money. Money is really just a notion of value. We mostly agree on the notional value of money (the value of different currencies are traded constantly) and this market for the value of money and the pricing of debt ranging from hourly borrowing, to overnight inter-bank LIBOR rates to 30 year fixed rate mortgages is really just a constellation of ideas and opinions laid on top of the superstructure of these notional values of money.
    It’s unavoidable given the fact that humans have brains big enough to have abstract thoughts, to think about the future and to weigh values of present and future happiness.
    Marxists hate this human nature and Darwin talk. But to me when they do they sound like religious idiots who say the earth is 4,000 years old. Can’t we all just be good people who don’t borrow and who don’t steal and who all agree on my Marx, Christ, Allah…etc.? Nope. Sorry. Doesn’t work that way.
    Most people want their kids to live better lives and to not live in a significantly crappier home than their neighbors. Thus, they’ll work jobs they don’t like, borrow money when they know it’ll cost them plenty.

    Money and borrowing are human ideas. We’re pretty much stuck with them until some better ideas comes along. Legislating against it or wishing them away won’t work. Let’s try to make the best of it.

  47. “Weed will get you through times of no money better than money will get you through times of no weed.”
    -Freddy Freak (or was it Phineas?)

  48. Others have commented that debt is often a GOOD product. If it were simply evil money lenders (and you’ve unfortunately encouraged the Rothchild-filthy-jew conspiracy theorists), surviving off the toil of others, it wouldn’t have worked for as long as it did.

    As far as your music pitch to Rolling Stone I’m reminded of the scene in “Once” when our busker gets a small business loan to finance his studio time.

    In any case, I understand your general point that modern society has been invented — agriculture, banking, etc. Most people get this. What most people DON’T get is the fact that there are other options, and, that none of this has bought us happiness — so, my bumper-sticker offering:

    Cavemen were happier than us

  49. How about these:

  50. You shouldn’t have to shop around for emergency care
    (I had to do just that on several occasions for both health care and dentistry, because of issues with places accepting my insurance.)

  51. A company’s brand is not a religion (ever watch a Wal Mart rally?)
  52. Employee loyalty shouldn’t be mistaken for gullibility
  53. The only jobs hurt by new immigrants are those of previous new immigrants (from “the Undercover Economist”)
  54. Service providers are supposed to be serving you, not talking down to you or taking advantage
  55. There should be more incentives for good service besides threat of lawsuit.
  56. They call it “trickle-down economics” for a reason.
  57. Wizard- You’re right. I’m just skeptical of any claims that monarchies “made it so”, when in fact, by the time usurious monetary systems were put into place on a large scale, most monarchs were out of the banking picture and in debt to money lenders.

  58. The true god of the USA is Mammon, not YHWH.

    Life is suffering.

    Suffering is caused by desire.

    Desire can be terminated.

  59. This nugget, from my line of work*, is actually centuries old:
    Rags make paper, paper makes money,
    Money makes banks, banks make loans,
    Loans make beggars, beggars make rags.

    *line of work: papermaker, printer, beggar

  60. Guy has a book out, “THE BEST WAY TO ROB A BANK IS TO OWN ONE”.

    The purpose of life is to add value. The business of business is the creation, production and distribution (mutual exchange) of value.

    Debt is a means to an end, not the end, but too much means is the end.

    Always do unto others as you would have others do unto you, cause if you don’t others will do unto you as you have done unto them, and you won’t like that.

  61. “Are you any good at finding someone stupider than you and taking advantage of them? Because that’s what trading is all about.” — some un-named Wall Street broker. Replace “Trading” with “Lending” …

  62. @28, 38:

    Yes! I would condense that wisdom thus:

    “Borrow not but for investing; Spend not but what is saved.”

  63. “Complexity confers invisibility”

    Meaning that, since investment products are abstract and can be made infinitely complex, the more complex you can make something, the less people can take the time to understand or oversee it, and therefore the more you can get away with.

    “When the revolution comes, the longer it takes for you to explain the value of what you do, the more likely you’ll be hanging at the end of a rope.”

    That one’s not as pithy, I know.

  64. Actually, I kinda like the idea of:

    “Let’s Make Music With Money”

    I say let’s evolve our perception and handling of money towards something that can creatively resonate in a peer-connected society.

    By adding an egg. No wait, social graph metadata.

  65. I think it was Phil Graham who said

    “It’s economics 101 — Poor folks can’t give you a job.”

    As far as bumper stickers, my favorite anti-sticker says (paraphrased),

    “Discuss complex ideas through bumper stickers”

  66. Here are a few off the top of my head:

    Money: merely paper and shiny rocks

    The Economy: The World’s largest faith-based organization

    Money is artiface. Value is imbued.

    What would you have, if you didn’t have money? Humanity.

    And one of my favorite quotes from Fight Club “The things you own, end up owning you”

  67. Even if the trickle down theory of economics works, you’re still getting pissed on.

    “By pursuing his own interest he frequently promotes that of society more effectually than when he really intends to promote it.”
    Adam Smith

    That “frequently” is the killer. Smith here implies that it ain’t always that the Invisible Hand is effective, as the Free Market Fundamentalists would have you believe. Sometimes the Invisible Hand picks your pocket.

    As somebody else once wrote, the problem with the Invisible Hand is that it never picks up the check.

  68. This has been a thought-provoking thread. (In fact, I joined boingboing just to comment.) Knoxvillegirl, Certron, Monkeybaister, anon #61, Ernunnos, Moriarty, all of you raised good points, as did others.

    Here’s my offering:

    “Wanna Buy My Debt?”

  69. Huh, after thinking a minute, this may be a better question than the last one I posted:

    “Whose Debt Is It, Anyway?”

  70. I really like “Debt is not a good product.” I like that it brings the focus to what is and is not good business. Capitalism needn’t be the villain here, but rather stupid business decisions.

    All I know is that every time I hear the phrase, “credit market” I cringe. How does credit become a market? Something’s not right about that.

  71. “High interest rates got your down? Me too :-/”

    “Remember Enron”

    “Well at least gas isn’t $5 a gallon….yet”

  72. “Debt is not a good product” is uninteresting because it isn’t clever or correct; if you want to get in the business of catchy bumper stickerisms the phrase needs to have at least one of the two going for it.

    I hate to break it to you but ‘this whole scheme was arranged by 14th Century monarchs’ is wildly inaccurate, people have been lending based on interest for all of human history.

  73. RUSKOFF?
    Debt is not a GOOD product OR
    Debt is not a SAFE product.

    I think the latter is better. It is subjective to qualify anything as good or bad. In the subprime case, almost all parties involved thinks the debt is a good product. the guy who got the loan , the guy who package the loan, the guy who got good returns from the packaged loans all thought this is pretty good.

    I think we need to educate and “over” simplifying is not educational. Just the other day on Planet Money Podcast, Nassim Taleb explained the problem is not debt; it’s our incorrect perception of it. To sumarize, he explains that anything we think is safe (but not actually risk free) is “bad”.

    As to those who don’t know how economy can work without debt – he suggest equity. Basically, don’t have business get in debt borrowing money ; have people invest in the business and get ownership of a piece in return. if the business fails, the money goes away. Since our perception that equity in a business is risky , all parties would check themselves and not reck themselves.

  74. Give me money or give me debt!

    Got Money?

    I think, therefore I shall not overburden myself with overwhelming debt.

    Luke, come to the dark side, use the American Express card.

    Recently seen on the Mcdonalds menu – “Smiles are no longer free”

  75. I like, “Debt is a tool, not a way of life.”

    Here’s one I also like, that I made up and use when teaching about the history of credit in the US, which is exactly, 180-degrees opposite of what Doug is saying:

    “Credit is a bet that the future will be better.”

    I completely disagree with this entire notion that consumer debt is inherently wrong/bad/evil/stupid. Can it be misused? Sure. So can a pointed stick. I don’t think it’s wise to go way into debt for consumer goods… but who am I to tell somebody else that they can’t? I know people who are $100K+ in debt for a graduate education that they no longer plan on using. While knowledge of obscure medieval history may be more important to them, a wide-screen TV may be more important to others. Judge not…

    And Doug’s example of a cobbler moving to a new town to start a business is, well… quaint to the point of fairy tale-ism. I know a guy who started doing 3D animation for an engineering firm. He eventually got so good that he wanted to move out and start his own shop. He had great instincts, huge talent, a great niche… and a need for more than $200,000 in start-up funds to even *touch* the studio he built with two other guys. You know anybody (or any 3 bodies) who could scrape up $200K while working a day job? But he had a great business plan and some good customer contacts and got a bank to front him the dough. 10 years later, he’s going gang-busters.

    Who would have loaned him office space, a server-cluster and $50K worth of advanced graphics software? His possible competitors?

    The reason we’ve been doing credit this way for 400 years is because (in general) it WORKS. Does it make sense for it to be misused the way it has been recently? To have 40X leverage on the future (possible) value of a bunch of mortgages? Of course not. But since the Great Depression, the failures have been because a lack of regulation and/or oversight, not because “debt is not a good product.”

    One more aphorism for you…

    “Bumper-sticker writers shouldn’t be in charge.”

  76. Well, put me in the pro-debt camp. Debt helped me buy a house, and get through college and grad school. Some businesses are capital intensive; that’s just their nature. If you need millions of dollars of equipment to make semiconductors or airplanes or medicines, you might want to borrow some capital. And yes, it’s a market, because there is competition between sources of capital and you can choose the bank offering the best terms. And yes, it’s a product, because if you don’t advertise your terms to me I won’t know you exist.

    So, my suggestion for the bumper sticker is:

    Debt. Borrow Responsibly.

  77. they owe, they owe, so out of work I go

    money is your imaginary friend

    capitalism is just a ponzi scheme

  78. “The difference between spending $100 more than your paycheck and $100 less is the difference between indentured servitude and freedom.”

    It took me five awful years after college to learn that one.

  79. “If you can’t afford it, you can’t have it.”

    “Risk never leaves the system”

    “Value is multidirectional”

    (as opposed to always going up or down)

    Debt works because it allows me to gain capital resources I couldn’t otherwise. If I’m a company building a building, I get the money to complete the project and then sell the building to pay my creditors. My creditors get something for lending me the money, and I (if I’m careful and have done my due dilligence) profit out of the deal as well.

    What breaks the system, is the belief that risk can be eliminated and value is unidirectional. That is fatal because value is always multi- directional and risk never, ever leaves the system.

    Debt is simply so functional that even belief systems that outlaw debt, have found ways around it such as “Islamic Bonds” which are Shariah compliant.

  80. #70 LUPIN YONSI.How right you are.In an earlier post I mentioned Mammon.The quote was from a poem written at the time of “Shock and Awe” it was somewhat prophetic.The first two stanzas went thus.
    Jose can’t you see
    “Tis Mammon’s way,like “In God We Trust”.
    As C.E.O’s plunder and business goes bust.
    The stock market wavers ‘twixt Bull and the Bear,
    Bankrupts,Debtors,Defaulters,all share.

    In the American Dream,free fiscal slaves,
    Victims of greed and corporate knaves.
    Plastic specie for plastic minds?
    “America the Free”,the myth that binds
    At first read i thought “free fiscal slaves” was an oxymoron but on reflection,the author was dead on.

  81. All you commenters who talk about how money is worthless and you’d be better off without it… I’m pretty sure I could make good use of yours, as long you don’t want it. Drop me a note for exchange of paypal information. Also, how on Earth are you commenting on a blog while forsaking all possessions? Direct mindmeld with the internet?

  82. Ill Lich, I love your Andre the Giant quote. Here’s a similar one: “Growth for the sake of growth is the ideology of the cancer cell.”

  83. I hope its not too off-topic, but Andy mentioned grad-school debt and I wanted to say something about that. There need to be some programs in place for recent college graduates to pay off their debt by joining a two or three year national peace corps/Americorps type of program. Stimulus money needs to go toward the establishment of jobs that help out neighborhoods and the people who live in them. College graduates would administer the projects and have their education loans drastically reduced in the process. Isn’t that a good idea? What I am really afraid of is stimulus money going mostly toward employing bulldozer crews, a respectable job, but not one that requires a college degree. We need like a domestic GI bill that would help people do things like pay for college or buy a home, in exchange for a few years of service. Kind of like what the military does, but NOT the military. Not that I have anything against people in the military, I just think there should be more options for subsidized service than that. There’s got to be a soundbyte in there somewhere…

  84. The root of the problem, and I think what Rushkoff may be getting at, is that most “investment” that is available to most of us is actually buying debt or equities in a secondary market. None of our “investments” go directly to a company. I could buy a million dollars of stock in GM and not a dime of it would go (directly) to building up productive capacity.

    Thus there are markets for investment products. These markets are affected by the law of supply and demand the same as any other market (“the iron cross” as one econ prof called it). Those seeking to supply those markets are ever more creative in finding ways to provide new products. The more demand there is in this market, the more aggressive suppliers will have to become to convince buyers that their product has a good “price” (risk/return tradeoff). Higher demand should drive the price down, and it does that by either reducing the return (lower interest rates) or increasing the risk required to earn that return (higher P/E ratios, complex debt products). If you can convince yourself that you’ve altered the risk/return balance, you can promise people high volumes of investment product at a low perceived price. But it’s not really a low price, and eventually the bottom falls out.

    That’s why we need regulation. Someone needs to police people to make sure that they are representing the risks and returns of their investment products accurately.

    I think it also points to another problem with our economy. As in the PBS recording “The Giant Pool of Money” many of our public policies (such as tax reduction) encourage people to “invest” by pumping money into this secondary market. Which pushes the demand for investment products that much further. We have more and more money chasing the same pool of real productive investments. (Yes, the pool of real productive investments grows too, but it’s a SIDE effect, not the primary).

  85. “We cannot spend our way out of debt”

    The problem isn’t debt per se, it’s fractional reserve banking “backed” by fiat currency — which means that every single dollar in existence represents a debt. This has several terrible consequences: the system must constantly grow or collapse, making sustainability impossible, guaranteeing violent cycles of boom and bust, and ensuring that banks earn interest on every dollar in existence.

    Further reading here:

  86. Give a man a fish, you feed him for a day.

    Teach him how to fish, you feed him for life.

    Teach him to teach others, you can feed the world and deplete the oceans of fish.

    Teach him how to use an AK-47 to take everybody’s fish and you can be a warlord and never have to fish ever again.

  87. Dargaud, that’s Ed Abbey you quoted without attribution.

    Of course, Abbey himself ripped off Tacitus, Voltaire, and Chuang Tzu with great abandon (Desert Solitaire is like “Plagarism’s Greatest Hits”) so perhaps that’s appropriate!

  88. Swampdog, you’ve got it backwards. High demand drives prices up.

    Also, the secondary nature of the stock market is pretty transparent. You hold a claim on a share of the future earnings of the company. You are willing to pay a little more than whoever sold you the stock for that claim, and are therefore supporting the price of the stock. This means the company can issue additional stock to raise capital as needed using the price of the outstanding stock to establish the value of the new stock. The secondary market is a feature, not a bug.

  89. Sort of a tangential thread, but I had to something about Antinous @96. Our mortgage has passed through so many hands I don’t even try to keep track. And you know what? It pisses me off to no end. I don’t know these people — I never agreed to do business with any of them, and now several of them are getting bailed out. Faced with this sort of slight of hand, mostly what I feel is helpless. And (more to the point of this thread) these people shifting my money around don’t actually make anything of use.


    Going to try to find my happy place now.

  90. I’ve been searching for the right phrase around “Too big to fail” for a while now.

    Too big to fail is too big to bail: break them up now!

    Too big to fail is too big for the American way!

    Then there’s always the cheap-shot at, or homage to, Mr. Smirnoff.

    In capitalist America, debt collects you!


    In Debt We Trust

  91. Lots of chatter, but not a lot of it helpful.

    Getting back to the task at hand, I’ll paraphrase something my mum always told me: “Never get anything on credit that you won’t have when the bill comes.”

  92. Since I never spent more then I had, I don’t got no credit history, so I can’t buy no house…

  93. I thought some great music (and other art) was created by W. E. B. DuBoise throwing money at poor artists (and sometimes just at poor people who weren’t doing anything at the time) in Harlem in the 1920s. In this case money did make music, and the rest of the Harlem Renaissance.

  94. I told a salesperson for Credo phones the other day that I haven’t bought anything on credit since I paid off my house thirty years ago and cut up my Merrill Lynch credit card. ”So I don’t have a bad credit-rating,” I said, “I have NO credit rating.”

    “But you’ve done better than Merrill Lynch,” she said.

    1. Heh. My total limit for my three credit cards is roughly ten times my annual income. I do everything on credit. They really do reward irresponsible behavior.

  95. The phrase “rent seeking” has wormed its way into my consciousness, and pops up at odd moments shouting “hello, it is me again!” The whole business with copyright and patents is about rent seeking, as are various forms of software lock in, and exploitation of social networks by the likes of Facebook. There always seems to be a bloated intermediary that ends up collecting rent from both the producers and consumers (if they are even different groups). Its a damnable trap, no idea how to fix it. A force of nature that requires constant effort to oppose, perhaps.

    Debt holding is perhaps its purest expression.

    Paul Harrison

  96. The problem with bumper sticker slogans is they become cliche, and lead to cliche-ridden thinking. Take for example the many absurd comparisons to “Ponzi schemes” on this thread. To abuse another well-known cliche: In the future everything will be a Ponzi scheme for 15 minutes.

  97. Greed is god-given, and available for free.

    Everyone “wants”. When you have the last one, protect it with arms.

    There have been several very insightful comments here. I don’t think anyone would argue that at some point DEBT makes the world go around. We certainly wouldn’t be communicating on the internet without it (meaning this would never have happened without the ability to form companies, provide capital and get the infrastructure built – which all required the formation of debt (not to mention government research).

    I’ve seen several comments that lament the US having Finance as a large industry. Would you want another country to do it? Because face it, someone has to be the world’s bankers. We have a society and a civilization that the world bets on constantly.

    But what really does debt mean? I “owe” somebody? Gone are the days of debter’s prison (at least in the US). LLC – Limited liability company – which means, “I want to try something out and really don’t want to go to jail for the rest of my life if it doesn’t work out”. Our country thrives on people trying and failing – there are so many things that you enjoy today that are the result of hard work and ingenuity and luck. Once farmers became able to grow enough food to feed the masses, the rest of us became expendable, and MONEY, DEBT, FINANCE, BUDGETS, etc are just a way to try and organize the masses into being able to do something with their lives.

    “Debt, not to be taken seriously”

  98. Citryphus, I was thinking of a move down the demand curve but represented it as a shift of the demand curve. I think the metaphor needs work but that there’s truth there. I’ll work on it.

    The secondary market clearly does price new equity (as well as debt) in the primary market. It’s a fairly clumsy way of doing it, but it does do it. I suspect it takes a lot of churning in the secondary market (equals brokerage fees, paper gains and losses by the players, advertising money spent on TV shows) to effect a small change in the primary market.

    The distortion I think we currently see is partly because too many people (including in the government) don’t understand the distinction between the two and think that any increase in the secondary market necessarily builds real wealth but it doesn’t. The prices can go up while the underlying value remains the same.

  99. There has to be some kind of artistic piece that could be done with sites like Boing Boing and comment threads like these, where clearly intelligent people assert utterly ridiculous things about topics they clearly don’t understand.

    Debt isn’t a good product? Really? The only way to buy a house should be to pay the entire purchase price in cash? Who, exactly, is even going to build the places that we’re all going to rent?

    Businesses should only use equity financing, and should shut their doors even if wildly successful but faced with a cash crunch?

    Ugh. Must. Not. Watch. Train. Wreck.

    (not that I’m a genius in these areas, I just know cluelessness when I see it)

  100. Barter was better

    Bankers: Modern day slave traders

    Interest is evil

    Community over corporations

    No justice in debt

    Slavery never ended, it just changed.

    USAI: United States of America, Inc.

    or maybe

    Dude, Where’s my Freedom?

  101. How ’bout the classic:

    Thems that understands interest earns it, thems that don’t pays it.

    @113: My thoughts on “too big”

    1985 – Soviet Union: too big to fail.
    2009 – America: too big to fail.

  102. Swampdog, the alternative to raising equity capital in the public market is to raise it in the private market, and the intermediaries putting private investor and cash-strapped venture together are typically investment bankers. They perform a real function and add real value. You might argue that they are wildly overcompensated for this and I won’t object. In fact, many companies must find it less expensive to raise capital in the public market, or it wouldn’t be so popular. The liquidity that the public market provides is a real advantage. When investor A wants out he doesn’t have to look hard for investor B.

    An increase in the price of a company’s publicly traded stock creates wealth for both the firm and the investor, unless you define wealth to exclude having a valuable asset you can trade, use as collateral, etc. I think that would be a definition in service of a certain point of view.

    As far as supply and demand goes, if you’ll forgive my presumption, I think what you were trying to say is that an excess supply of loanable funds spurred banks to find ever more “creative and innovative” to get us to borrow, and that some of those methods were at best needlessly risky and at worst immoral and illegal. Do I have it right?

  103. It takes a village to raise an idiot and a leader to be one.

    You don’t have to fuck people over to survive.

    Invest in reality it just taste better.

    Don’t worry, When all the foods gone we can eat the money.

    The rich and the poor have two things in common, the deserve neither their wealth nore their level of privilege.

  104. Interesting discussion. I actually earn a living creating and selling such slogans (yes, for bumperstickers, sigh…) and have at one time or another had many of the feelings you all express. On one hand, it seems crass to take such complex and important issues and make them quippy; on the other, if useful dialog results, that’s a good thing. Plus it helps me pay my underwater mortgage. Still, I can’t get over the petrochemically based products bearing messages of the evils of gas consumption or encouraging people to buy nothing. Life’s rich pageant… P.S. Papermeister, where are you in AZ? I’m in a paper show in Tucson that opens next month.

  105. Or, for brevity’s sake, “What was accountability again?”

    Also, “The Next Bubble will Be Better”.

  106. People in US tends to get affected by some of the banks loan schemes. Banks approach them and they will show their interests to them. U need to keep a control on your expenses.

Comments are closed.