Friday, January 27, 2012

Whirring the fact

Notes on the Graeber interview

I listened to the PBS interview of David Graeber repeatedly and transcribed some chunks of it.

The first Q&A, which begins around 0:45...
Q: "What were the first debts, as we understand debt today?"

A: Well
That's an interesting question
is its how moral debts -- the sense of obligation, promises (because debt is really just a promise) -- turning into something that can be quantified and transferred
and for that reason you can transfer them from one person to another
and in a way that's exactly what money is, they're debts that we can transfer.

Debt is not "just a promise". Debt is a promise to pay. Money is the payment.

Perhaps money started out as debt. I don't care.

The dining room table started out as a tree. I don't go around saying the table is a tree. That would be wrong.

The second Q&A, which begins around 1:15...
Q: When did debt become a negative?

A: It's hard to trace
It seems to go back to the very beginnings of written history
but there's always the terrible ambivalence about it
because if you look at history on the one hand
not paying your debts is the essence of immorality but
people who lend money are almost universally also considered to be evil
that's one of the mysteries I was trying to resolve
there is a sense of moral confusion about debt
it seems like in a way both parties to a transaction are at least in terrible moral peril
and probably actually both sinners and bad people.
So there is a sense that people are constantly
whirring the fact that basic economic relations causes everyone to be bad

That is interesting, both the borrowers and the lenders are "sinners". Reminds me of Benjamin Franklin's "Neither a borrower nor a lender be."

Interesting, but completely beside the point, if you want to understand the economy. Mysteries and moral confusion. To understand people maybe it is relevant.

I don't know what word "whirring" is supposed to be. Makes a good title, though.

The third Q&A, which begins around 1:52...
Q: What kind of things changed debt over time"

A: The most significant pattern that I found was
whether the predominant form of money is virtual money, is credit money, what we have now
or whether people are actually using gold, silver, bars, coins
in everyday transactions.

For most of human history virtual money -- it's nothing new -- virtual money has actually been the predominant form.

Now when people recognize that,
that money is just a promise that we make to each other
then money doesn't seem quite so ineffable
it doesn't seem quite such a moral absolute
if i owe you money
well if there's a problem, we renegotiate it...

It doesn't matter whether money is made of precious metal or paper or electronic blips. It matters if there is an extra cost associated with using it. The DPD graph shows that when that cost gets too high, we get a depression. It's very simple, really. Nothing about moral absolutes or effability.

The economy is transaction, and the problem is always cost.

Fragments, after I got tired of transcribing:

Around 3:28 she asks about the debt ceiling. Graeber calls it "a moral myth".

Around 3:43 he says: "When people start talking about debt they're not really talking about economics they're talking about morality."

Not me. When I start talking about debt, I'm talking about a cost problem. But yeah, Graeber was talking about morality at 3:28, and at 1:15.

Around 4:00 Graeber says "dollars ARE debt".

The table is a tree.
The table is a tree.
The table is a tree.

I think I just discovered what "whirring the fact" means.


jim said...

Hi Art,
Graeber is an anthropologist. he observes people's behaviors and beliefs. When he talks of the moral component of debt he is not expressing his opinion of debt. He is talking about his observations of commonly held opinions.

Frankly, I find your opinion that It matters if there is an extra cost associated with using money as a type of moral judgement.

There is cost associated with borrowing and lending, but the fact that you apparently think that is inherently a bad thing is telling.

Let's suppose I need a new computer and it sells for $1000. I won't have $1000 until next week, but I have a coupon that expires today that will get me the computer for 25% off, but only if I buy today. So I go to the local loan shark and borrow $750 and promise to pay him $900 next week. I buy the computer and pay the loan shark his $900.

Now I look at the cost of that loan as -$100 for me and -$150 for the loan shark. After that experience, I'm having trouble seeing the cost of lending as bad thing.

LiminalHack said...

dollars ARE debt.

My position is that Graebner is right, and you are wrong.

The distinction here is between debt that is the liability of an individual and debt which is the liability of society.

Maybe you saw it already but here is a post of mine addressing this point and that Graebner piece specifically.

Clonal said...


You have it slightly wrong.

Money is a "standardized debt instrument" that is used to extinguish other debt obligations.

The government when it spends, issues these debt tokens. These debt tokens circulate in the real economy as money till tax time, when they are used to pay the tax liability, and the government debt is then extinguished (in other words, the government repays its debt by getting rid of another)

The Arthurian said...

Well that is all very nice.

When i take out a loan, a dollar of money is created and a dollar of debt is created by the same act. Is this correct?

(Observe that TWO things were created by the one act.)

When I spend the money that I borrowed, the money goes into circulation. But the debt never goes into circulation. It stays with me until I snatch some money out of circulation and use it to pay off the debt.

This explanation, above, is part of my understanding. Certainly I could be wrong. Actually it is pretty easy to convince me that I am wrong, if your argument is good. But I don't see arguments. I see proclamations. Arthur must be wrong because money is debt.

Debt as "the liability of society" -- I don't know what that means. Is "society" an economic actor? Does it spend money? Does it incur debts? Is society a person, as a corporation is said to be a person?

I really don't want to spend the rest of my life talking about whether money is debt. You can go to FRED and look at the numbers for AMBSL money or M1SL money or M2SL money or MZMSL money and ALL of them are not the same as TCMDO debt. And I make ratios of debt-to-money and every time I do, somebody thinks they can disprove the numbers by saying "money is debt".

I disagree.

LiminalHack said...

"Debt as "the liability of society" -- I don't know what that means."

Nonsense, you are being deliberately obtuse.

A debt may be owed by one man or many. A debt owed by one man is different to that owed by many, and a debt owed by many is different to a debt owed by ALL.

These words, written by a wise man recently, are I think relevant here:

"In reality, accepting the laws of social life in all their complexity,
even if we find initial difficulties in comprehending
them, helps us to come, finally, to a certain level of understanding
that we acquire by something akin to osmosis. Thanks to
this comprehension, or even just an instinctive intuition of such
laws, an individual is able to reach his goals and mature his
personality in action. Thanks to sufficient intuition and comprehension
of these conditions, a society is able to progress
culturally and economically and to achieve political maturity.
The more we progress in this understanding, the more social
doctrines strike us as primitive and psychologically naive, especially
those based on the thoughts of thinkers living during
the 18th and 19th centuries which were characterized by a
dearth of psychological perception. The suggestive nature of
these doctrines derives from their oversimplification of reality,
something easily adapted and used in political propaganda."

It really is quite a simple point.

The Arthurian said...

Hi Liminal. If you are hinting that I suffer from "a dearth of psychological perception" then I say don't hint it, shout it. My view of economic matters is *entirely* mathematical. I look at monetary imbalances, visible in mathematical ratios. I choose to focus on a thing that everyone else, apparently, chooses to ignore.

I am not being deliberately obtuse... it comes natural.

A debt that is owed by "many" is perhaps much easier to bear than a debt that is owed by one man. But somehow I don't think that's your point.

"A debt owed by ALL" sounds like part of some profound religious belief system.

Jerry said...

I don't think it's "good" or "bad" that using the money has an extra cost -- but you can't say it's irrelevant.
I guess it's sort of like a tax that goes to the bankers, or something. There has to be a net effect from that. Especially as the amount of debt in use grows from 3x to 30x M1 over the course of 50 years.

And also, this predates ben franklin.

jim said...

To Jerry:

The cost of each loan can be positive or negative. If 20% of a bank's loans end in default that will be costly (unless the interest on all loans is high enough to cover the cost of those that default).

It is pretty easy to structure loans so that everybody wins (I gave an example). And conversely, 2008 revealed how easy it is to structure large numbers of loans so that all parties lose.

There is a difference between productive lending and unproductive lending and Minksy was able to predict the financial meltdown decades before it happened because he understood that one simple fact.