We live and participate not in a capitalist culture, but in a debtist culture. Why? It's easier until it's not.
Capital requires savings derived from past effort. Since it is derived from past effort and productivity, its value is not speculative. We know how much work, material, and time was required to produce the tangible or intangible item reflecting the aggregation of those items. (For the moment, set aside the variable value of the measuring and exchange tool — money — itself.)
Debt, on the other hand, is intrinsically wholly speculative. While the principal lent may appear to be fixed, and the return is stated in a way which may be definitely computed, its value is completely contingent on future events. Will it be repaid, or not?
Where the source of principal is capital, only the lender is at risk.
Where the source of principal is debt, at least two lenders (more in our current system) are at risk.
In our current system, where does the money financial institutions lend come from? Coming in part two....
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Can't wait to read part two.
ReplyDeleteI have some other thoughts about the speculative nature of future events, and how that might contribute to the ease of running up debts. If I'm optimistic, and pretty sure I'll keep getting better and more productive at earning income, I will assume that what takes an hour to earn today might only take half an hour to earn next year. So - why not pay for that object with next year's easy money instead of this year's hard money?