Invasion of the Moneylenders – Part 1 - “Debt is good”

By Peter Ewart

In 1956, a scary science fiction film was released called “Invasion of the Body Snatchers.”  Set in a fictional American town, the movie is about how individuals in a town are taken over, both mind and body, by alien “pod” creatures.  These creatures look and sound like ordinary human beings, but they are robotic in character and devoid of any emotion whatsoever.

Some interpreted the movie to be a warning about the dangers of communism; others saw it is a protest against the paranoia of the McCarthyite period.  Whatever the case, the movie was a hit and is now considered to be a classic of the science fiction genre.

Flash forward a half a century to 2007.  Have we, indeed, been invaded, not by “body snatchers” but by moneylenders?

Practically every pore of our society is hopelessly clogged with debt.  Governments at the federal, provincial, state and municipal levels in North America and many countries abroad are literally drowning in debt to the billions, and in the case of the U.S., trillions of dollars.

Despite the “booming economy,” many small and medium businesses are only a payment or two away from defaulting on debt payments and having their assets seized.  Even some big companies that are considered to be pillars of the economy are highly leveraged with debt and only a downturn in the economy away from creditor protection or collapse.

Consumer debt in the U.S. and many other industrial countries is off the chart, with many ordinary people juggling two, three or four credit card balances in desperate attempts to stay afloat.

We are swamped with so much debt that it appears as if we have passed over into some kind of alternate universe.  Forget about gold and silver; forget about dollars, euros and yen.  Debt has become the new 21^st Century currency, and, at least until the latest “subprime mortgage” crisis in the U.S., has been shoveled off the back of trucks like manure.

In the 1980s, not a few people said that the slogan “Greed is good” best summed up the atmosphere on Wall Street.  Indeed, financier Ivan Boesky (who was later jailed for insider trading) made a famous speech at the University of California claiming as much, and Oliver Stone even made a film called “Wall Street” in which the central character, played by Michael Douglas, echoed Boesky’s speech.

Many would say that “greed is good” still applies today.  Others might argue, in summing up our swimming financial times, that the slogan should be “Debt is good.”  After all, President George W. Bush, on whose watch the U.S. has racked up the largest debt of any country in recorded history, claims - with that odd little smirk of his - that the American economy is “fundamentally strong.”  Dick Cheney, Bush’s vice-president (and some say the real power behind the “throne”) has gone so far as to claim that “deficits don’t matter.” 

Both Bush and Cheney, of course, would make for extremely scary figures in any science fiction film.  Or perhaps a rewrite of “Alice in Wonderland.”  In this alternate universe, negative numbers take on more weight than positive ones; subtraction becomes more important than addition; non-productive turns into productive; and central banks grow dollar bills as plentiful as autumn leaves on some genetically modified tree.

Today, there is no doubt.  The moneylender, that much reviled figure, at least in past centuries and previous civilizations, rules supreme.  “Hedge funds”, “derivatives”, “collateralized debt obligations”, “asset backed commercial paper”, and other recently spawned creatures of the modern financial world roam the economic seas, preying upon the “producing economy.”  

What these creatures don’t catch, banks, credit card companies, and mortgage companies scoop up with their wide drift nets.  As with the foreign factory ships off of the Grand Banks of Newfoundland, practically nothing escapes, whether individual, corporation or government.  If they do, they are looked upon as being odd, like some strange and bizarre species of fish hiding off somewhere in the deepest ocean waters. 

So who is making all the money?  And, even more important, where do we go from here?  Through the magic of compound interest, debt piles up day after day, year after year, decade after decade.  Is that how it works?  Do we just continue marching down the yellow brick road like Dorothy in the Wizard of Oz?  Or is there a day of reckoning, like 1929, when it “all falls down”?

In this series of articles, we will look into some of these nagging issues. 

Next: “Invasion of the moneylenders – Part 2 – “Usury by any other name”.

Peter Ewart is a college instructor and writer based in Prince George, British Columbia, Canada.  He can be reached at: peter.ewart@shaw.ca

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