There’s nothing that highlights the coming financial debacle like the news I read this morning: Costa Rica is considering open-pit gold mining and deep sea fracking to cover the epic, yawning, gaping hole in their finances.
Um, say what???
Now, I lived in Costa Rica, on and off. When I was one (my parents were there learning Spanish); in 2004 for regional work – I bought an apartment there that I owned for several years, to have a place in the sun away from the mayhem of everywhere and everywhere else. I consider Oscar Arias as one of my heroes, I even met him once when I was working on freeing Venezuela from the Chavistas (one of my many failures – not the meeting, that went swimmingly – the efforts to avert a suicide that is still playing out). Costa Rica, a land of firsts. The first (only) Latin American country to abolish their army, ending the banana cycles of thugs (from the right and left) periodically upsetting democratic and economic gains. The first to join the International Criminal Court (whatever you think of that institution, the search for justice is something we’re all for). Setting aside 25% of its national territory into national parks. The first to vie for carbon neutrality (whatever you think of that newest propaganda agenda of the redistributionist left, and I don’t think much of their base politics, who can object to trying to be better to our little planet? Read ‘Apocalypse Never’ before you scream at me). Now, they’re gonna dig and frack. HELP!!!!
And like Costa Rica, so many others. A 10% increase in global public debt – to 103% of global GDP this year. To say nothing of private debt, a way that China and the USA and Europe (and everywhere else) camouflage our fiscal insolvency pretending that our explosion of ‘private debt’ is not a result of bad government; in systems which have neither been ‘communist’ or ‘capitalist’ in a long time – but something in between, the brainchild of Moreau’s island.
This is the damn cycle. Bad governments come to power – and rack up stupid debt (entitlements to buy votes and corruption to buy leer jets and mansions in the Swiss Alps). They are then overthrown or voted out, with good governments coming in and taking steps towards being responsible (Macri in Argentina). Fiscal discipline and sound financial management meets the partisans of the previous bad government, the good government is overthrown product of the hangover after the excess, and we start again – only deeper this time. This example is so commonplace as to be boring. Argentina, of course, is the poster child. Nigeria. Brazil. South Africa. India. In USA we haven’t had a fiscally responsible government since the ’90s. Too big to fail, except we are – that at least is heartbreakingly apparent. Nigeria spends more than 60% of its revenue on servicing its debt. USA’s debt servicing costs between 500 and 600 billion dollars. Want universal healthcare? That would pay for it.
So what should we do? There is a concept in ancient Hebrew law, specifically the Mosaic codes of Leviticus – the year of Jubilee. Every fifty years, land was to be returned to its original owners (or their children); indentured servants were to be set free – debt was to be wiped away. The ancient Hebrews knew what we also know, that the powerful use money and debt as tools to cement their position and those who suffer the most are the poor. No, I’m not a communist – sounds sort of Karl Marxy, I know, but its true. The pandemic, at least, has showed us that – the elites in America made new-billions and the desperate poor got a $600 check. How the elites got rich (I for one am grateful for Amazon, if not for Bezos himself. Oligarchs should be excluded from politics… Oops, there I go again) is not ignored, nor is the fact that our new Aristocracy has taken inter-generational elasticity in America to its worst point ever. As Angus Deaton writes, the rich have “raised the latter as they ascended” – and some of this is through debt; debt they benefit from, as the first to have access to the newly printed money.
“But this will benefit the rich!!!?” the socialists will say. “This will give those no-good lazies a pass on their own irresponsibility” the other side will respond. “Maybe we should just set up a voucher program,” somebody will suggest. “Naw, we can just send them a check for $600, like, perhaps every month. That will calm them down!” says another, licking lobster juice from her fingers in a restaurant beside a beautiful old bridge.
STOP!!! ALL OF YOU!!!
Because that is the whole point – for the Bible also says “The rain falls on the just and the unjust alike” – whoever your just and unjust are (and your opinion is probably different than mine), a jubilee does not discriminate between human opinions of each other. Therein lies its power. It eschews social engineering – and isn’t that what has gotten us into our mess in the first place? But… But… what about?? I mean, shouldn’t they… It’s the fault of…
Just let them go, the “…stock of commonplaces, prejudices, cigarette-ends of ideas or simply empty words which chance has piled up within (your) minds.” (Yes, I’m talking to you). Let them go, its OK. Embrace the ‘local knowledge problem’ that confounds all economists, surrender to our extraordinary spontaneous order, and above all eschew your efforts at planning – they fail. You’re not smart enough.
Let’s start over. Lets wipe it all away.
Now, my economist friends will object. They, who pretend they are ‘scientists’, will talk about their curves and their models and their inflations. But isn’t it they who have brought us to the brink in the first place? Playing politics with the lives and livelihoods of others – Paul Krugman playing the role of Iblis, as he tests God again and again?
Because what they forget, is the nature of money. For what is money anyways, the repayment of which has resulted in the hobbling of nations? It is a store of value and a unit of measure. It is a means of exchange, the best of your mind for the best of mine. It allows a potato farmer and a computer designer to interact with each other across boundaries and over oceans – because the potato farmer needs accounting software and the computer wizard wants a curly fry. An intercourse ruined by toxic debt. Without debt, what will remain? Productivity. Productivity which will be set free; whether in the unruly slums of Lagos or the soy fields of the Pampas, those who can create will do so and those who can only engage in usury will find themselves powerless, at least for a season. And the alleviation of debt can even allow now-strangled countries to free money to pay park rangers, or invest in nuclear energy (the only solution to our global energy demands).
But how do we stop our downward spiral from happening all over? Well, first of all, we don’t. The Hebrew jubilee happened every fifty years; and the national (granted rural) economy adjusted for it. They knew that humanity has a tendency to repeat stupidity over and over in a cyclical race to the bottom. “A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largess from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been 200 years. Great nations rise and fall. The people go from bondage to spiritual truth, to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency, from complacency to apathy, from apathy to dependence, from dependence back again to bondage,” said Alexander Tytler. And that is not only true of a democracy, as our modern world has shown us.
But specifically, we could start to engage in real governance. Perish the thought!!!! Things like balanced budget amendments to our constitutions. A new Bretton Woods which denies loans to countries who do not balance their budgets or who go off the rails (incidentally this works well – take as example Mali in 2012, denied ECOWAS currency until the coup-captain was ousted. The ‘dictatorship’ lasted only a number of weeks, deprived of money). A return of real competition – not over greenbacks and who can print more but on who can make the best appliance or the cleanest form of dense energy source (renewables lack energy density, which is why they are a fad, not the future). Maybe these are the moments for bold, non-partisan ideas to be batted around. And why not??
For, lets be honest, the current debate is stale and boring indeed.
Working in the financial field, I have long advocated for occasional universal debt jubilees, on a predictable and understood schedule, so that a greater balance can be had between debtors and creditors. This would minimalise the financialization of the economy and reduce the dominance of the lenders. But, “it can’t be done”, because it would upend the current order of things, where the lenders hold sway, and the moneylenders like things the way they are. These conundrums have a way of solving themselves, sooner or later, in an unstructured and messy form. We appear somewhat close to one of those times.
so I lived in Argentina and Venezuela (and Congo) for a while. The “working themselves out” in those contexts was massive inflation. But the poor got screwed also, the rich found a way to make their debts payable. Or they seized the property back. The trick is, like you say, the “can’t be done” people who would get poorer. Generally speaking, those people deserve to be poorer. And the special interests who don’t want to weaken their base and their interests. But the pandemic offers an opportunity to try something new. I mean if Costa Rica is debating deep-sea fracking in parliament, holy $*%&!!!!!