The Fallacy of Debt and the New American Serfdom

Secretary Paulson and other financial geniuses (the term is used loosely) in Washington keep harping on the importance of restoring the ability of Americans to borrow money. These people toss out fine sounding phrases such as "Get the credit market flowing again." Borrow money not just for home loans but to buy lots of other consumer goods as well. Do not encourage thrift, encourage the spendthrift. If you overextend your credit, don't worry, the government will save you.

In the modern version of the feudal system of the Middle Ages that is developing in the U.S., this economic philosophy offers every benefit for the Upper Class, who have enough money not to need to borrow. It encourages the Middle and Lower classes to go further and further into debt. Any awareness of history at all suggests the result likely will be a two-class system, in which the Nobles (formerly known as the Rich) live off of the work of the Serfs (formerly the Middle Class, impoverished to the point that it joins what was the Lower Class). The peasants, or serfs, choices about housing, jobs, geographic location and everything else become more and more limited. Certainly the ability to relocate becomes restricted when there is only enough money to feed and house a family. The incoming ruling party in Washington will aid in this change by bringing in more illegal aliens to supply labor when the borders are opened to all, as seems to be the desire of the very liberal Democrats.

Borrowing, which is the politically correct word for going into debt, is a technique used for centuries to keep the lower class in place. For example, coal mining companies formed company towns with company stores. Miners could buy only from the company store and pay company prices. The result was a perpetual state of debt, a serious limitation on mobility and restriction of alternatives. Czarist Russia provides another good example of a two-class society composed of the elite and peasantry.

Leading up to the Great Depression (the 20th Century one-not preceding collapses or the coming depression) borrowing was very easy, particularly borrowing to buy stocks on margin. The aim then was not to keep a peasant class in order, but it did thin out the ranks of the wealthy or quasi-wealthy, often through a smashing contact with the pavement after a leap from the top floor of a hotel or office when margin calls became unbearable.

After this unhappy event, those who grew up during the Depression learned not to rely on credit. They learned old-fashioned virtues such as thrift. People did not borrow money to buy a radio or a washing machine. Instead, they saved pennies and dollars until they could afford to purchase worthwhile consumer goods.

This mind-set is anathema to corporate America. If people wait to buy things until they can afford them, the cash flow for large corporations decreases, which directly affects CEO bonuses and hugely expensive retreats such as the taxpayer-sponsored ones that AIG keeps throwing.

The solution, easily recognized by the current administration, is to ignore the wisdom of history and let companies that did not succeed because of greed and mismanagement, such as General Motors and the loan officers at the major banks, simply fail. Instead, bail them out and keep pushing the serfs further into debt-not even debt to American companies anymore but outsource the debt to China and the Middle-Eastern oil potentates.

In the Middle Ages, individual revolution at the peasant level was impossible. It took huge, almost cataclysmic events to begin to change the existing social structure. In the early 20th Century in Russia, a few charismatic leaders joined by the continually worsening lives of the peasantry, produced a successful, albeit bloody Revolution. Thomas Jefferson supposedly said, "Every generation needs a new revolution." Like two other famous Jefferson quotations, "That government is best which governs least," and "Eternal vigilance is the price of liberty," neither of which appear in Jefferson's writings, Jefferson may not have touted the need for generational revolution, which seems somewhat impractical. However, as conditions continue to worsen in the United States, whoever originated the revolutionary idea may turn out to be a prescient thinker.