Social contributor – Dickson Igwe
Debt is a supertool of modern economics transferring wealth from the 90% to the 1%
Now most consumers own debt. In fact it would not be an over assertion stating that half the population of democratic western countries are submerged in debt.
The USA is the great model of a society driven by debt, in spite of its status as the world’s largest economy. It was discovered in a recent survey that 50% of the US population would be unable to cover a $500 emergency expense.
But here is the crux. Debt drives the US economy in every way imaginable. The US national debt is over $22 trillion which is 110% of US GDP.
However the US dollar is the world’s reserve currency, and the Federal Reserve can print cash at will – or so it would appear – to cover interest payments on that national debt.
UK national debt stands at approximately $1.9 trillion. This is 88% of GDP. Again UK debt is sustainable owing to the fact that the Bank of England too can print money through the sale of bonds and various treasury instruments.
Who owns this debt? Or better stated to whom is this debt owed? The simple answer is the wealthy.
When consumers borrow, whether it is through bank loans, mortgages, or credit cards, that cash is loaned by middlemen called banks and similar institutions.
Banks are businesses too, and are owned by shareholders, investment funds, and various stockholders. So when consumers borrow at interest the bank profits go to the ultimate owners, usually wealthy investors.
Photo courtesy https://www.businessinsider.com/
And that is how the global economy operates to the benefit of the superwealthy.
Debt is the vehicle through which the 1% put cash into the pockets of the 90%- consumers- to buy the goods and services that the 1% produce.
With the onset of Austerity in 1980, Supply Side Economics drove deregulation and rent seeking.
Consumer credit became the means through which businesses sold their products and services, as the public sector shrank, with public sector workers – the largest consumer group under the Keynesian economy of the 1960s and 1970s – were placed on the unemployment line.
The consumer boom was widely encouraged with borrowing driving a new culture of ostentation further driven by retail services.
However with the consumer boom came rising debt which had to be paid for in interest payments. Interest rates were the means by which cash was transferred from consumers to wealthy investors.
As wealthy investors ploughed their cash into the expansion of their businesses such as IKEA, Hilton, Koch, Apple, Microsoft, Wal Mart, and Amazon, the returns on investment were twofold: profits from basic transactions, and profits from providing consumers with the cash to buy their products.
The 1% grew wealthier by the day, while Jack the Consumer appeared to be living a great life in a large home, with to sports utility vehicles, and annual vacations in Barbados and the Bahamas.
The reality was that this was a life financed by debt, and Jack and Jill were always one paycheck away from the poor house.
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Dickson Igwe is an education official in the Virgin Islands. He is also a national sea safety instructor. He writes a national column across media and has authored a story book on the Caribbean: ‘The Adventures of a West Indian Villager’. Dickson is focused on economics articles, and he believes economics holds the answer to the full economic and social development of the Caribbean. He is of both West African and Caribbean heritage. Dickson is married with one son.
