When did debt become acceptable?
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When did debt become acceptable?
I believe America after its first couple of wars went into debt and then paid it off as quickly as they could because they understood the shackles of debt. (I'm talking like civil war days). Fast forward to today, it seems society is very comfortable (in general) with debt. Does anyone know what the turning point was and what drove this change?
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Re: When did debt become acceptable?
The U.S. has had a national debt pretty much since the beginning.
"Historical Debt Outstanding - Annual 1790 - 1849"
http://www.treasurydirect.gov/govt/repo ... histo1.htm
"Historical Debt Outstanding - Annual 1790 - 1849"
http://www.treasurydirect.gov/govt/repo ... histo1.htm
Re: When did debt become acceptable?
Alexander Hamilton!
His basic idea was the new country needed people vested in its survival. Nothing like being invested in someones survival like them owing you money!
His basic idea was the new country needed people vested in its survival. Nothing like being invested in someones survival like them owing you money!
Re: When did debt become acceptable?
UK is planning to pay back old debt this year, some of it dating back to the 1720s. http://www.nytimes.com/2014/12/28/world ... oming.html
I don't think there has been a particular turning point, but fiat money has made it a lot easier to create debt. Now almost all money are essentially debt.
I don't think there has been a particular turning point, but fiat money has made it a lot easier to create debt. Now almost all money are essentially debt.
Re: When did debt become acceptable?
anecdotal support of BeyondTheWrap's comment ....
I was struck 15 years ago by a tour of James Monroe's estate - Fifth President of the US. Living in debt to maintain a public facade even in late 1700's. It seemed almost evil or alien to me when they described it.
Guess this lifestyle has been around for a while ....
I was struck 15 years ago by a tour of James Monroe's estate - Fifth President of the US. Living in debt to maintain a public facade even in late 1700's. It seemed almost evil or alien to me when they described it.
http://en.wikipedia.org/wiki/James_Monroe"Monroe incurred debts by his lavish and expensive lifestyle and often sold property (including slaves) to pay them off.[19] "
Guess this lifestyle has been around for a while ....
Re: When did debt become acceptable?
I think the acceptance of debt is directly proportional to the importance of appearances. Debt is a way of purchasing a lifestyle you cannot yet (and may never) afford. It has always been around, whether it's the Joneses today or the Monroes of the past. But as a cultural trend it definitely is on the rise.
Re: When did debt become acceptable?
Well, debt was used by both government and individuals LONG before this. I don't know exactly when, but I'd make a guess that debt was commonly used soon after cultures evolved/changed from small nomadic 'tribes' where things were generally owned communally (and given away very freely) to where people had things they considered their own long-term possessions. Once trading currencies existed, debt surely followed soon.
Last edited by C40 on Sun Jan 25, 2015 5:19 pm, edited 1 time in total.
Re: When did debt become acceptable?
Yes, there's a reason why Franklin had a lot to say about debt in his Autobiography -- not that he had a problem, but that it was a common problem at the time.
Thomas Jefferson was also notorious for incurring debts.
Debtor's prison was still around into the 19th century, though.
Thomas Jefferson was also notorious for incurring debts.
Debtor's prison was still around into the 19th century, though.
Re: When did debt become acceptable?
Debt has been around a long, long time. Even before currencies and barter came about. For an in-depth read on the subject check out Debt: The First 5,000 years
http://www.amazon.com/Debt-The-First-00 ... 1612191290
or see a synopsis of the book on Wikipedia...
https://en.wikipedia.org/wiki/Debt:_The ... 5000_Years
http://www.amazon.com/Debt-The-First-00 ... 1612191290
or see a synopsis of the book on Wikipedia...
https://en.wikipedia.org/wiki/Debt:_The ... 5000_Years
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Re: When did debt become acceptable?
Well, I love talking to the elderly about how things were. My wife's grandfather is still around he talks of his first house being financed at 6%. A very high rate at the time. Because he had no real collateral. Half down, and 6%. This was high, because this was in the 20's. Before decoupling gold from the dollar, a time when deflation was as common as inflation.
Nowadays, we automatically adjust for expected inflation in all debt.
I'm not saying good bad, or indifferent. Just that we should understand our preconceptions
Also,much of the Jefferson debt was leveraged business investment. Everyone wants to get rich using other people's resources.
Nowadays, we automatically adjust for expected inflation in all debt.
I'm not saying good bad, or indifferent. Just that we should understand our preconceptions
Also,much of the Jefferson debt was leveraged business investment. Everyone wants to get rich using other people's resources.
Re: When did debt become acceptable?
Are there any Game of Thrones readers among you?
It put a smirk on my face when I read that also George Martin undermined the power of the Lannister family (known as the most rich and powerful family in the book) in the blink of an eye when he introduced the fact that the Lannisters are heavily in debt to the Iron Bank of Braavos. The Iron Bank pretty much finances the elite families fighting the Game of Thrones.
Financial institutions usually don't appear in fictional novels, even less so in fantasy novels.
But in this context, the Iron Bank of Braavos fits the image of the "power of money (or debt)" too well when citing from the "Debt: The First 5000 Years" wikipedia article:
"This book documents Graeber's argument that as far back as we can see in the historical and archeological record, people with power have often established rules to benefit them and impoverish and enslave everyone else."
It put a smirk on my face when I read that also George Martin undermined the power of the Lannister family (known as the most rich and powerful family in the book) in the blink of an eye when he introduced the fact that the Lannisters are heavily in debt to the Iron Bank of Braavos. The Iron Bank pretty much finances the elite families fighting the Game of Thrones.
Financial institutions usually don't appear in fictional novels, even less so in fantasy novels.
But in this context, the Iron Bank of Braavos fits the image of the "power of money (or debt)" too well when citing from the "Debt: The First 5000 Years" wikipedia article:
"This book documents Graeber's argument that as far back as we can see in the historical and archeological record, people with power have often established rules to benefit them and impoverish and enslave everyone else."
Re: When did debt become acceptable?
thanks, i just bought it(used of course).theanimal wrote:Debt has been around a long, long time. Even before currencies and barter came about. For an in-depth read on the subject check out Debt: The First 5,000 years
http://www.amazon.com/Debt-The-First-00 ... 1612191290
always gets me how so many people are so easily swayed to take on more and more debt. heck, in Houston; if you dont have house and car payments; a family can live on $1,000 a month and most likely $1500 if you have to have a mortgage. i realize most people dont have 150K to pay off a house note, but carrying big car payments is entirely up to the individuals.
Re: When did debt become acceptable?
did some quick searching and found for the avg american with one credit card is carryin 15k in debt and the avg car loan is 27k. doing the math, on a card with 16% apr and car loan of 4% at 60 months, they are paying $300 monthly in interest alone. no wonder most people have to work until 70.leeholsen wrote:thanks, i just bought it(used of course).theanimal wrote:Debt has been around a long, long time. Even before currencies and barter came about. For an in-depth read on the subject check out Debt: The First 5,000 years
http://www.amazon.com/Debt-The-First-00 ... 1612191290
always gets me how so many people are so easily swayed to take on more and more debt. heck, in Houston; if you dont have house and car payments; a family can live on $1,000 a month and most likely $1500 if you have to have a mortgage. i realize most people dont have 150K to pay off a house note, but carrying big car payments is entirely up to the individuals.
Re: When did debt become acceptable?
thanks, i just bought it(used of course).theanimal wrote:Debt has been around a long, long time. Even before currencies and barter came about. For an in-depth read on the subject check out Debt: The First 5,000 years
http://www.amazon.com/Debt-The-First-00 ... 1612191290
always gets me how so many people are so easily swayed to take on more and more debt. heck, in Houston; if you dont have house and car payments; a family can live on $1,000 a month and most likely $1500 if you have to have a mortgage. i realize most people dont have 150K to pay off a house note, but carrying big car payments is entirely up to the individuals
did some quick searching and found for the avg american with one credit card is carryin 15k in debt and the avg car loan is 27k. doing the math, on a card with 16% apr and car loan of 4% at 60 months, they are paying $300 monthly in interest alone. no wonder most people have to work until 70.
add in the avg mortgage debt of 150k and theyre up to $600 a month, which i believe is less than what Jacob is living on; which i believe is $7000.
Re: When did debt become acceptable?
The thing with debt that is usually forgotten is the other side for whom that debt is an asset. Paying off (or cancelling) debt also means removing this asset. Debt is a deal between person A and person B. Usually person B prefers to just silently collect money from person A for ... well ...
To some degree, this is just a racket.
Graeber is interesting wrt the moral idea behind "having to pay your debt".
To some degree, this is just a racket.
Graeber is interesting wrt the moral idea behind "having to pay your debt".
Re: When did debt become acceptable?
Well, in the West, debt first really began to take off with the Italian city states. It enabled them to expand their economy using letters of credit, which were dramatically more flexible and much better instruments for managing risk and exchange than silver coins were. They outcompeted the Northern European / Baltic shipbuilders and merchants pretty handily because of their letters of credit.
The thing is, not all debt is bad. It enables societies to allocate resources more efficiently by transferring wealth from people who have it to people who can put it to productive use. The prevailing interest rate reflects the relationship between the availability of capital in proportion to the availability of profitable investments*.
Our prevailing interest rates are low because we found that by issuing credit for even marginally profitable investments, we could grow our economy (and thus jobs, consumption, etc) much faster.
Even at the national level, it was pretty clear during the post Depression era that national debt could have a useful purpose if acquired in the right way, at the right time, towards the right ends. Infrastructure which improves the efficiency of communications, transportation, and food production enables widespread prosperity that simply wouldn't be possible without a concerted effort and a degree of faith in the credit in the central government.
We do have a debt problem with our society as a whole, though, for a few reasons:
1) We had faith that we could continually slowly lower interest rates and have a near-unlimited tool for driving economic growth through investment. Since there is a finite number of potentially profitable investments at any given point in time, this eventually stopped. The key decade in which lowering interest rates become an unsustainable way to produce growth was the 70s, when we had stagflation.
2) Consumer debt doesn't lead to increasing productivity or profitability in the system as a whole, except in a small way through increasing economies of scale. Principally, it increases the wealth of the creditor at the expense of the future labor of the debtor. It's very close to a zero sum game which skews firmly in favor of creditors. Many such creditors aren't even real holders of capital, but rather are functionally government-sponsored "seekers of profitable investment" which have simply learned that they can use their powers to create serfs through consumer debt.
On the whole, this has lead to large amounts of malinvestment and wealth/labor transfers from the mass of people to a few people.
(*This is fairly idealized. This gets thrown off by tax incentives, central bank interest rates, and consumer debt)
The thing is, not all debt is bad. It enables societies to allocate resources more efficiently by transferring wealth from people who have it to people who can put it to productive use. The prevailing interest rate reflects the relationship between the availability of capital in proportion to the availability of profitable investments*.
Our prevailing interest rates are low because we found that by issuing credit for even marginally profitable investments, we could grow our economy (and thus jobs, consumption, etc) much faster.
Even at the national level, it was pretty clear during the post Depression era that national debt could have a useful purpose if acquired in the right way, at the right time, towards the right ends. Infrastructure which improves the efficiency of communications, transportation, and food production enables widespread prosperity that simply wouldn't be possible without a concerted effort and a degree of faith in the credit in the central government.
We do have a debt problem with our society as a whole, though, for a few reasons:
1) We had faith that we could continually slowly lower interest rates and have a near-unlimited tool for driving economic growth through investment. Since there is a finite number of potentially profitable investments at any given point in time, this eventually stopped. The key decade in which lowering interest rates become an unsustainable way to produce growth was the 70s, when we had stagflation.
2) Consumer debt doesn't lead to increasing productivity or profitability in the system as a whole, except in a small way through increasing economies of scale. Principally, it increases the wealth of the creditor at the expense of the future labor of the debtor. It's very close to a zero sum game which skews firmly in favor of creditors. Many such creditors aren't even real holders of capital, but rather are functionally government-sponsored "seekers of profitable investment" which have simply learned that they can use their powers to create serfs through consumer debt.
On the whole, this has lead to large amounts of malinvestment and wealth/labor transfers from the mass of people to a few people.
(*This is fairly idealized. This gets thrown off by tax incentives, central bank interest rates, and consumer debt)