Weekly update - An Inquiry in the Nature of Debt
It has been 7 days since I started the work on the subject. Let’s see what I’ve been up to.
- Went through the first chapter of the book.
- Talked with a few people about various topics. Some discussions were in depth, some were not.
- Took an overview of Anarchism, Libertarianism, Socialism, Capitalism.
- Long thinking sessions of crypto-currency, the current state of government, issues in implementing any of the above-mentioned x-isms, various countries that have notable implementations of the x-isms.
- Ethereum, fiat money etc.
- Outlining of things to be done in next week.
- Implemented various note-taking techniques.
Surely one must pay one’s debts!
This is a moral statement. It might not appear as a matter of debate in this context since we don’t have much of context so far, but the same statement is used when we loan money. It is understood that we need to pay it back. Thus, the use of the statement should have been economical, but it clearly is not. It is a moral statement - and that is why it is powerful.
From the first chapter of the book, it is established that we need to look at the history to understand what debt is.
The way history has treated debt has been very interesting. It has been understood that one must pay one’s debts - but to what level? There are many accounts that do not line up very well. We found accounts saying the debtor was punished for not paying back. We also find accounts saying the rich people were punished for forcing their subjects to pay back the debts.
During malaria outbreak in Madagascar, the government needed money to maintain the mosquito eradication program. Not a lot of money. But owing to IMF-imposed austerity programs, the government had to cut the monitoring program and ten thousand people died.
The example of Aristocratic inmates is worth noting too. Here is how it goes:
In the 1720s, one of the things that most scandalised the British public when conditions at debtors’ prisons were exposed in the popular press was the fact that these prisons were regularly divided into two sections. Aristocratic inmates, who often thought of a brief stay in Fleet of Marshalsea as something of a fashion statement, were wined and dined by liveried servants. On the “common side,” impoverished debtors were shackled together in tiny cells, “covered with filth and vermin, and suffered to die, without pity, of hunger and jail fever.”
Here, the quote from the beginning of the chapter would be useful:
If you owe the bank a hundred thousand dollars, the bank owns you. If you owe the bank a hundred million dollars, you own the bank.
To better clarify the point, consider this: What is the difference between a gangster pulling out a gun and demanding you give him a thousand dollars of “protection money”, and that same guy demanding you provide him with a thousand dollar “loan”?
Book gives many examples to further demonstrate the concept of moral confusion in debt.
Who owes what to whom?
If a rich person tortures his debtors, sells their kids and destroys his life to collect the debt, the rich person is considered to be the bad guy and many religions (including Hindu). Such people are thought to have made a contract with the Evil etc and will go to hell. However, it is also understood that debtors must pay their debt back. If they don’t do so, they’re considered bad, thought of being born at the usurer’s house as his servant ox or something on those lines.
Sure, you might argue that we will never know if they went to hell or were born as an ox in their next life, the point is that people - society had this perspective towards the situation.
Debt is often mixed with obligation. We can even argue that debt originated from obligations. Here is how:
A merchant wanted a pig for his daughter’s wedding. His neighbour happened to have many pigs. So the merchant asks his neighbour to give him a pig. Neighbour happily “gifts” him one. Now, the merchants “owes one to the neighbour”. But how much? His life? Surely that’s an exaggeration. To precisely decide how much one owes to another, the concept of debt emerged. This measurement is done through - money.
We now have a solid question: Debt vs obligation. I am not going to discuss this because I need to gather more information.
From all these accounts, it seems acceptable that to be able to understand debt (and thus money), we have to look at the history. And that is what, the book says, is the central subject.
Anarchy, crypto-currencies etc
You can always read about Anarchy, but I also found a great video - Anarchist vs. Libertarian. I liked the video because Libertarian guy is having very profound questions. I am sure you will find it very interesting. The channel itself is very good.
There is a great approach to solving the basic problem of the commerce of the Internet. It relies almost exclusively on financial institutions serving as trusted third parties to process electronic payments. This works well, but completely non-reversible payments are not possible and financial institutions cannot avoid the mediating process. With the possibility of reversal, merchants must know some things about their customers - this information may be unnecessary. It also makes a certain percentage of fraud acceptable and unavoidable.
Sure, these issues can be solved by physical currencies, but there is no way to transfer physical currency in electronic payments.
The solution is cryptographic currency - bitcoin being a popular one.
Use of cryptographic currency brings many other things to the table as well - a global marketplace, competing currencies, removal of fiat money, taking away the evil power from governments and the people involved etc.
I found the use of bitcoins interesting. And I found out that one can buy bitcoins in exchange for conventional government produced money. I found this very interesting. How would such a conversion happen?
Here is what I found:
Initially, researchers and a few people had all the bitcoins. Bitcoins started gaining popularity among other people as well and they also wanted the currency. The ideal way would be to exchange the bitcoins with services. For example, a programmer could write something for the researcher and earn bitcoins. This way feels really slow - we will have to wait till someone requires the services we offer. So instead, people decided we will just exchange it for real money since that also holds value in the society. And thus, supply and demand is now the deciding factor of the conversion rate of BTC to other currencies.
I personally think “buying” bitcoins is not a good idea especially if one can find someone who has bitcoins and is ready to exchange it for services.
I would have to have the expensive hardware to be able to mine (technical term - basically means I can generate bitcoins). This would require me to be rich. So rich people would be able to create more and more bitcoins and stay rich even if we move to bitcoins completely! Not a nice thing, surely. But the complexity of mining increases exponentially and thus the mining will keep slowing down faster and faster. Hardware is also getting faster and faster. So I am not sure how this is taken care of, but for now, it seems even in the case of bitcoins, riches are favoured.
So, that’s a lot for a weekly update. Feel free to talk over twitter, email, calls etc on the subject.