In lieu of sharing my own stories, I have amalgamated three stories with a common bond, debt, that has been preoccupying me both in my dealings with microfinance (the less rosy picture of credit is debt) and in my own musings on life. As my job involves promoting the extension of credit to poor entrepreneurs and as my life is composed of relationships and takes place in the grander narrative of history, I believe these issues are okay to ruminate on. I would opine on the matter at great length, and perhaps will in a later post, but for now let me share with you three pieces that may give insight into the puzzle I’m assembling and disassembling in my mind on long walks in the wee hours of the night.
First, to give deference to my post’s title, is a lecture/sermon series given by Andy Stanley that I found by accident when looking at a funny parable using Starbucks (“Coffee is good”…”All the time!”). It is called iMarriage and the first part (there are three) deals with the tricky cross-over between desires and expectations and all the consequences this has for marriages. I’ve included the first part of NorthPoint’s Marriage Expectations below:
In the middle of this talk, Andy mentions how insidious the shift from desire to expectation can be and how romance is necessarily snuffed out by the introduction of a debt/debtor mindset. While I affirm his beliefs, I obviously have never been married and thus have no basis for my supportive opinion. What I do have, however, is the experience of playing board games with roommates and friends. At the point where one player replaces the mystery of the outcome and the desires of world domination (I’m talking about the game Risk, but insert the title of whatever game you play) with an expectation that one player will obviously win, it takes all excitement and all joy out of the game. If you win, it was expected and you may even feel disappointed that you didn’t win in a more convincing fashion. This same joy-killing attitude can infect sports and obviously marriages.
So moving on to the specific idea of DEBT as it affects personal relationships, I point you toward a good article by the Canadian author Margaret Atwood. Entitled “A Matter of Life and Debt”, Ms. Atwood’s article in the New York Times came at the height of the unraveling of the American financial system in October. I have included it below but you can also find it here.
A Matter of Life and Debt
THIS week, credit has begun to loosen, stock markets have been encouraged enough to reclaim lost ground (at least for now) and there is a collective sigh of hope that lenders will begin to trust in the financial system again.
But we’re deluding ourselves if we assume that we can recover from the crisis of 2008 so quickly and easily simply by watching the Dow creep upward. The wounds go deeper than that. To heal them, we must repair the broken moral balance that let this chaos loose.
Debt — who owes what to whom, or to what, and how that debt gets paid — is a subject much larger than money. It has to do with our basic sense of fairness, a sense that is embedded in all of our exchanges with our fellow human beings.
But at some point we stopped seeing debt as a simple personal relationship. The human factor became diminished. Maybe it had something to do with the sheer volume of transactions that computers have enabled. But what we seem to have forgotten is that the debtor is only one twin in a joined-at-the-hip pair, the other twin being the creditor. The whole edifice rests on a few fundamental principles that are inherent in us.
We are social creatures who must interact for mutual benefit, and — the negative version — who harbor grudges when we feel we’ve been treated unfairly. Without a sense of fairness and also a level of trust, without a system of reciprocal altruism and tit-for-tat — one good turn deserves another, and so does one bad turn — no one would ever lend anything, as there would be no expectation of being paid back. And people would lie, cheat and steal with abandon, as there would be no punishments for such behavior.
Children begin saying, “That’s not fair!” long before they start figuring out money; they exchange favors, toys and punches early in life, setting their own exchange rates. Almost every human interaction involves debts incurred — debts that are either paid, in which case balance is restored, or else not, in which case people feel angry. A simple example: You’re in your car, and you let someone else go ahead of you, and the driver doesn’t nod, wave or honk. How do you feel?
Once you start looking at life through these spectacles, debtor-creditor relationships play out in fascinating ways. In many religions, for instance. The version of the Lord’s Prayer I memorized as a child included the line, “Forgive us our debts as we forgive our debtors.” In Aramaic, the language that Jesus himself spoke, the word for “debt” and the word for “sin” are the same. And although many people assume that “debts” in these contexts refer to spiritual debts or trespasses, debts are also considered sins. If you don’t pay back what’s owed, you cause harm to others.
The fairness essential to debt and redemption is reflected in the afterlives of many religions, in which crimes unpunished in this world get their comeuppance in the next. For instance, hell, in Dante’s “Divine Comedy,” is the place where absolutely everything is remembered by those in torment, whereas in heaven you forget your personal self and who still owes you five bucks and instead turn to the contemplation of selfless Being.
Debtor-creditor bonds are also central to the plots of many novels — especially those from the 19th century, when the boom-and-bust cycles of manufacturing and no-holds-barred capitalism were new and frightening phenomena, and ruined many. Such stories tell what happens when you don’t pay, won’t pay or can’t pay, and when official punishments ranged from debtors’ prisons to debt slavery.
In “Uncle Tom’s Cabin,” for example, human beings are sold to pay off the rashly contracted debts. In “Madame Bovary,” a provincial wife takes not only to love and extramarital sex as an escape from boredom, but also — more dangerously — to overspending. She poisons herself when her unpaid creditor threatens to expose her double life. Had Emma Bovary but learned double-entry bookkeeping and drawn up a budget, she could easily have gone on with her hobby of adultery.
For her part, Lily Bart in “The House of Mirth” fails to see that if a man lends you money and charges no interest, he’s going to want payment of some other kind.
As for what will happen to us next, I have no safe answers. If fair regulations are established and credibility is restored, people will stop walking around in a daze, roll up their sleeves and start picking up the pieces. Things unconnected with money will be valued more — friends, family, a walk in the woods. “I” will be spoken less, “we” will return, as people recognize that there is such a thing as the common good.
On the other hand, if fair regulations are not established and rebuilding seems impossible, we could have social unrest on a scale we haven’t seen for years.
Is there any bright side to this? Perhaps we’ll have some breathing room — a chance to re-evaluate our goals and to take stock of our relationship to the living planet from which we derive all our nourishment, and without which debt finally won’t matter.
To end this triumvirate with the Julius-Caesar character being DEBT, I present an interview that noted English/American author Niall Ferguson gave to the German paper Der Spiegel today. If you are wondering about the connection, I just finished Niall Ferguson’s massively long book “The War of the World” encompassing 880 pages so I am pretty engrossed into his worldview. Also his interview is entitled “A World War Without War” and he delves into insights he garnered whilst writing his tome on the First and Second World Wars. In the interview he describes the current arc of history and specifically refers to the recent past and upcoming future as Chimerca, a marriage relationship between the United States and China based on debt/debtor version of marriage. You can read the article here or simply scroll down:
11/11/2008 04:47 PM
NIALL FERGUSON ON OBAMA AND THE GLOBAL CRISIS
‘A World War without War’
In a SPIEGEL interview, British historian Niall Ferguson discusses Barack Obama’s historical election, Europe’s hopes for the new president, the consequences of the economic crisis and his idea of “Chimerica” — the economic alliance between Beijing and Washington.
SPIEGEL: Mr. Ferguson, were you moved when you saw the future president, Barack Obama, in Chicago?
Ferguson: Yes, it was a very moving moment. It was similar to the release of Nelson Mandela. When Obama was born, in 1961, mixed marriages between blacks and whites were still illegal in one-third of the American states.
SPIEGEL: Historically speaking, that was yesterday,
Ferguson: Of course. But we are talking about ordinary discrimination, not just the legacy of slavery. And it had not disappeared. It is astonishing that the transformation from a racist America to an America that elects a black man to the White House was possible within that period of time. Even the world’s most dogmatic conservative ought to be moved.
SPIEGEL: You initially favored John McCain?
Ferguson: I have become a convert in the last six months because of Obama’s extraordinary combination of rhetorical genius, coolness under fire and organizational skills. This was the best election campaign we have ever experienced.
SPIEGEL: Which doesn’t necessarily have to mean a great presidency.
Ferguson: What it means is enough: the death of racism, the end of the original American sin and, most of all, the right reaction to end the economic crisis. Obama can stimulate self-confidence because he is so calm and collected. He will not simply put an end to the crisis or ensure that banks lend money again. He is a politician, not the Messiah. But he can change the national mood. Americans are lucky that they were able to elect him now, just as the panic reached its climax. It is as if they had voted Roosevelt into office earlier, in 1930, and not in 1933.
SPIEGEL: Shouldn’t the world have seen it coming, the economic crisis we are now experiencing?
Ferguson: Of course, it has been clear since 2006. I know that for many people it doesn’t feel that way. They are horrified because they were taken by surprise, and they are in a panic because the enemy comes from within. The system is the enemy. And they don’t understand the nuances of the crisis, which makes them afraid.
SPIEGEL: In retrospect, historians are usually right. What did you foresee in 2006?
Ferguson: Excessive debt. The debts of private households and the financial institutions reached levels that could no longer be offset. Then came the bubble in the real estate market, when prices doubled even though the houses weren’t worth the money. But most of all, there was the ignorance of the bankers, hedge fund managers and financial experts in the political arena, who did not want to recognize something that was plain as day.
Ferguson: That a liquidity crisis could happen. That they would run out of money. “Impossible,” everyone was saying at the time.
SPIEGEL: It sounds a little self-opinionated for you to claim that you had predicted all of this for years.
Ferguson: Oh, I’ve been wrong before. The thing I was wrong about was the trigger.
SPIEGEL: The trigger?
Ferguson: I had believed that the price of oil would be the cause of the world economic crisis, and that the necessary trigger would be a second defenestration, a second Sarajevo and perhaps even a war, a truly major war.
SPIEGEL: Iraq and Afghanistan don’t count?
Ferguson: Too small. I had believed that a geopolitical event would lead to a credit crisis, but this crisis is so fundamental that it was capable of triggering itself. Money disappeared, and now companies can no longer refinance, can no longer borrow anything. Now it’ll be bloody.
SPIEGEL: Are the bubbles happening with greater frequency than before, or is this just the way we perceive it? Or has the world economy consisted of a single super-bubble for some time now, as speculator George Soros says?
Ferguson: There have been bubbles large and small, again and again since 1700. First there was the tulip bubble and then, in 1890, it was all about the gold mines. No, we haven’t even changed the rules of the game. If a central bank makes loans available to speculators at low interest rates, we have a bubble. Always, it’s guaranteed. Yesterday, today and tomorrow again.
SPIEGEL: Do you consider the US government’s so-called bailout plan and the Europeans’ investments in banks to be pointless?
Ferguson: No, but it is not clear that they will work. We have a situation like 1914 or 1931, and the financial and fiscal authorities have learned from history. They are doing the right thing. They are trying everything to prevent us from getting into a Great Depression.
SPIEGEL: With success?
Ferguson: We will see. So far, success has meant that relatively few banks have collapsed, whereas in the 1930s it was thousands. At that time, the gross national product dropped by 30 percent and there was 25 percent unemployment in the United States. This time we will have a painful recession, but not figures like those. What I truly criticize is the fact that so much time was wasted.
SPIEGEL: What was lost as a result?
Ferguson: Flexibility. Clout. A lot of money. Many, many possible solutions. The US treasury secretary should have flown to Beijing and could have solicited investment in American banks, which would have benefited everyone. Those who combat a crisis early on can prevent its effects from becoming too entrenched.
SPIEGEL: Is confidence in the market’s ability to purify itself dead?
Ferguson: Yes. But a true Armageddon was needed before the Republicans could be made to understand. A world war without war, a state of emergency, was needed. Now we are responding the way they did in World War I: with moratoriums, suspension of trading, new money. It’s fascinating. And it wasn’t the fault of Alan Greenspan …
SPIEGEL: … the former Federal Reserve Bank chairman …
Ferguson: … who believed that the market would regulate everything, and yet the assignment of blame is too simplistic. We are all at fault. Who in America or Great Britain didn’t take out a loan for a house that was far too expensive or for a car? And then all of these bubbles come to resemble one another, but the financial world is immune against the whole thing.
Ferguson: Most managers leave the educational system completely unequipped for the decisions they will have to make. They learn business as a mathematical discipline. They know nothing about what happened before their careers began. Many working on Wall Street today don’t even know what happened in 2000, after the Internet boom.
‘A Crisis of the Western World’
SPIEGEL: Does the system teach people to be irresponsible?
Ferguson: And to be naïve. For these people, it must have felt as if nothing could go wrong between 2001-2007. When that happens, one is tempted to make one’s own experience part of the theory of financial history.
SPIEGEL: Is it a coincidence that this crash began in the United States?
Ferguson: It could have started anywhere. The system was an upside-down pyramid, a pyramid made up of securities, derivatives, bets and loans, and all of it was balanced on a fragile tip consisting of mortgages. If it had happened someplace else, the consequences just wouldn’t have been as dramatic. But it had to tip over. It was a crisis of the Western world, and then it turned into a global crisis.
SPIEGEL: Will Barack Obama truly change the world? Or world politics?
Ferguson: Yes, by virtue of his very existence. The world is waiting for him, ready for a different America. The United States has the opportunity to remake itself without Obama having to make many changes to its foreign policy. He will close Guantanamo and declare an end to torture. All he has to do is change the tone and the game will already change because he is the one playing it. That is the real phenomenon. By virtue of his sheer existence, he reestablishes American credibility.
SPIEGEL: There are concerns in Germany that a President Obama will demand more soldiers for Afghanistan. On the other hand, there is hope that he will pursue multilateral policies.
Ferguson: Both are justified. Obama will certainly focus on Afghanistan, while at the same time attempting to withdraw Americans and get international soldiers. A true challenge could arise if Iran or al-Qaida tried to test Obama. Al-Qaida hasn’t been taken over by J.P. Morgan yet, and Iran won’t abandon its nuclear policy just because a black man is in the White House. Both dangers still exist. However, I believe that all of these issues, including Kyoto, will initially fade into the background because the economic crisis will demand our attention for a long time.
SPIEGEL: What will the consequences of the crisis be?
Ferguson: New York could turn into Venice.
SPIEGEL: A museum of itself?
Ferguson: At least in the distant future, in 100 or 200 years. The more that happens in Asia, the better London’s position will be, even from a geographic standpoint. The same, of course, applies to Shanghai, or Hong Kong.
SPIEGEL: Life is unfair.
Ferguson: Money has never been fair.
SPIEGEL: Isn’t Europe better equipped for times of crisis? More modern?
Ferguson: Perhaps, but Europe will be more severely hit by the crisis. In Great Britain, Switzerland, Belgium and Germany, the financial sector constitutes a higher percentage of the gross domestic product than in America, which is why the impact will be far greater in Europe. And Russia, Iran and Venezuela are feeling the brunt of falling oil prices.
SPIEGEL: In other words, the United States could become a winner in the current crisis, for which it bears the blame?
Ferguson: Absolutely. Obituaries are premature. It depends on how China reacts. The Chinese have achieved exchange rate stability and protected the dollar with artificial interventions. They will continue their policies because they now own vast numbers of dollars and export goods that are paid for in dollars. The United States and China are involved in a marriage like my wife’s and mine.
SPIEGEL: The wife …
Ferguson: (laughs) … spends what the husband saves and earns. A very healthy equilibrium. It will remain that way.
SPIEGEL: What is so healthy about it?
Ferguson: It has always been the case that one economy offsets the weaknesses of others. There is nothing wrong with that. The United States can afford to pay for this crisis as long as it gets cheap money in Beijing — that is, by paying not much more than four percent interest. And China needs its exports to the United States to continue growing. Chimerica …
SPIEGEL: … that’s what you call the structure of the Chinese and US economies in your new book …
Ferguson: … is no chimera, but rather a functioning alliance. Of the big three — China, Russia and America — two always join forces in a coalition, and neither China nor the United States has any reason to prefer Russia as a partner.
SPIEGEL: And yet the American deficit cannot be healthy.
Ferguson: Well, it’ll balance itself out a little now. But if the United States had a balanced budget, it would be a shock for the global system. No one can seriously want this to happen. If the Americans started saving the way the Chinese do, that’s when we would have a Great Depression!
SPIEGEL: That was one of Barack Obama’s key warnings: “We borrow money in China and use it to buy oil in Saudi Arabia.” During the campaign, he repeatedly promised that he would put an end to this.
Ferguson: A few foreign policy advisors will probably explain to him very quickly that he would be better off not to touch the relationship with China.
SPIEGEL: But there is some truth to his sentence.
Ferguson: That’s true, but it is also an over-simplification. Americans want to buy goods inexpensively, and the Chinese can produce inexpensively. Does anyone want to upset this system? Imbalances should exist in a global economy. Nations grow at different rates, and the system is there to transfer profits and savings from one place to another. This makes much more sense than the financial autarchy of the 1950s, when there were no international transactions.
SPIEGEL: It’s hard to believe. In the end, you think everything is fine the way it is?
Ferguson: No, but the subject isn’t the deficit or America’s dependence on China. China has become somewhat more self-confident and America somewhat more insecure, but China is no rival for America, neither militarily nor economically. The subject is dependence on oil, which is a technological subject, not a financial one.
SPIEGEL: Responsible politicians …
Ferguson: … would borrow money in China and invest in clean technology, in wind power and solar power. That would be a rational strategy. It was crazy to borrow money in China and burn through it by speculating in the real estate market.
SPIEGEL: So you don’t think lending is the problem?
Ferguson: It never has been. Lending transactions are the basis of the economy. It isn’t lending, it’s investment. If you don’t invest, but just consume, you bring about your own ruin.
SPIEGEL: Will European-American relations change?
Ferguson: Yes, but not in the way many Europeans expect. Democrats and Republicans are not that different on foreign policy. In fact, there is much more continuity than you would think. Will Obama be the antithesis to Bush? No, because the national interests of the United States have remained the same.
SPIEGEL: Obama has not had a relationship with Europe so far.
Ferguson: And for that reason he will see Europe as a single entity. He’ll be surprised, because he doesn’t know whom to call when he wants to speak to Europe. Europe will present itself to him as a group of sovereign states, and Messrs. Sarkozy and Brown, and Ms. Merkel, will all want to be his best friend, each of them on their own.
SPIEGEL: What will the new American president be able to achieve economically, if anything?
Ferguson: He promises a feeling of change, not necessarily real change. But the feeling is already important enough. This whole crisis has to do with trust and self-confidence. We need a US president who brings renewal.
SPIEGEL: So what can Obama do?
Ferguson: He can give a great inauguration speech.
SPIEGEL: And what else?
Ferguson: Give more great speeches.
SPIEGEL: He can’t do more?
Ferguson: No, because he will have the least latitude of all presidents we can remember. Obama wants to assemble a nonpartisan government, and we will experience a more cautious first 100 days than we did under Bill Clinton. He will be cautious to the point of being boring. This will be precisely his great strength.
SPIEGEL: Where does the problem lie?
Ferguson: With Hank Paulson.
SPIEGEL: What does the current treasury secretary have to do with Obama?
Ferguson: Because of his big bailout plan, Paulson has already spent the money for Obama’s healthcare reform and for his tax cuts. The money is gone.
SPIEGEL: Mr. Ferguson, we thank you for this interview.
Interview conducted by Klaus Brinkbäumer.
And there you have it, an inside glimpse into how Josh’s pseudomemories are fortified. By drawing together disparate pieces of information gathered in the course of my past few days and pondering how they could fit together, I am beginning to formulate deeply held beliefs about marriage, debt, and world history. While I am notorious for having opinions and knowing what they are but then refusing to share them unless absolutely pressed, here is a glimpse into how they sometimes meld into what I call a pseudomemory.
Memories are just imagination with a hint of arrogance thrown in. If one is honest, we would realize that what we take as ‘MEMORY’ is really just an imaginative reorganizing of the myriad of experiences and information we have received in our past into a format we can understand (and especially minute amounts of all we have received…if you think of sample sizes and their effect on the validity of a research experiment, then it ought to become readily apparent to us how tenuous our bases for opinions are and hence how lightly we ought to regard them when substantial issues are at stake [ie our relationships with other people, nations, and God]). Obviously I have read much more than these two articles and Mr. Ferguson’s book in the past week and heard more people talk than Mr Stanley and have thought extensively on other topics, but for some reason or another, those three sources came to form an idea that I probably will tuck away for future reference when consulted on the topic of marriage/debt/world history. Though memory is rightfully the storage area of knowledge and experience that inform our current opinions, I prefer to view any PARTICULAR delving into that ocean as a pseudomemory- a hazy idea formed of memorable components could easily be re-arranged tomorrow to justify a new course of action. Let the prefix add humility to a word which connotes pride and, if unexamined, can lead to disastrous consequences (ie nationalism, stubborn policies, fundamentalism, judgmentalism, etc.).
Now if you can excuse me, I need to dismount off my high horse and get back to work.