Guestboner: On debt as a social construct

Giant guestpost by Boneflour.

The Magic Goblin Godfairies of the Modern Economy

I.

Biden announced today that he was canceling $10,000 in debt for most people with federal loans:

https://www.cnbc.com/2022/08/24/biden-expected-to-cancel-10000-in-federal-student-loan-debt-for-most-borrowers.html

For me, this was an inevitable occurrence that had been in the works for at least two years. If you Google “date of first student loan suspension”, Google will tell you that the first suspension of student loan payments was in March 20, 2020. Somewhere between that date and when they extended it through August of that year, I started telling family members with student loans to stop paying anything on those loans.

“No payments, 0% interest, no collections on defaulted loans? Look, take your student loan payment, put it into something that says ‘Blackrock’ or ‘Vanguard’, and wait till they turn payments back on or forgive the debt. Pay off credit cards. Get it in the bank even. Just don’t spend it.”

But when I showed the headline about the debt cancellation to Aeoli, I got suspicion and disbelief:

“I’ll believe it when I see the potential for grift in loan forgiveness.

If they’re doing something nice for people due to economic factors then the apocalypse is approaching faster than I’ve been predicting, but I don’t think that’s it.

This looks like an election-year headline that’s designed to be walked back to small one-time checks for blacks.”

The reaction made me do a double-take. On the one hand, I have been on the money/budget train for a while. This was looking like a ‘when, not if’ event for years now. On the other hand, Aeoli has been relatively better on political predictions. Pretty sure I lost money betting against him at least once.

Fortunately, Aeoli saw the opportunity for grift after a couple minutes. Itz happening, probably. Whew. It’d be silly to write something like this and be wrong about THE central fact of the post in a week or something.

But hang on. Why was this thing that was obvious to me something that looked like fake news to Aeoli? Is the apocalypse approaching faster after all? What was the missing grift that stood in between the news of the headline, and acceptance? (I really probably should have asked!)

Then again, it wasn’t just news about politics, but news about money. And there is a Shadow that stands behind our modern life. Behind its buildings, behind its people, behind everything we see in this world, even the physical dollar bill itself. A place that most people don’t like to think about, that seems to the uninitiated to flicker in and out of existence… Yet the powerful use its realm to create the reality we are bound by.

And the logic of that place made it inevitable that this day would come.

II.

What even is debt, anyway?

One thing that debt is, a thing that makes it… strange, is that debt is very much a social construct. Even the balance of a loan is subject to change based on who owes the debt, and to whom the debt is owed. What people believe about a social construct IS the construct, in a very real sense.

For instance, take a loan for ten thousand dollars. $10,000… or 10k, depending on who you are. Even the representation of the thing shifts in front of us. How much is that debt worth?

If you say $10,000, you probably at least tried to pay your student loans. “Ok, fine, it’s probably closer to $10,000 plus whatever the interest is.” That’s what it’s worth to you, but even then you would be wrong. Why? Because you tried to pay it off.

$10,000 – $10,000 = $0, AKA You Might Be A Member Of The Middle Class If…

—

A relative sent me this story floating around their corner of the internet. I think this is as close as you can get to the prototypical middle class conception of debt:

Via https://twitter.com/lackingceremony/status/1364052684223913988

Here is how credit cards work:

Imagine stumbling into a fairy ring that belongs to the fairy mafia. An enchanting being appears, smile wide enough to reveal rows of sharp and glistening teeth, and it remarks, “Why, traveler, you look positively destitute! I have just the thing!”

It turns its palms up, revealing fistfuls of gold coins. Gold coins falling to the moss below. Gold coins all around you.

“Borrow whatever you’d like! Just bring it back by the next full moon, alright, my sweet?”

That’s when you notice its necklace of withered human fingers.

You take a handful of gold coins, because you really do need the money. As long as you pay this strange creature back before the next full moon, nothing bad will come of it.

Now, obviously the fairy is trying to trick you. You know that! But you’re confident you can outwit it.

You borrow what you need, and you return it to that magical forest place before the moon fills. All is well. Better than well! The fairy grows fond of you, leaving you larger and larger piles of gold to borrow.

Other fairies begin to make offerings to you as you walk the woods.

One month, life is particularly cruel to you. You can’t pay back the gold you borrowed.

On the night of the full moon, the being appears. “Don’t worry, my sweet. I am merciful. Just give me what you have today, and pay the rest by next moon.” It strokes its gruesome necklace.

“I’m sorry,” you say. “I’ll earn the money. I’ll pay back the debt!”

“Don’t worry at all, precious darling! All in due time. Things have a way of working themselves out.” And then, before disappearing in a puff of smoke, whispered under its breath: “that’s the first finger.”

The fairy keeps leaving you bigger piles of gold. The temptation grows stronger. Eventually, you come to think of it as your gold.

You borrow too much sometimes, and can’t pay it back. “Two fingers,” it whispers without sound. Then three. It keeps letting you take more money.

One day, you realize that regardless of whether you make good on your debts, you can’t stop borrowing more gold. Not only because you’ve built your life around it, but also because if you ever stopped borrowing it would make the fairies very angry. Not just this one. All of them.

You look around you at the world. Your fellow villagers have all fallen under the sway of the fairies. Borrowed fairy gold runs your whole town. People only do business with others if they are known to be in the favour of the fairies. Every day, more hands with missing fingers.

The savvy villager knows just what to do: borrow small amounts of gold regularly, to attract the attention and good graces of the fairies, and always repay it in full before the next moon, knowing it is not their gold. Get charmed and keep their fingers.

Few villagers are savvy.

Anyways, “sinister temptations from the fairy mafia, who will love you dearly if you play their game right” is the framework that helps me make my best credit decisions. Maybe it will be helpful to someone else out there too.”

I think this is, by and large, the “I worked hard and did the right thing” person’s view of debt.

It was my view of debt, once upon a time. The ideal version of this looks like the Standard Life Script, where you go to college, get a job, buy a house, and make payments on things till you die or retire.

For people slipping down the ladder, it looks like leasing a sectional couch, making payments until you run out of money to maintain appearances, and then Aaron’s sends a repo guy your way. You lose a couple fingers to the goblin fairies, but it’s a fair cop. That was the agreement, after all.

But then! THE STATE walks over and bails out the most irresponsible people a normal, hard working son of a gun can think of!

(Besides the banks, of course. They’re always bailing out the banks. And the corporations, but what are you going to do? And the various countries we ladle aid dollars on, but we gotta Stand By Ukraine™. And of course we need More For Israel™.)

Tons of irresponsible borrowers, the people that didn’t even try to pay off their loans, who probably got a degree in Gender Studies, they suddenly get $10,000 off the top, just… vaporized. Won’t someone send a stern warning about responsibility? Won’t someone think of the middle class?

III.

As fate would have it, we do have someone willing to give Stern Warnings about Responsibility and Potential Consequences. We have The Man From The GOP.

What is the net result of this messaging?

The middle class, the people too poor to print money from assets, but who make too much to be “Government Poor”. What happens to them?

They learn that it is somehow not right to use the various government programs. Any legal breaks they could qualify for, any government check-boxes that give boosts based purely on self-identification? To benefit from the system as it is would mean they stop being Real Americans.

After all, Real Americans pay back their loans. Period. Real Congressmen, of course, get their PPP loans forgiven:

—

How does the lower class think about debt? Let’s ask the question again, changing the who and whom. Take a loan for $10,000. How much is that debt worth?

If you’re a hospital system, it’s worth maybe $200 when you bundle it up and sell it to a collections agency. It’s a lot of work to chase people around and shake them down for whatever they got, and the hospital is busy billing Medicaid anyway. So they sell their right to collect the debt to a collections agency. Whoever the hospital treated that didn’t pay, that person now owes the collections agency.

I read an interview with a rural hospital CEO who estimated that over 50% of their bills from people without insurance went to collections. You know the medical debt that can threaten to wipe out anyone with a hint of assets? A person that gets found knocked out from overdosing in a dumpster is legally required to get the same expensive, life saving treatment as someone else who has insurance… or at least a car to repo.

To the druggie, it’s effectively free money. They got the expensive medical care and are gone.

If you’re a little bit higher up the ladder? Being $10,000 in debt and below the federal poverty line makes you Government Poor. Your social worker will figure out if that means you qualify for six government programs or eight. All you have to do is say you’re too tired to follow the call in procedure. If anything, $10,000 could be worth more than the original sum, especially if, as a ‘distressed borrower’ if, as a distressed borrower, you qualify for emergency financing or can negotiate down the debt.

As an aside, of course, (of course!), THE JEWS would be in on this scheme up to their eyeballs. While Real America is working hard to pay back those debts, THE JEWS are building entire towns out of Section 8 money: https://www.latimes.com/nation/la-na-new-jersey-orthodox-20170923-story.html

All of those people have become invisible, because now we’re talking about Gender Studies graduates getting a $10,000 debt writeoff. It’s Hipsters On Food Stamps again: https://thelastpsychiatrist.com/2012/11/hipsters_on_food_stamps.html

I had forgotten about even the idea of Welfare Queens until doing background for this post. So many things have happened so fast it’s hard to keep track. Biden bumped food stamp benefits 27% last August. And what do you know, boxes got smaller, prices got bigger. Well, Real Americans are just going to have to dig deeper. For everyone else, there’s Free Money™

What about them, Jim? 800 billion in Coronavirus loans, 200 billion for student loans, 54 billion for Ukraine, and the GOP response amounts to:

1. Highlighting the Democrats successfully rewarding their demographics with government money
2. Disqualifying their own constituencies from getting anything!

IV.

If you want to understand how people on the incline use debt, I like this Real Estate Twitter guy:

This is a guy who understands the meaning of ‘leverage’ – that is, debt as a lever to increase the value of his personal assets and labor.

What is debt? Debt is money… so long as you don’t pay it back. The people at the top get to run the money printer, or have a pile of assets that works much the same way. The people at the bottom get handouts and program benefits.

The people in between get slowly lowered into the gaping chasm of poverty- whoops, I mean a constant erosion of purchasing power- ah, uh. I of course mean the quiet dignity of being Real Americans.

I remember this old story from Weimar Germany, right near the beginning of the hyperinflation. A salaried professional was decently into the stock market, and was almost nervously watching the numbers go up. I mean, prices were going up too, but the guy wasn’t noticing as much because his assets were rising at the same time.

He went to the market to buy produce, and an older man came up to him in line.

“How much are these apples today, do you know?” the old man said.

“Looks like about 17 marks per apple, today”, the salaryman replied.

The old man looked deflated. “I can’t afford 17 marks per apple on my pension.”

Anyone on a fixed income in Weimar Germany got obliterated. Hyperinflation destroyed the purchasing power of money so fast that prices were changing multiple times a day. Yesterday it was a million marks to buy a loaf of bread. So you pull out two million marks to buy some bread, just in case. Whoops, tough luck, it’s six million marks for a loaf, now.

We’re lucky enough to just have regular inflation here.

—

When you have inflation, you can go two ways. (Hypersimplified, no financial advice, it’s illegal to have opinions on this stuff so I certainly don’t claim to)

-You can raise interest rates, which makes people on debt have a hard time, and rewards anyone with cash in the bank.

OR

-You can just keep inflating, which makes it easy for anyone on debt to pay it all off in inflated dollars and/or keep borrowing more.

Who has debt? And who has cash in the bank? Turns out everyone on top is loaded with debt. Debt is how they pay for things without paying taxes. Like the only rich people that don’t like debt are Steve Jobs and Dave Ramsey, and one of those guys is dead. Coincidentally, Apple is now near 300 billion dollars in debt. This is great for them, because they don’t pay tax on their cash, and interest rates are low.

If these gigacorps were too big to fail over a decade ago, you think we’re going to endure that pain today? And ruin Nanci Pelosi’s stock portfolio?

Who has cash in the bank? The middle class, some of them. For now. And when that runs out, I’m sure they can get some emergency financing at a reasonable monthly payment. Don’t worry, they’ll be too proud for bankruptcy or programs.

You can see a glimpse of the future in what’s happening in the UK right now. How are they dealing with house prices so high that no one can afford to live? Restricting foreign investment? Reducing financialization?

Hell no. They’re seeing if you want to sell your kids into debt:
https://www.bloomberg.com/news/articles/2022-07-01/johnson-weighs-50-year-mortgages-that-children-can-inherit#xj4y7vzkg

Last story. I remember reading some random news article from the early 2000s about some reporter doing people watching while on the trading floor of the New York Stock Exchange. The part I remember went something like:

“Despite working as a janitor at the New York Stock Exchange, he said he never learned to invest. On the one hand, you have the traders on the floor, staving off the declining purchasing power of the dollar by working to make more of those inflated dollars. On the other hand, you have the janitor, getting poorer despite making the same wage… never bothering to become interested in the opportunities happening literally feet away from him.”

—

“For those who are aware of where we’re heading, this is going to be the golden age of inflection and Event-Driven investing. For everyone else, it will be absolutely miserable.”

–https://adventuresincapitalism.com/2022/08/22/the-pause/

Don’t get me wrong, credit card debt will wipe you out like the story of ye olde faerie mafia warned about. I wouldn’t recommend anyone start off learning about finances by borrowing money, for sure.

But remaining ignorant of one of the main ways our rulers maintain their power is losing by default. If ‘money stuff’ makes your eyes glaze over, you will be ruled by the Shadow looming behind the world we live in.

Might have to assimilate that sheeit: https://aeolipera.wordpress.com/2020/05/25/of-swords-and-shadows/

Get a budget. Learn a new marketable skill. Change jobs for a pay bump. Take this last window of cheapish loans to buy a house you can comfortably make payments on. Hell, buy a couple used cars and resell them to Californians in a few years. Apply for government grants, anything to get out of the quicksand pit that is The Economy.

Just don’t be surprised when the people that run it ‘vote’ themselves more money.