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September 10, 2011

Subprime Slave System

There’s no way  Gillian Tett, FT’s US Editor, could have known how timely her column today would be.  It’s provocatively entitled “From Mesopotamia to America’s Subprime Slave System” and is about debtors and creditors throughout history. 

“Graeber believes that precisely because a world of ‘virtual credit’ tends to become profoundly exploitative, societies have often been forced to create safety-valve mechanisms to prevent social explosions; say, by forgiving debts when they became too large to repay. Mesopotamia, for example, periodically protected debtors by ‘wiping the tablets clean.’ But in the western world today, governments are intent on protecting creditors, not debtors. What makes the west an outlier, in other words, is not just the presence of credit cards or the existence of virtual credit, but the reluctance of leaders to countenance programmes of widespread debt-forgiveness of the type that used to be found in Mesopotamia.”

This is directly relevant to the central flaw in the President’s so-called jobs plan announced Thursday:  its failure to help tens of millions of homeowners with mortgages higher than the value of their homes, as the Washington Post points out today.  

The current “reluctance” to help debtors is a huge flaw that is causing an ongoing drag on the economy.  

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