Another Sign that Economic Recovery Isn't Reaching Everyone

Chase is rolling out new ATMs that dispense $1 and $5 bills.

The option to get exact change will be a plus for customers -- including those with low account balances who want to take out less than $20 or who need $25 but don't want to take out $40, for example, said Greg McBride, senior financial analyst at Bankrate.com.

"Particularly in difficult financial times when peoples' account balances have been lower, not having to withdraw more money than you really need is helpful," said McBride.

History of Debt

There is a fascinating interview with David Graeber author of Debt: The First 5,000 Years on the blog Naked Capitalism which turns a lot of our conceptions about the origin of money on its head and which examines the role and consequences of indebtedness on all aspects of society.  I highly recommend the article.  Here are some highlights:

Money evolving out of barter is a myth.  Rather a sense of indebtedness and mutual responsibility came long before an exact accounting of goods for trade.  

Think about what they’re saying here – basically: that a bunch of Neolithic farmers in a village somewhere, or Native Americans or whatever, will be engaging in transactions only through the spot trade. So, if your neighbor doesn’t have what you want right now, no big deal. Obviously what would really happen, and this is what anthropologists observe when neighbors do engage in something like exchange with each other, if you want your neighbor’s cow, you’d say, “wow, nice cow” and he’d say “you like it? Take it!” – and now you owe him one. Quite often people don’t even engage in exchange at all – if they were real Iroquois or other Native Americans, for example, all such things would probably be allocated by women’s councils.
So the real question is not how does barter generate some sort of medium of exchange, that then becomes money, but rather, how does that broad sense of ‘I owe you one’ turn into a precise system of measurement – that is: money as a unit of account?

The first word for "freedom" in any language was related to freedom from debt.

This was the great social evil of antiquity – families would have to start pawning off their flocks, fields and before long, their wives and children would be taken off into debt peonage. Often people would start abandoning the cities entirely, joining semi-nomadic bands, threatening to come back in force and overturn the existing order entirely. Rulers would regularly conclude the only way to prevent complete social breakdown was to declare a clean slate or ‘washing of the tablets,’ they’d cancel all consumer debt and just start over.

 In Sanskrit, Hebrew, Aramaic, ‘debt,’ ‘guilt,’ and ‘sin’ are actually the same word.

Graeber also concludes that our economic system is at tremendous risk because it does not offer enough protection to debtors.

In the past, periods dominated by virtual credit money have also been periods where there have been social protections for debtors. Once you recognize that money is just a social construct, a credit, an IOU, then first of all what is to stop people from generating it endlessly? And how do you prevent the poor from falling into debt traps and becoming effectively enslaved to the rich? That’s why you had Mesopotamian clean slates, Biblical Jubilees, Medieval laws against usury in both Christianity and Islam and so on and so forth.

Since antiquity the worst-case scenario that everyone felt would lead to total social breakdown was a major debt crisis; ordinary people would become so indebted to the top one or two percent of the population that they would start selling family members into slavery, or eventually, even themselves.

Well, what happened this time around? Instead of creating some sort of overarching institution to protect debtors, they create these grandiose, world-scale institutions like the IMF or S&P to protect creditors. They essentially declare (in defiance of all traditional economic logic) that no debtor should ever be allowed to default. Needless to say the result is catastrophic. We are experiencing something that to me, at least, looks exactly like what the ancients were most afraid of: a population of debtors skating at the edge of disaster.

Although governments and banks are behaving differently at the moment, if we recognize debt as a social agreement, we can change and negotiate the terms.

The UK takes the even weirder position that this is true even of debts the government owes to banks that have been nationalized – that is, technically, that they owe to themselves! If that means that disabled pensioners are no longer able to use public transit or youth centers have to be closed down, well that’s simply the ‘reality of the situation,’ as they put it.


These ‘realities’ are being increasingly revealed to simply be ones of power. Clearly any pretence that markets maintain themselves, that debts always have to be honored, went by the boards in 2008...

When thousands of people begin assembling in squares in Greece and Spain calling for real democracy what they are effectively saying is: “Look, in 2008 you let the cat out of the bag. If money really is just a social construct now, a promise, a set of IOUs and even trillions of debts can be made to vanish if sufficiently powerful players demand it then, if democracy is to mean anything, it means that everyone gets to weigh in on the process of how these promises are made and renegotiated.” I find this extraordinarily hopeful.

A truly interesting read worth checking out in full via the link above. I've also added Debt: The First 5,000 Years to my (overly long) to read list.

Quote of the Day: Free Markets

"In the four and a half years I worked for Sen. William Proxmire (D–Wis), I routinely met businessmen who believed in and touted the free market but who also just happened to 'need' protection from competition or a government subsidy. It was a perfectly rational request from their point of view because in most cases tax subsidies or protection from competition made them more money than they could have gotten by producing something that met consumers’ needs."-Martin Lobel in Nieman Watchdog

Nervous Breakdowns at the Bank and their Benefits

You ever had one of those moments when you felt like it was all you could do to keep from strangling the bureaucratic clerk saying, "I can't remove the overdraft fee, it says so on my screen"?

Don't feel so bad. According to Mental Floss, the actress Charlize Theron owes her career to just such an unseemly outburst:

Charlize was trying to cash a check from her mother, who was in South Africa, but the L.A. bank refused to honor the international check. Charlize pitched a fit of epic proportions, really letting the bank teller have it. As luck would have it, an agent was in line behind her and was impressed by her passionate “performance.” Although she later fired him because he kept sending her scripts for films like Showgirls, it was the break she needed.

From the article How 10 Celebrities Were Discovered.

Idea of the Day: Move Your Money

From Making Things To Financing Things

A couple of stories today highlight the power and dominance of the financial sector of our economy, and politics. The first is an op-ed in the Huffington Post by Robert Creamer who argues that the dominance of this sector has become "a mortal danger to our economic security."

This sector, he reports, "has doubled in size over the last 14 years. During the period 1973 to 1985 the financial sector never earned more than 16% of domestic profits. This decade, it has averaged 41% of all the profits earned by businesses in the U.S. In 1947 the financial sector represented only 2.5% of our gross domestic product. In 2006 it had risen to 8%. In other words, of every 12.5 dollars earned in the United States, one goes to the financial sector, much of which, let us recall, produces nothing."

This helps to explain why, as the associated press reports, Treasury Secretary Timothy Geithner's telephone logs show he talks with Goldman Sachs and Citibank CEOs more frequently than the chairs of the House and Senate Banking committees.

Both articles are worth a read.