By David Tulis
The explosion of indebtedness in the West and in the United States is bringing stagnation and despair to commoners and elite alike. The grandiose schemes borrowed into existence have proven insatiable for more credit. Fancy TVs, surgeries and gadget-filled cars bought on time stagger individuals and families.
A critic of the borrowing boom and its attendant burden is a local artist and dissident, Thomas Gokey. A new arrival in the River City with his wife, Meg Backus, a librarian, Mr. Gokey has spun off from Occupy Wall Street a media-grabbing lobby that uses stunts and art projects to hurtle defiance up the fog-spotted IOU slopes of a financial Mount Everest.
The self-admitted “debt peon” with nearly F$50,000 in student debt proposes to turn the obscure mechanics of modern credit creation on their head. In buying off discounted lots of medical and other consumer debt, he offers a symbology of debt release for token groups to help show others the way. I haven’t checked, but I believe most U.S. nongovernment debt is fruit of a structural American glory, namely credit creation by a central bank and a banking sector that uses the Fed’s paper scrip.
In modern banking, debt is created from thin air on the basis of a fractional reserve (vs. a 100 percent reserve), enabling the industry to leverage F$1 on deposit into, say, $250 in credit to a borrower.
Mr. Gokey, who doesn’t understand that process, nevertheless has the bright idea of using that kind of leverage in reverse mode. In a first “debt buy” in November, Mr. Gokey spent F$5,000 to purchase soured medical debts dumped into the secondary market with a face value of F$100,000 — and extinguished it.
His debt jubilee activist troupe is taking a second step. “Just a couple weeks ago we announced we had abolished F$1.1 million worth of medical debt from the Louisville, Ky., area,” he says. “And it only cost us about F$21,000 to do that. That is our Rolling Jubilee project. We are very much ascribing this project within the tradition of Jubilee, which is a tradition that comes from Judaism, Christianity and Islam. *** You are letting all those in bondage go free. It’s our view that this debt should never have existed in the first place. The real crime here was that this debt existed, that it exists because we aren’t meeting our true obligations to one another. *** We’re calling for a local Jubilee.”
‘Experiment’ gone bad; plastic to pay necessities
Mr. Gokey scopes out the economic landscape. “Everyone in the United States is affected by debt, even if you don’t have personal debt, — and 75 percent of American households have some kind of debt,” he says in a phone interview. “But even if you don’t have debt, you’re affected by it because we have municipal debt and we have sovereign debt. And this debt is a very heavy burden for the vast majority of people. Last year we saw student debt increase [to] over F$1 trillion. This is something entirely new. We’ve never done this as a society. This is a new social experiment. What happens when you put an entire generation of people — who are doing everything we’re telling them to do — work hard, get into the best school that will accept you, get good grades and graduate — and they’re graduating a having already mortgaged most their life away. The other side of the bargain is school is worth it and you’ll get a good job. That’s just not true for most students who are graduating today.”
Credit card debt is more than F$900 billion in the U.S., he says. Most of it goes “to pay necessities. I think there is a false idea that if you have credit card debt it’s because you’re spending beyond your means, these’re people who are buying flat screen TVs they don’t need, or jewelry, or something like that. Credit cards are basically the safety net that we have right now, especially for people who have lost their job and are long-term unemployed.” Debt by Uncle Sam is stratospheric. As of tonight he owes F$16.78 trillion ( F$16,779,469,574,293) to bondholders, Treasurydirect.gov reports. Total obligations of Uncle surpass F$225 trillion and is unlikely to be paid back.
Debt isolates, redemption reunites
Mr. Gokey, who taught art classes five years at Syracuse University in New York, has one creation that uses shredded Federal Reserve Notes to complain about the debt he accrued to obtain his master’s degree. “Total Amount of Money Rendered in Exchange for a Masters of Fine Arts Degree to the School of the Art Institute of Chicago, Pulped into Four Sheets of Paper” comprises shreddings of currency the face value of which was within F$5 of the $49,983 amount of his student debt to that school.‡ “I’ve turned my tuition debt into art, which you can now buy — and I sell the whole thing, I’ve paid for school.”
“I think we need a debtors’ movement” because one pernicious effect of debt is “that it tends to isolate and atomize you. One of the slogans we use in Strike Debt is, ‘You are not alone.’ You are not alone, and you are not ‘a loan.’”
In our interview I sense Mr. Gokey directing his conversation in a direction I highly favor, that of local economy. The argument for local economy is all about relational commerce, favoring small over big, loving your neighbor and shopping local, caring more about people than the dollar — a sequence of ideas that arises from the concept of Christian grace and imaginative service of the other. But is his shared terminology an evasion, a dodge into sentimentality famous on the left?
“We need to build some kind of debtors movement to really question what our true obligations are to one another. Because that’s basically what it is, a debt is a promise we make to one another. It’s a kind of bond, a way we bind ourselves to one another. So I want to ask in my talk: What are our true obligations to one another?” Is this “true obligations” talk, I wonder, just more mush from Occupy Wall Street feel-gooders? He speaks about living in a democracy among “truly free” men and women, and says that we should “be able to determine for ourselves what kind of obligations we have to one another. And I think we’re actually defaulting on our true debts. We are defaulting on our true obligations to one another. I think one obligation is that people should be able to meet their basic needs without being forced into a cycle of poverty and debt without being forced into bankruptcy.”
You can decide for yourself when Mr. Gokey explores these questions Tuesday evening in Chattanooga. He is the speaker for the “Theology on Tap” series at 7 p.m. at the Camphouse coffee house. I am planning to attend. Please come and say “Hi.”
Unrecognized selling point for Jubilee concept
To pursue my question further, does Mr. Gokey favor more government welfare programs from Washington to save us from “defaulting on our true obligations to one another”? I suspect he is prone to favoring, if not demanding, more federal intervention in a wicked marketplace needing a cleanup and a bit of moralistic marketing from Congress.
But I suggest that our city’s new artist-in-residence and his media-savvy labor include a selling point. It’s one rarely considered on the left but often posited by the young Ron Paul counterrevolutionaries. And that is the argument for local economy and honest money.
The honest money argument is from Scripture’s honest weights and measures diktats. The commandment requires the civil magistrate to prosecute fraud and secure integrity of contract. Scripture forbids dilution of goods, debasement of coin, inflation via “elastic currency” and counterfeiting such as that pursued by the U.S. Treasury, the U.S. mint and the Federal Reserve System. The eighth commandment outlaws theft, the ninth false witness, the 10th coveting.
Mr. Gokey is not friendly to my questions gently in favor of a referential and legal dollar that arises from the understanding of money in terms of weight. It may be because, as he says, he’s not an economist. In our interview he dismisses the idea that paper money is a structural U.S. cancer. He speaks as favorably of a F$5 bill as of that entirely different instrument, the $5 bill. The second one, a silver certificate, assures the holder that he can redeem that shred of engraved paper for a real dollar, a weight of money in silver coin. “I’m not one of those people who thinks our problems can be solved if we go back to the gold standard or something like that,” he says.
Not stopping there to defend fiat money, Mr. Gokey indicates the euro is “relatively inflexible” and a reliable holder of users’ buying power (Hold on! Has he read about the European Central Bank’s bailout by inflation plan?). Paper money might be better than gold and silver, Mr. Gokey says, saying that even with gold or silver circulating specie “we’re still fundamentally trading in debt, what that metal signified was a kind of IOU.” I speak with few words. But my question of whether a debt can be extinguished by payment of a debt, and my claim that fiat money only rolls a debt made Mr. Gokey, I think, compel himself to exercise grace toward me.
Redemption in God, in money — do we really want it?
As Mr. Gokey talks Tuesday night to Chattanoogans interested in studying God’s word and ways, I bring up the idea of redemption. Rolling Jubilee seeks to redeem out-of-hope debtors. It wants to pay off the debt at discount in the secondary bad-debt market, or to otherwise separate the debt from the borrower, to alienate and from the obligor. That is an that act of redemption. A debtor is brought to safety. A dunned payer weeping over an empty checkbook is relieved of a burden he cannot pay. He is forgiven.
The debt Mr. Gokey is targeting is denominated in the dollar. Is that too obvious to state? The modern dollar, because it is not referential, is radically at odds with the idea of redemption. The dollar cannot be redeemed in a practical over-the-counter sense. The credit “dollars” Mr. Gokey wants to tamp down and make vanish are created from nothing in the fractional reserve process in banks and the monetizing of government debts. When the dollars are printed by the U.S. Mint as currency, they are not able to be presented to the Fed or a bank for redemption. The language on the face of the bills refers to nothing at all. Not to gold nor to silver nor any other valuable commodity. As notes, they are fraudulent and counterfeit. The bills are IOU-nothings, as our Dr. Hein likes to say. Probably, medical debt is more defensible and honorable than bank debt, since those debts are for services rendered and goods sold. Bank debt is different. It is pure and simple ideasphere credit generated by administrative bookkeeping entries in the banking sector with no cost to anyone.
Mr. Gokey is so infused with popular notions about money that his deference is markedly wild — he says gold and silver coins are held up by paper money. He’s simply confused (or maybe I misheard him); one need not worry too much, for mistaken ideas always are cleared by improved reading.‡‡
If I am right about the dollar being a figment of imagination and truly, as Mr. Gokey says in another context, a social arrangement based on confidence, then Mr. Gokey has the best argument yet for the repudiation of bank paper as debt. He can win not only Ron Paul fans to his program, but Occupy Chattanooga friends as well, stubborn souls who hate big banks and on March 6 protested a bank debt dispute against Citizen Tri-County Bank (Terry Horn’s mom’s house in nearby Bridgeport, Ala.).
If I am right, Mr. Gokey can boldly argue that dollar debts of people he wants to show mercy upon are not real chains at all, but mere chains of paper. These debts can be written off with no one’s noticing in the least, except for bank presidents, who might want to fling themselves from their 5th story balconies into the street. Banks may fail if their portfolios somehow magically go up in smoke through a repudiation. But what harm is that to Americans? Since banks will not be outlawed and forbidden to create hot money by any legislature or Congress, are we commoners wrong in exposing the lie — the fraud — in their operations?
Shared vision of economic harmony
Mr. Gokey very possibly favors a mighty and benevolent Uncle Sam. He may agree with Occupy’s rejection of the free market and aspects of local economy. He may entertain college-age fancies about using the state’s power of the sword as minister of grace, mercy, care and tenderness, virtues that flower exclusively in family and church. He may blithely overlook the disaster than monopolism and statism bring at every turn, whether innovations of gulag, of strict liability statute or Roe vs. Wade.
Still, Mr. Gokey has an interest the Christian possibility of redemption, in buying back the slave, in the “jail break” Jesus, as he calls Him, who redeems the lost sinner and the hopeless lost. Underlying his argument is the question of slavery to sin and the fall. Lacking a vigorous sense of antithesis that is invited by scripture, Mr. Gokey insists the American people are not to blame for the debt crisis; certainly you will forgive him spreading victimhood with such a broad brush. While orthodox Christianity with its unshakeable teachings of Christ’s vicarious atonement for the sins of His people contradict some of his innovative ideas in theology, Mr. Gokey seems a harbinger of economic storms to come amid the systemic problems he identifies.
‡ All told, Mr. Gokey has F$65,000 in student debt, and his wife is F$40,000 in the red.
‡‡ My homeschooled 16-year-old recently finished and greatly enjoyed Richard Maybury’s book, Whatever Happened to Penny Candy?
My debt from the Art Institute of Chicago is $59,983. This is just a portion of my personal debt (which is all tuition debt). With undergrad included I sit at around $65,000 in debt, and my wife started out with about $40,000 of her own.
After reading your piece I now understand a bit better where some of your questions were coming from. I am aware that debt is indeed created out of thin air (although it would be fair to say that I don’t fully understand that process, I always worry that I’m starting to sound crazy when I try to explain it). An earlier name we used for the Rolling Jubilee was “The Debt Fairy.” We figured that since debt is created by lenders as if by magic, the 99% should have some magic of their own to destroy it.
The point I was trying to make is that even if we used gold or silver coins those gold or silver coins have only ever really measured debts and credits by social agreement. In the beginning was credit, money is simply a way to weigh or mesure a debt owed to someone for something. Here I’m mainly drawing from the history of debt that David Graeber has written from an anthropological perspective: “Debt: The First 5,000 Years.” (here’s a review of Graeber’s book that was just published in the NYT Book Review: http://www.nybooks.com/articles/archives/2013/may/09/debt-we-shouldnt-pay/?pagination=false).
Just to clarify, it’s true that I am anti-capitalist (I would make a distinction between capitalism and the market and I’m fascinated by what a truly democratic marketplace would look like), but I’m also an anti-statist. The critique of the 1% is not just a critique of corporations, it’s a critique of the state and the way corporations use the state to benefit a very small group of people. When I talk about fulfilling our true obligations to each other I’m talking about establishing a true democracy where we determine what our real obligations are and then meet them together.
We’re constantly told there are only two options, to either increase the power of the state to rein in the abuses of priviate industry, or we should increase the power of priviate industry because it is the only thing that has the power to rein in the abuses of the state. In reality this is a false option. States create markets and markets need states. I’d like to see what Wall St would do without the NYPD 🙂
The real choice, from my perspective, is between our current system and a true democracy. In both of those false choices we’re being asked to sacrifice our own power and liberty, and the market can be as cruel of a master as any state. There is a third option, and that is for the people to govern themselves and decide for themselves what we owe each other. At present the government doesn’t represent the people at all, and indeed the government and corporations are hardly at odds with one another, they are one and the same. In a truly democratic society the state disappears in the sense that the state is just the people cooperating with each other, debating and agreeing and disagreeing with each other.
You might not believe me on that point since a lot of what I am advocating for will probably sound like “big government” to you. I would suggest that I have a real obligation to you (and to everyone else) that if you get sick or hurt you should be able to get all the healthcare you need without having to deal with the bill a alone. If we all cooperated we could provide that healthcare, and provide it at a higher quality and lower price than our current private for-profit system (a system that Obamacare simply makes larger). A “single-payer” healthcare system would cost us $400 billion less than our current system every year according to the PNHP. The same holds true for education. The way we are currently funding higher education is extremely expensive and full of inefficiencies and waste while burying a whole generation in debt. Fully financing public higher ed is actually quite affordable if we all work together, and it’s also just good business (the GI bill got back $6 in increased revenue for every $1 spent, that sounds like a good investment to me). It’s not as if we can’t afford it. Even if we left everything exactly how it is in our current broken system of higher ed, for the price of the war in Iraq we could have provided tuition free education at all 2 and 4 year public schools for the next 65 years! It’s not a matter of cost so much as it is a matter of political will and priorities.
Is this big government? I wouldn’t say so provided that the government was the same as the people. Indeed our current government is not even considering these common sense solutions largely because it is more responsive to the needs of private insurance companies and for-profit schools than it is to the needs of ordinary people.