Michael's Corner

Let’s kick this post off with a limerick. Here we go:

There lived a man from North Carolina-

Who owed a shitload of money to China-

When looking over the note-

He started to bloat-

And dropped dead the next day from angina-

*****

Hey, Michael, so whatcha been thinking about?

I’ve been thinking a lot about debt lately. What is debt, precisely? I don’t mean debt as an abstract principle—for example, you foot the bill in a cash-only restaurant; I have no pocket cash and Venmo you for half the check and tip—but debt on a macro level.

Okay, so what about it?

The United States is currently 38 trillion dollars in debt. Meanwhile, global debt tips the scale at 315 trillion and is rising. According to my trusty calculator, the U.S. is responsible for roughly 1/8 of the globe’s debt, or 12%. But to whom does the United States and the rest of the globe owe the massive bill? Hmm. If not an inspiring question, it surely is a thought-provoking one. And to add a nifty twist, or perspective: according to Neil deGrasse Tyson, if one were to count to a mere trillion, one would have to reach the ripe old age of 31,963. That’s a lot of goddamn candles to stick in your birthday cake! But what about 315 trillion, otherwise the number representing global debt? One would have to live 10,068,345 years to count to such a lofty number. Sheesh! If you could travel back in time 10,068,345 years, you might find yourself running from a Woolly Mammoth or fending off a Triceratops. And to add a bit more levity, we could turn global debt into a drinking game. Instead of “99 Bottles of Beer on the Wall,” we could begin with 10,068,345 bottles, and together sing, “Take one down, pass it around, 10,068,344 bottles of beer on the wall.” Hell, I bet, on any given weekend, all of Dublin could kick the shit out of 10 million bottles of beer! However, what Dubliners couldn’t do, in their collective lifetimes, is count to 315 trillion.

We appreciate the anecdotes, but how about some cogent analysis:

So when, where, why, and how did it all go wrong? The “when” was 1694. The “where” was England. The “why” was because England was at war with France and running out of money. She borrowed money from her merchants or mercantile middle class, otherwise subscribers whose funds would be the primary source that formed The Bank of England. And thus, money was borrowed against unrealized assets or what we like to call a “futures market.” The “how” was that borrowing in this fashion became the blueprint that the rest of the globe copied, America most famously.

…And then came the next sea change moment. President Nixon, in 1971, severed the dollar from the gold in Fort Knox, relegating the good old American greenback to a fiat currency and paper asset. It’s fair to ask, if President Nixon hadn’t severed gold and the dollar, giving The United States unlimited borrowing power and license to print money and raise the debt ceiling, would America have won The Cold War? There is no definitive answer, only doubt. But President Nixon’s nifty maneuver cleared the path for America to take her debt from 22.7 billion to 38 trillion.

So, to whom does America and rest of the globe owe a debt that would require someone living 10 million years to count? Ourselves. Despite that we can barely pay the debt’s interest, thus the principle will continue to swell, we owe it to ourselves, else we risk rendering currency worthless. I am not an economist, so I don’t want to get into the weeds concerning what worthless or severely devalued currency would do to goods, services, and labor. But here’s what I do know: the next rung on the ladder is a zillion. Before we dare move the decimal point one more space to the left, maybe The World Economic Forum could use a few less ideologues and a few more economists.

What got me fired up in the first place?

Back in the early 70s, at precisely the same time that President Nixon was severing the dollar from gold, Don McLean released his rock anthem “American Pie.” In the opus, McLean references “a generation lost in space.” The phrase encapsulates the disillusionment experienced by a generation that saw itself as disconnected from the whole of society. McLean was singing about Boomers. Today, his words would resonate no less impactfully with Zoomers, a generation desperate to jumpstart their lives but lack the tools. Recently, I had a friendly debate over whether or not to forgive college debt. Presently, America’s collegiate debt hovers at 1.7trillion. Were we to sweep that “paltry” sum under the proverbial 38trillion dollar rug, would anyone even notice? Moreover, the deft maneuver would only raise America’s percentage of the global debt by a mere tenth of a percent. So, why wouldn’t America seek to give a boost to a generation it threw overboard to save itself during the subprime crisis? But wait, there might be an alternative solution. Those burdened with the debt of a degree that has underdelivered when juxtaposed to the price of housing and eggs can simply mimic the government: Throw money at the interest and sleep on the principle.

Have a lovely Sunday. And while you’re at it, take one of those 10,068,345 bottles of beer down from the wall. Don’t pass it around, drink it all yourself. And for crying out loud, pay for it with cash!