So now Japan is broke too
“Japan is at ‘risk of collapse’ under its huge debt mountain, the country’s new prime minister has said.” — Japan PM Naoto Kan warns of ‘collapse’ under debt pile
Modern finance has become an endless source of wonder and inspiration for me, but sometimes it’s confusing. People way smarter than me watch the continuing debt crisis, and I listen as they make more and less trenchant remarks. One observation I didn’t quite understand at first is that we’ve all been living beyond our means. How could we as a species collectively impoverish ourselves? I think the answer is related to the Debt Mountain. Check me as I think it through.
It seems not to make sense to say the whole world has lived beyond its means for years. Granted, making sense isn’t strictly essential when it comes to contemporary finance. But, what – we borrowed too much, and now we owe each other more than we can pay back? That’s like saying Peter robbed Peter to pay Peter, and now Peter is bankrupt, the rich bastard. Or maybe it’s like saying, “I robbed myself and now I’m rich! Whee!” Somehow that’s more compelling, maybe because of my innate optimism.
It’s a ziggurat
It could be like ziggurats, if humanity fell victim to some kind of collective mania and spent the last forty years building useless junk. Then we came to our senses and realized ziggurats aren’t really good for anything, and we should have been building obelisks. Now there’s a shortage of obelisks and a huge ziggurat surplus. Of course, ziggurats and obelisks are metaphors for computers and wheelbarrows, or lawyers and machinists, or thneeds and socks.
If the Debt Mountain is a ziggurat that explains how the human species went bankrupt. We have been systematically and collectively impoverishing ourselves as all the bright young men become lawyers and bond traders. One day the last baker will die, and everyone will starve as they sue each other. That’s probably what happened to the Anasazi. They all became shamans and flute players. Then one morning there was no more corn, and nobody knew why.
UPDATE 15 June 2010: “It’s one thing for a government to spend more money than we have. It’s another to spend more than we can imagine. Cross that threshold, and people will start to ask: how imaginary is the value of this unimaginable amount of money?” — The Bailout To End All Bailouts, linked from A trillion here, a trillion there…
