Introduction: The USA has become more of a CREDITIST country, rather than a capitalist one. That should remind us of the Middle Ages, when the serfs were very much in debt to their Lords. Being debtors rather than owners has created a sharp class divide in the USA, and is at the root of the real estate, credit and financial crisis presently unfolding.

This did not happen by accident. It was no accident that the serfs were very much indebted to their Lords, and that their Lords were so rich. Credit forces people to pay several times for whatever they acquire, and reduces their freedom.

Change we can believe in will have to reduce the debt burden of the American People to the plutocracy that overlords it. This can only involve a creative rebalancing of the tax system.


The bottom line of the present US financial crisis is that the USA turned into a creditist country, to the point where it became unsustainable. So the People rebelled against Pluto, who threatens to take revenge on the People.

We will argue that this addiction to credit rested on, and impacted, not just the socioeconomy, but even the psychology of people, switching them from the long view connected to saving, to the shortsightedness connected to spending now, on whatever is shiny and sweet.

Credit has caused too much leverage overall, and too much debt (relative to the savings of the country in its entirety). These flaws made a capitalist country (good) into a creditist country (bad). US citizens literally became addicted to spending money they did not have, a classical situation that leads to the poor house. As the weight of credit became too great, people refused to get indebted even more than they already are. In some parts of the USA, foreclosed homes are now more than one third of the sales (the foreclosure process yanks down the value of any home, diminishing considerably the credit load of the new owner; so the solution to the housing crisis, as far as simple people are concerned, is to sell their house, and rent, or move, to the house next door, leaving the banks to hold the bag).

Credit, made incredibly sweet (the subprime and zero down ARM madness) had allowed housing prices to bubble up to the sky. The phenomenon was used to the fullest by organized crime plutocrats. An example of a technique they used, that was amazingly tolerated by the Bush administration, was to give cash (up to 20% of the house’s price) for totally unqualified people to buy houses. Yes, they paid people in the streets cash to entice them to “buy” houses. That was a fraud on the banks, because part of the cash came actually from the money to supposedly “buy” the house. But the banks themselves were accomplices, because they profited from increased commissions, and passed the (worthless) mortgages to other investors down the line. That invention became endemic, allowing the crooks to sell overpriced houses even as the market had started to crash. 

Housing prices became disconnected with rents, incomes and reality. In the next phase, naturally enough, housing collapsed, creating a domino effect through the entire credit system.

Indeed, in the USA, “buying” a house is done by borrowing most of the cost of a house (80%, up to 100% during the bubble; this extreme borrowing is uniquely American and related to the possibility of subtracting one’s interest payments form one’s income before the income tax, a uniquely U.S. subsidy). Thus, in truth, U.S. “homeowners” are renting their houses to banks. And this happens on (principal) values that outrageously disconnected from the market value given by how much the owned property would rent for. 

Thus, most “homeowners” are little more than the nice little slaves supporting the fabulous riches of the banking sector. Example: in the San Francisco Bay Area, renting to the bank as a homeowner is at least twice more expensive than renting as a renter. Across the USA, people are becoming aware of this. This gathering perception is a heavy Damocles sword hanging above the banks. More than 1,000 banks could fail, if more of the homeowner-slaves throw away their chains by walking away from their houses.

Not that millions have a choice. The price of houses got so high, that the debt became unbearable: some people, unable to eat their home, sweet home, have had to forsake it for real food. Many of the subprime victims discovered to their horror that the house that basically cost them nothing in the beginning, required, after a few years, servicing interest rates of 12 to 13%, often more than their entire income. Thus the fish feeds on the delicious bait, before the hook is yanked.

But a general philosophical perspective is in order. Why is too much credit always bad? Why can’t credit replace capital?

Because credit is about spending what one does not have. In a way, it is closely related to the financial technique called “selling short”, because, when credit is used for consumption, it is a form of pessimism: enjoy it now, because tomorrow is not worth saving for. Credit often can be used as the opposite of deferred compensation. Then it is about getting now what one has not earned yet.

Not that credit is always bad. Credit is excusable, and even uniquely irreplaceable if, and only if, borrowing allows to engage in a profitable investment. The definition of “profitable” being to be able to reimburse with interest, from the profits of the investment, and the sale of the principal, in a reasonable future, while insuring an agreeable surplus.

Instead, and in the exact opposite mood, massive credit was used in the USA for everyday spending, by all and any, and, thus, NOT for profitable investments. This led to a dearth of profitable investments. The USA, has operated with increasing credit, especially in recent years, under G. W. Bush. Not surprisingly pessimism about the direction the USA had taken became rampant (80% of US citizens now think that the USA is heading the wrong way). As people increasingly viewed the future bleakly, they spent right away what they did not have. That they did, until they got scared that housing was not the surest path to riches.

A particular consequence of American credititis is that there has been not enough money left for infrastructure (be it material or human). Indeed why would the credit industry lend to infrastructure, when the gullible average US citizen has proven so much more profitable? As old infrastructure goes down, so does the whole country (an example: it is said that it can take now a freight train 24 hours to go through Chicago; a century ago, it probably took no more than an hour…). In this situation be it railroads or school systems, nothing can be brought up to optimal standards (those being defined as the best that would satisfy most people).

Last but not least: why did the USA go from capitalist to creditist country? Well, it’s very simple: when one buys a house, or a car, or anything on credit, one ends up paying it several times over. Or it could be dozens of times over: after all credit cards can charge usury like interests of more than 20%. The extensive usage of credit rather than savings for everything makes US citizens overpay for everything massively.

Another result: pushing credit on US citizens makes them indulge in extravagant consumption, acquiring a lot of goods they don’t really need because the up-front cost is presented as lower than it truly is, and because impulsive behaviors connected to the opposite of the emotions that lead to saving are encouraged. So giant houses, giant cars and trucks, chronic restaurant habits, etc. are gulped down with wild abandon. Then of course the ravenous borrowers, most of US citizens, have no money left, so they can’t support the rest of the socioeconomy, so they can’t even pay enough taxes to support a full socioeconomy serving the full panoply of modern human emotions and opportunities. Hence the USA ends up, or rather down, with a government that pay mostly for war in far away places with lots of oil.

In other words, the credit economy is related to the gratification-now American way of waste, and starves the rest of the socioeconomy, especially the part related to care, be it health care or education-for-the-non-rich. That imbalance, in turn, makes the non rich weaker and more overlorded by the hyper rich, and that is what the hyper rich likes, be it only because it makes its rule more stable.

So the USA became a creditist country because it is led by the nose by its plutocracy, the class that pays for the procurement of elected offices. Why not pay for a house three times over, when the average American loves, admires, and wants the hyper rich to get even richer? The USA is globally victim of a form of the famous Stockholm syndrome: love your captors, collaborate with them.

This means that the present credit crisis, characterized by the sudden unwillingness to overpay for lodging, cars, etc. can be interpreted as a long overdue revolt of the subjugated ones against their hyper rich masters.

Viewed that way, the present financial crisis is mostly a crisis for Pluto, while being an inchoate struggle of liberation for the People.

In any case, it is fascinating to see the ultimate “Free Market” fanatics of the Bush administration having to nationalize right and left. There maybe justice after all: the “Freedom Fries” crowd is frantically transforming the USA into France after recognizing the error of their ways…

France, thanks in part to her mighty regulations against malignant credit, has plenty of saving, hence capital, so paradoxically, did not have to take the desperate measures that Paulson and his crew are taking, for generations. But then, again, France or not, the plutocrats will try to save the country while helping themselves and their friends, on the grand scale they cannot do without. So vigilance will have to be exercised, lest we end up with much more of the same..

Patrice Ayme.


P/S 1: Astute observers of religion will point out that Judaism (hence its parrots, Christianism and Islam) disapproves of the payment of interest to coreligionists, hence already disapproves of credit. True, but this religious interdiction was going overboard, because credit for profitable projects is a common good. They demonstrated that it was overboard, because they all turned around it by calling each other infidels, thus allowing themselves to access credit by borrowing from heathens. Indeed, with enemies like that, who needs friends?

P/S 2: The Iraq war has been mostly paid on credit. Some from having China buy US Treasury bonds. Some disguised under the form of future costs not entered in the books (such as long term health costs taking care of thousands of gravely crippled veterans, or replacing all the worn equipment). The full anticipated cost goes from one trillion dollars to triple that, a significant number. Of course the Iraq war should not have been paid on credit, because the probability that it turns into a (financially) profitable investment, for the USA, is nil. (But I am not saying that all is lost.)

P/S 3: How does one fix the credit addiction? Those familiar with France will observe that there, a constant roll of propaganda towards savings is all over the media. It’s the equivalent of the omnipresent US propaganda for credit (Zero down! Buy it Now, and don’t pay a dime for 6 months, etc.), but the French propaganda is not about borrowing, as the American one is, but it is about saving. And they better save, because that house of their dream is going to be paid from savings (cash), not from renting to a bank (as in the USA). Thus the French financial system rests on savings rather than borrowing. The practical effect is that there is money for major investments. In particular there is capital for the Lignes a Grande Vitesse, the 250 mph High Speed train Lines, that are hyper expensive, and are fast becoming the main European transportation system (for passengers, and, increasingly, for freight).

If one wants a capitalist country, one needs capital, and it is better not to generate it in China (as the USA does). All this can be achieved by making the tax system encourage savings and punish waste and hysterical consumption, a choice Europeans made long ago (with the Added Value Tax and giant energy taxes, the main revenue sources of European governments). Change one can believe in will have to start with change on can tax.

P/S 4: The mentality of immediate gratification that the credit economy fosters and lives by is pervasive throughout U.S. society, and has made Americans more unbearable to each other than they otherwise would be. The connection with the obesity epidemic is obvious. Stuffing oneself with fast food is the cheapest way to answer the call of “buying” something now (it’s best done with a credit card). Last but not least: the credit mentality is also a world epidemic. As credit progressed in France (however minutely) so did obesity (albeit not to the U.S. scale). Financially, strong world regulations will have to be put in place to control credit and its related leverage (this has started; the U.S. credit valuation agencies were accomplices to the general corruption, and are in need of serious international supervision).

P/S 5: As we said, the housing bubble was supported in no small amount by plutocratic crooks who paid street people to “buy” houses (and this organized crime has not been denounced, lest prosecuted yet). It is one of the largest organized crime conspiracy the USA has ever known. Many investors down the line, absorbing all this bad credit that they knew was bad, in particular the so called “investment banks”, were institutions led by individuals who took the money and ran (those are not being prosecuted yet, either). Now, of course, the entire system is collapsing, because the financial institutions themselves could not run, and lest the U.S. financial system goes poof in the night, the U.S. government has had to come in, and provide enough money for the ongoing existence of it all (including insurance and money markets!). In other words, amusingly, the Bush administration has become a sort of Politburo led by Comrade Paulson, nationalizing and reorganizing the entire heart of the U.S. capital and housing markets. So much for the Free Market, long live Central Planning and the People’s Republic! It was high time.

P/S 6: In the interest of fairness, and of a nice completion of the theory above, one should recognize that there has been a world wide real estate bubble. Surely the long arm of U.S. credit madness did not extend worldwide? Well, it did. Just go ask shareholders of UBS (Union des Banques Suisses), a major (Swiss) bank, majorly impacted by astronomical losses (similar to AIG’s losses). Another factor in the bubble has been the rise of a worldwide plutocracy, that globalizes profits, while eluding local taxes. Part of the scheme is to buy properties worldwide (so one resides nowhere). That pushes up the cost of real estates in international cities, and places the international jet set plutocracy enjoys to meet and plot. This acts only on the margin of demand, but that has been enough, so far, to push the real estate bubble up. When a Russian Billionaire pays  $750 million for a house on the French Mediterranean Cote d’Azur, as happened in 2008, no doubt many homeowners there may feel inclined to ask for stiff prices, looking forward. Many of these Russian billionaires are amazingly young, and rumored to be connected to all sorts of dubious activities. Hence we observe a sort of generalization of the scheme at work in the USA (that is secret, but highly profitable money manipulations from an unsupervised plutocracy). That led the worldwide real estate bubble (the madness of excited crowds following their leaders is enough to explain the rest). And I did not mention maneuvers such as Microsoft siphoning all its world profits through a tiny lawyers’ office in Dublin (to bask in an advantageous tax regime). And yes, Microsoft was not alone, and yes, there was a tremendous real estate bubble in Ireland, and yes it’s deflating.

Time for more globalization of regulation.


  1. jarod Says:

    This is awesome thank you .


  2. Alarm System : Says:

    At one point in our life we will always have some bad credit because of some unpredictable factors.


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