A theory of debt

We have a good understanding of what is the essence of “money”.

"Money" is generalized form of goods and services.

In an economy that makes widespread use of money, “everything has a price”, meaning that anyone can buy or sell most anything, in exchange for money, which can then be used to purchase most anything else.

The use of money enables the more complex and specialized trading practices that are essential to a more developed economy.

But what is “debt”?

Our usual descriptions of “debt” are more mechanistic.

We can explain how debt works?

A debtor and a creditor exchange money in the present, in exchange for a promise to payback that money in the future, commonly with interest, commonly under terms and conditions enforced by police and courts, and frequently under the threat of some penalty to the debtor, such as forfeiture of some collateral property if not repaid as promised.

That’s how it works.

But in more abstract terms of the present and future goods and services, resources and liabilities available to a society:

What is “debt”?

I would suggest that, in an economy that has excess “stuff” (goods and services) or that can make excess “stuff”, then debt is an instrument for exchanging present stuff for future stuff.

In other words, “money” is a generalized medium of exchange between two parties in the present and “debt” is a generalized medium of exchange between one party in the present and one in the future.

The debtor receives some “stuff” in the present.

In return, the creditor expects to receive some “stuff” in the future.

Control over who gets lent what for what offers a powerful control lever over an economy.

… more to come when I continue this discussion, hopefully in the next day or three :slight_smile: .


Debt is fundamentally an exchange between people (or corporations, the legal analog of people) of present excess for future value.

The person or corporation will consider the transaction an “investment” of their present excess resources, with an expectation of receiving something of similar or greater value in return in the future, and the other person will accept the resources, along with accepting the obligation, called the “debt”, to return that value as and when expected.

Whenever a person or a corporation is for that moment living on the edge of existence, they have no little interest in making any such investment, as all they have is going towards their present needs. However that same person or corporation, living on the edge of existence, is more vulnerable to accepting lent resources that come with debt obligations that are not favorable to them in the longer term.

Not all “investments” of excess present value create debt. For example, if a farmer has his hired hand work on repairing fences, tools or buildings when no more immediately pressing task, such as harvesting crops or milking cows, presents itself, that’s an investment of the farmer’s excess available labor in items of future value, but the increased wealth remains in the farmer’s possession, and the hired hand undertakes no corresponding obligation to return some value to the farmer in the future.

The notion of “obligation” leads to a moral or legal framework that can, to some degree, compel the debtor to repay the debt, later on. Much complexity and overt and covert exercise of legal, police, judicial, religious, political, military and other coercive or persuasive power can be involved in such frameworks.

One particular form of this, which I usually call “debt money” has taken on great importance in Western Civilization in the last millennium or two. In this form, a few families can, over the centuries, gain immense power and wealth, once some form of money has become the life blood of a civilization’s economy, and once they have gained control over the supply of that money by having most of it lent into existence from their institutions.

They can extend this control over the legal, police judicial, educational, news reporting, religious, political, and military institutions, thus ensuring that debt obligations, from the small to the immense, are adjudicated, publicized, elucidated, and enforced according to their preferences, and can be leveraged to control all the critical economic activity, such as providing food, water, governance, health care, energy, and the products of specialized technologies.

This great power remains somewhat invisible to the ordinary person, because it is spread out over time, and enforced by means and under terms and conditions obscure to the commoner. The shifting “time value of money”, especially when that changes over time, under the control of those powerful, for reasons and at times not made publicly clear, easily confuses most people who don’t have a head for such such tactics and mathematics.


… I lost my way a bit on this exposition of debt.

Listening just now to another Jim Willie (Golden-Jackass.com) interview, I realize where I was going with this exposition.

Debt trades present value for future value.

When that trade fundamentally changes, because the near future involves new energy technologies that fundamentally change the economics, the very structure of our civilization, then current debt instruments and debt-based institutions, including the political, legal, corporate, judicial, military, industrial and intelligence institutions built up, over centuries, to “perfect the collateral”, to ensure the continuity of social and economic order required to support the value of debt across time (the time from the lending to the repayment, roughly) … then all this is necessarily restructured.

We are about, perhaps in my lifetime (and I’m getting on in years) to enter into the biggest such restructuring in recorded human history.

This is so for the simple reason that the next wave of energy technology will provide a greater increase in energy available to human civilization, by a greater multiplication factor, than any prior such wave.

The biggest prior such wave has been over the last 150 years or so, with the wide spread adaption of coil, oil, and gas. That wave increased the energy available to civilization by a factor of perhaps (waving my hands wildly) ten to a hundred fold. The changes in “how our world works”, over the past 150 years, have been staggering. The world’s population has increased from about one billion to seven billion in that time frame, and the “physical wealth” of the typical human has increased many fold as well.

The next wave may increase the energy practically available to our civilization by a factor of perhaps (waving hands even more wildly) a hundred to a thousand fold.

This will change everything involving our financial, monetary, economic ordering, and our political, religious, legal, corporate, judicial, military, industrial and intelligence institutions. It changes what is taught in our schools and universities. Families such as the Rockefellers, and the corporations and non-profits built up around the wealth of such families, which has come from petroleum and chemistry, are undergoing immense stress.

We (humans on this planet) do however have to accomplish this change quickly.

For it seems, from my other readings and viewings that planet earth undergoes major shifts of its crust and magnetic field, every ten thousand (give or take thousands) years, and with the increasingly rapid weakening and movements of the current earth’s magnetic field, we might be close to another such shift.

No civilization that is not highly advanced can survive such a shift.

Here are the two Jim Willie Youtube clips I was listening to, when the above thoughts, once again, became clear enough in my mind to be put into words:


Michael Hudson, with his usual erudite and well researched insights, explains debt jubilees, debt deflation and the neofeudal empire.

There’s both the audio, and a transcript at the following link:

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