I wrote this article for Robin Cosgrove Foundation and Observatoire de La Finance, Switzerland; also enclosed some pictures of my visits to American Finance Museum and Wall Street
The Credit Society
It was my first time walking along Wall Street in winter. The American Finance Museum in New York City was about to close in one hour. One head of a thought: it may be a good idea to see in and try to reflect back what have brought us to the current economic situation – the precursors revisited. Inside, The US National Debt Clock is showing the outstanding public debt as February 2, 2011 at 03:28:38 PM, pointing at US$14,142,240,187,319. Constantly updated, this sum of money was absolutely huge. Underneath stated a quote from the first US secretary of the treasury, Alexander Hamilton: “A national debt, if it is not excessive, will be to us a national blessing”. Ironic atmosphere struck when I tried to compare the quote with the actual number on the monitor. Hamilton’s quote, if taken in hypocrite sense, may be interpreted that American consumers, do not see this sum as excessive yet, so why not keep going? But it may also be an ignored history where society has no longer bothered whether Hamilton is a valuable reminder or not when it comes to excessive or not excessive.
I asked the museum guard whose seat was located not that far from this clock, “How fast, in US dollar, this clock moves per minute?” His answer was shocking, “Every time I close this museum and came back again in the morning, it is usually already added up about US$8 million. This number never goes back. It only stops once in a year, for few minutes, on Hamilton’s birthday.” When this clock stops, it must be a sacred time to see through where Americans stand and when my wonder went to the source of the credit, the guard replied with an answer that put me in fear, “Our children and great great grand children will pay for this”.
The history of credit-granting was full of complaints on how rigid the terms requested, that what banking industry called as factors of credit analysis must be carefully taking into account. Credit nowadays is designed easier than before, but involving more risks. My personal experience showed how easy a commercial bank offered me a credit card when I was still in first year in college relying on my monthly stipend from my parents. Neither I had job at that time nor had a joined-account with my parents which if I had, perhaps would enable me to have additional credit card auto-debited from my parents’ accounts. This is just a simple example of consumer credit, but out there, hard selling is happening, offering people to impulsively buy things that they could not even afford: properties, luxurious cars, speculated financial products, through a scheme called credit with poised interest rate. 2008 economic crisis had taught us a lesson: with the speculation that housing would increased in values, NINJA (No Income No Job No Asset) generation rushed into the market aggressively taking loans which later resold by investment banks to unfinished investors who had no idea that the products they bought were contracts placed over contracts and had no market to claim.
The first English bankruptcy that was passed in England in 1570 during the rein of Henry VIII, which later became the foundation of American bankruptcy law, mentioned that under the statute of debtor was summoned to appear before Chancellor and the debtor under the demand of the creditor, to be examined under oath and if the debtor failed to surrender his possessions, off to debtor’s prison he went (Rhode, 2010). Through this history perhaps we see how credit was initially designed to anticipate the potential of misuse from the debtor. But what if it is not only the debtors who misused the oath? What if in reality we also see a lot of naughty creditors, working on behalf of their clients’ money, misused these trust with our government involved in it?