You should probably know that the literal meaning of mortgage is ‘death pledge’. According to the Australian debt clock we owe 1,647,386,800,000 dollars to banks as housing debt. It’s about 90% of all household debt in this country and it is accumulating faster than GDP. In its March 2017 Monetary Policy Meeting the Reserve Bank noted that household debt was rising faster than household income.
It is usually the public’s want of restraint that is blamed for the worsening private debt problem; hedonistic public needs to tighten its belt and stop living beyond its means. Bad, pampered public. Mainstream reporting on Australia’s private debt level goes out of its way to avoid making clear one crucial aspect of what is driving it. This money that people are borrowing is required to run the economy. We have explored in detail how the money we use everyday is created by banks when people borrow. The primary concern of finance is how to induce people to borrow enough money to keep the economic system jerking along. The fact is if we didn’t borrow so much money we’d be berated for lack of faith (confidence in financial terms) and the economic pundits would be decrying the next round of crisis, depression, recession, downturn or whatever word their employer’s banker told them to use.
Readers of this blog will know that when money is loaned, a deposit is created in the borrower’s account which did not exist before. It is in every way new money. The bank also registers the amount as a debt owed to them, and it is the obligation of the borrower to repay it plus interest and charges. The money that is created will cycle through the economy facilitating trade and will disappear from the scene as it is repaid. The health of the economy depends upon sufficient credit in cycle. When credit levels are too low we call it a recession or depression depending upon the severity of the dearth of credit.
With this process in mind we can examine the mortgage system more clearly. With the dismantling of Australia’s manufacturing sector and the public’s disapproval of increasing national debt, private lending is becoming an increasingly important wedge of the credit pie, and the mortgage is far and away the largest contributor of credit in this category. From a macro-economic perspective, this is why every effort is made to maximise the amount of money borrowed against property.
From the loans officer who decides how much a borrower will get, to the incentives offered to speculators to invest in property, from the ubiquitous real estate publication and renovation TV trend promising ‘the lifestyle you deserve’ to the weak foreign investment regulations guaranteed to inflate prices in the most sought after areas in the country, the financial establishment, including the treasury department, ensures a continual stream of mortgage applicants and debt money contracts to inflate the national money supply.
You might say that the real estate bubble has become a necessary feature of financial management because, under the present system, there wouldn’t be money in our pockets for bread and milk without one. It is a corner of an absurd system that institutionalises the practice of gearing up into the distant future in order to enable consumption in the present.
The fraud is that the banks have been empowered to monetise the real wealth of the community and use it as a lever to sustain a faulty financial system reaping huge rewards in the process. Under these arrangements money is a liability to society, not an asset. If you didn’t borrow directly the money in your pocket somebody else did. That somebody is now required to do things in order to pay it back. For all the money cycling in society there are corresponding obligations to banks making demands on peoples’ time and energy. When the failure to meet these obligations leads directly into homelessness you can be sure they take precedence over all other things. It is largely via the mortgage system, the tying of land to debt, that the banks have been able to elevate their demands on the energies of the community into the number one position.
The problem here is the problem that runs through the whole economy. Generally put, the real economy is being forced to conform to an abstract financial economy in an attempt to constrict the reality of abundance into a control matrix based on the illusion of scarcity. After food and clothes, it is peoples’ first consideration that they have somewhere decent to live and it should be the priority of the land market to facilitate availability of this human need. But, at this time, that is not the objective of the land market. Rather the first objective of the land market is the creation of debt that controls peoples’ behaviour from day to day, and secondly, to enable the fat profits of an interested coterie consisting of bankers, lawyers, government and real estate agents who operate the scam. It was C.H. Douglas who warned that funding economies by means of loan credit would progressively mortgage the wealth of the community to the banks. The financial position of Australia’s banks and the consequent indebtedness of her citizenry bear out his predictions.
The idea that the distribution of land can be arranged in no other way than the contraction of increasingly onerous debt constitutes a serious lack of imagination on the part of economists and politicians and the grandest confidence trick of our time. Access to soil, air and water is the right of every living thing and an organisation that insists people only have access to it via the assent of banks, other official agents and the laws that protect their rackets is perhaps the paramount modern absurdity. Douglas defined the function of money as ‘that which enlists the cooperation of the community and the use of its assets’ which, under present settings, cannot ultimately be got at by anyone without first lining the pockets of a banker. This absurdity becomes painfully clear upon common sense examination of the death pledge industry.
If the banks and their records mercifully disappeared down well-placed sink holes the biggest problem we’d face would be congestion in the best parts of our towns. But, in this new world of people relieved of their duties to banks, if we continued to insist that we didn’t need to know anything about the money system it is a certainty that in a little while we would once again find ourselves yoked to the debt finance methods of banks.
It is not without irony that access to land that would make us free has become the chain around our ankle. The mortgage system in Australia and the world over is an instrument of mass dependency. A better mechanism for the establishment of the servile state could hardly be imagined.
We have pledged $1,647,386,800,000 and counting. Till death do us part