This summer, Yves Smith at Naked Capitalism opted an interview of social anthropologist David Graeber on the history and evolution of debt in human society. In light of the Occupy Wall Street movement and the expanding debt crisis in Europe, the post is worth revisiting.

First, I highly recommend the entire interview, as it is fascinating to read about the different theories for how debt and money emerged, as well as seeing Graeber offer thoughtful disproofs of common assumptions – namely that barter emerged prior to currency and debt.

But what’s more important in the current moment is the connection between debt, morality, and power. Financial and political elites have made clear in the last three years that their own debts must be wiped out at will, at the expense of the 99%. Graeber responds to a question about the current crisis in Europe:

Well, I think this is a prime example of why existing arrangements are clearly untenable. Obviously the ‘whole debt’ cannot be paid. But even when some French banks offered voluntary write-downs for Greece, the others insisted they would treat it as if it were a default anyway. The UK takes the even weirder position that this is true even of debts the government owes to banks that have been nationalized – that is, technically, that they owe to themselves! If that means that disabled pensioners are no longer able to use public transit or youth centers have to be closed down, well that’s simply the ‘reality of the situation,’ as they put it.

These ‘realities’ are being increasingly revealed to simply be ones of power. Clearly any pretence that markets maintain themselves, that debts always have to be honored, went by the boards in 2008. That’s one of the reasons I think you see the beginnings of a reaction in a remarkably similar form to what we saw during the heyday of the ‘Third World debt crisis’ – what got called, rather weirdly, the ‘anti-globalization movement’. This movement called for genuine democracy and actually tried to practice forms of direct, horizontal democracy. In the face of this there was the insidious alliance between financial elites and global bureaucrats (whether the IMF, World Bank, WTO, now EU, or what-have-you).

When thousands of people begin assembling in squares in Greece and Spain calling for real democracy what they are effectively saying is: “Look, in 2008 you let the cat out of the bag. If money really is just a social construct now, a promise, a set of IOUs and even trillions of debts can be made to vanish if sufficiently powerful players demand it then, if democracy is to mean anything, it means that everyone gets to weigh in on the process of how these promises are made and renegotiated.” I find this extraordinarily hopeful.

This strikes me as exactly what one of the main thrusts of the Occupy movement is about – a desire for debt forgiveness, especially in the face of a system that forgives every bad gamble of financial elites.

Moreover, as we’ve seen recently with Robert Cruickshank’s piece calling for student debt forgiveness and some larger calls for a debt jubilee, there is a growing demand for this to happen. For a long while, those fighting the foreclosure crisis have demanded principle write downs, a moderate form of debt forgiveness that has been strenuously rejected by both political and financial elites. Or, to put it more differently, given the situation of crisis financial and political elites have put the world in, it’s hard to imagine there being a solution on scale to address the depths of the crisis other than jubilee.

This moment of popular anger isn’t going to be solved by a piece of tepid legislation regulating corporate money in politics. This anger isn’t going to be quelled by a financial transaction tax. While a massive infrastructure spending and jobs creation effort in the US could reduce some anger here, it would do little to stop the rage felt by the students and unemployed in Greece, Italy, Spain, and Portugal. Throwing all the banisters in jail would probably help things, at least in so far as restoring a sense of the rule of law, without changing the underlying fundamental problems of our economic system, it’s unlikely that change would be forestalled.

What Occupy Wall Street teaches us is that the scale of the problems we face demand solutions which realistically meet the problem. Occupation is a tactic fit for this crisis. But if we are to begin to answer the complaints of the Occupy movement or Los Indignados or any of the protesters in Greece and beyond, we have to look at how individual people and families have been broken by this elite-centric economy. The problem is debt and solution is forgiveness. The only question will be how long will it take, as Graeber says, for sufficiently powerful people to arrive at this position or for the public to amass enough power to make it happen democratically.

I like this version of Reich better than the one who thought NAFTA was a great idea.

Last week, New York City’s billionaire mayor Mike Bloomberg made the remarkable assertion that Wall Street banks bore no blame for inflating the housing bubble, leveraging themselves out their ears, and causing the financial collapse when their house of cards fell apart.

Mayor Michael Bloomberg said this morning that if there is anyone to blame for the mortgage crisis that led the collapse of the financial industry, it’s not the “big banks,” but congress.

Speaking at a business breakfast in midtown featuring Bloomberg and two former New York City mayors, Bloomberg was asked what he thought of the Occupy Wall Street protesters.

“I hear your complaints,” Bloomberg said. “Some of them are totally unfounded. It was not the banks that created the mortgage crisis. It was, plain and simple, congress who forced everybody to go and give mortgages to people who were on the cusp. Now, I’m not saying I’m sure that was terrible policy, because a lot of those people who got homes still have them and they wouldn’t have gotten them without that.”

Matt Taibbi had one good response, but when readers kept trying to spin him with bogus pro-bank talking points, he put up an even more thorough debunking of Bloomberg. Taibbi explains not only how Bloomberg is wrong, but how he is monumentally and deliberately dishonest. I’m pulling a longer-than-usual quote from it because Taibbi’s response is really important.

Nomi Prins pointed out in her book It Takes a Pillage that we could have paid off every subprime loan in America at the start of the crisis for about $1.4 trillion dollars. But the bailouts ended up being four, five, perhaps as much as ten or twelve times that size.

Why? Because we weren’t paying off the underlying loans of those subprime, personal-responsibility-deficient homeowners. We were paying off the banks’ bets on those loans. We were adopting all those clones they made.

Anyway, there’s is a massive gap between making a bad decision with one’s personal finances and committing criminal fraud in billion-dollar amounts. Morally, the two acts are not even in the same universe.

Homeowners who took on those bad loans did so for a variety of reasons. Some were coaxed into adjustable-rate loans when they qualified for fixed-rate loans, for the simple reason that the ARM loan garnered a bigger commission for the seller. Others were told by their brokers that if interest rates went up, or they couldn’t make their payments, they could just sell their homes, or come back to the same broker for a refinance.

Some were flat-out defrauded, like the prison guard in Massachusetts I interviewed who was told he was buying a fixed-rate loan, and only found out (from Goldman subsidiary Litton) that he’d been sold an ARM when rates went up — right around the time his wife developed cancer, incidentally.

And, yes, there were others who were just dumb and irresponsible, and still others who never even intended to live in their homes and simply bought properties with no cash down as a speculative gamble.

But from what I’ve seen, most foreclosures involve ordinary people with jobs who bought houses when the economy was good, but are caught now in the triple death-trap of an underwater home, rising costs of living, and declining wages and opportunity. And as far as personal responsibility goes, those people who bought that home-ownership ticket, if they missed payments, they’re all taking the foreclosure ride right now.

What we have on the other hand, however, is a bunch of financial companies who consciously created huge volumes of bad loans, dumped them on retirees and foreigners and union stiffs, then doubled down on the problem by creating mountains of new liabilities based on those bad loans via synthetic derivatives. Then, when it all blew up, they came to us and asked us to buy the whole pile at full retail prices, clones and all.

Which we did, flooding them with bailout cash. This allowed them to instantly jack their annual bonus pools back up into the $150 billion range while the rest of the country waited out mass unemployment and a foreclosure epidemic.

So these people created giant masses of these defective loans, pumped the global system full of toxic debt, asked for the biggest government handout in history when it all went wrong, then walked away in the end even richer than before, forcing the rest of us to deal with their messes.

It baffles me that people can look at that behavior and still think it’s individuals in foreclosure who need to be lectured about “personal responsibility.”