25/09/2012 07:37 BST | Updated 23/11/2012 05:12 GMT

Debt, Grinding Debt

The great American writer, Ralph Waldo Emerson (1803-82) wrote in his 1836 essay, Nature:

Debt, grinding debt, whose iron face the widow, the orphan, and the sons of genius fear and hate: - debt, which consumes so much time, which cripples and disheartens a great spirit with cares that seem so base, is a preceptor whose lessons cannot be forgotten

Debt is hardly something new and what it does to a life are not new either. Emerson, as a socially concerned person in 1936, understood it well and expressed in a way that feels powerfully close to us today.

The Observer, Sunday 23rd September, covers a recent report and refers to the example of Nottingham family. The mother, Claire Beattie, works part-time as a hairdresser, looks back to her parents' generation and wishes things could be like that now.

Her father had a good profession: he was a builder who brought home a decent wage. Her father-in-law, working in the same trade, owned his own company. His prosperity meant his family owned their own house and went away every year on holiday

By contrast, Clair and her husband Dan struggle. They don't complain too much. But life is tough. Dan's expertise is in air conditioning and because there are few jobs in that field in Nottingham he works 50 to 60 hours in London every week.

They don't own their own home and half of their joint income of around £30,000 a year goes on rent and council tax. The Beattie's say: 'We can't look beyond the next pay day'

People are watching their spending power ever diminish with the job and pension prospects of the children in steep decline. On top of this parents and their children have to assume more and more debt just to organise their lives. Young people have to assume massive debts just to get an education.

We are told this gradual degradation of our standard of living is inevitable. We have to pay off the public debt and for this ever more austerity is necessary, destroying lives, businesses, employment and well-being. The current political parties blame each other for the problem but they are all to blame. They were all complicit in the damage perpetrated on our economy by the banking system.

But there is an alternative approach to their bankrupt negative thinking. There is no way any of the main them will ever accept it for they are too implicated in the current compact between big finance and the democratic system. Here I will outline just three major solutions.

1. Eliminate raising of government money with government bonds.

The way to eliminate the deficit is to eliminate the dumbest idea anyone ever had for financing government excess expenditure - government bonds.

I am the government and I write an IOU with a promise to pay interest. You are a bank so you create the money and buy my IOU. Duhh! But I am the government so I could have created the money myself and had no debt and no interest to pay.

The origin of the bonds system lies when currencies were backed by gold. But it is a nonsense with a fiat currency such as any modern currency..

2. Put an end to the Housing Ponzi scheme.

For decades house prices have been too high due to the fact that the banks have created more and more money and people are forced to borrow it to buy houses. If the banks had not created the debt in the first place house prices would be lower - much lower. This is a classic Ponzi scheme where the values of the scheme depend, not on fundamentals, but on new entrants to the scheme or existing entrants increasing they stake.

The solution? Bring back societies. Building societies could only lend on what they received as deposits, thereby creating a strong link between house prices and the economy at large.

3. End the Financialisation of our lives.

Financialisation is closely connected to securitization. CDOs enable debt to be sold and traded to suit "investors" and have created a worldwide demand for CDOs. But to create CDO's, someone has to go into debt and so the banks who originate the CDOs seek to create more and more debt.

These are just three important measures that could be taken tomorrow to free the people from debt and the impoverishment of our lives that debt brings with it. None is radical in any real sense. They would eliminate what are blatantly unjust anomalies and correct the current system in a way that everyone would see is fair.

There is a simple reason why they are not carried out: they would put a stop to the banks and their clients, ie the tax-avoiding globalised superrich, siphoning billions out of the real productive working economy so reducing ordinary people to debt slaves.