State of Debt

August 18, 2012

After the May Day action, which brought 50,000 people to the streets of Manhattan, OWS activists met to consider their next steps. As powerful as May Day had been, it did not shape a narrative for the future. So “Occupy Theory”, the working group that publishes Tidal (, convened  a series of assemblies in Washington Square Park. Unlike the General Assembly, which no longer meets, these assemblies were open and horizontal discussions about the choices confronting a smaller but more focused movement.

After three weeks, the decision was reached to concentrate on questions of debt. Student debt in the US has reached insane dimensions: Tuition levels are rising annually, scholarships are increasingly scarce, and general economic hardship is growing, which means the majority of students are unable to source financial support for their studies from relatives.  According to the Wall Street Journal, the total student debt in the United States just passed $1 trillion. This includes over one million people who owe $100,000[a]; 27 % of these student loans are now  in default. Put all these graduates together in one place and you would have the tenth largest city in the country.  An actress who spoke at the assembly described how she can no longer take acting work because if she does, all her income goes to finance her student debt. She has to work in the black economy after having graduated from one of the top drama schools. Whereas a director decided to emigrate to Eastern Europe to escape his debt and start anew.

The working group moved on to discuss other ways debt has had a destructive affect on people’s lives. Five million homes have been foreclosed in the US, and five million more are in the process of foreclosure.  Outstanding credit card debt has reached $800 billion, but the lenders have had to write off an additional 10% because people are unable to pay. Debt is the price the 99% have paid for the excesses of the 1%. Or, more precisely, debt is what ties the 99% together. It ruins and constrains lives.  Thus was born a new campaign out of OWS: “Strike Debt”.  Strike Debt will call for an end to debt culture and empower an invisible army of people who are already refusing to repay their debts. In effect, we should consider this a debt strike. This campaign is gathering pace and will officially begin in the week of September 17, on the anniversary of Occupy Wall Street.

Since OWS began, there have been concerted efforts to create a narrative to tie together the themes of biosphere extinction, debt catastrophe and the failure of counterinsurgency. It may be as simple as this: The oil empire built by the US has been challenged by the unanticipated consequences of debt and climate change. There never was a grand strategy, just an application of overwhelming force from a world power that no longer holds sway. No one knows what comes next.

What we do know is that the debt machine at the heart of western hegemony has been exposed as a fake. In London: the LIBOR (London Interbank Offered Rate) debt scandal should be the top political issue of our time. LIBOR is the means of setting global interest rates after the polling of 16 leading banks. This process sets the rate for mortgages, credit cards and student loans – internationally. And it has been systematically fixed for years. The manipulations were of the order of five or ten basis points (1% equals 100 basis points), which sounds negligible. But $550 trillion of credit is affected by this rate, and some estimates are as high as $800 trillion. Even tiny changes save or cost the banks billions. Interest rates were never an expression of the “free market” – they were rigged.

Even the banks know there’s a price to be paid. The Financial Times now estimates that fines will reach $22 billion. And for us? For our over-priced credit cards, the interest is on average 16.24%, on money borrowed at 3.25%. For the student loans, interest rates are running up to 15%. Adjustable mortgages keep getting more expensive even as deposit rates dwindle to zero. We expect what we will get: nothing. But we will strike debt.

It’s not just about Barclays, which has paid a minimal fine of $450 million as part of their admission of guilt. LIBOR rates automatically exclude the highest two rates and the lowest two. So to actually change LIBOR, at least six, probably eight, maybe all 16 banks had to be involved. If the mafia had done this, we’d have hundreds of years of prison sentences being handed down under the Racketeer Influenced and Corrupt Organisations Act. Don’t hold your breath to see a ‘bankster’ do time.

Of course the US government were aware of this. As early as 2008, the Federal Reserve Bank of New York was aware of the fix and refused to intervene. In a functioning political system, heads would roll. If they don’t, we’ll know that this empire has no functioning democracy – it has been outsourced to the financial sector.

Why do nations keep supporting the US market? One answer is that other nations buy US treasury bonds because of the prominence of America’s global empire, as David Graeber has argued. Thus, it makes a difference whether that empire can keep order or not. It’s been obvious for some time that global counterinsurgency has morphed into a drone-enabled assassination program, a kind of automatic merger of COINTELPRO (the FBI’s covert Counter Intelligence Programme from 1956 to 1971) and Murder Inc. It is now obvious that it doesn’t work very well.

The US Defence Department budget is so enormous that the $70 billion it would cost to make all public higher education free is equivalent to the amount of money that was lost to management errors in defense spending. They ‘lost’ $70 billion in just two years. But since 9/11, the Defence budget has been almost sacred. If we were willing to shrink it, we could easily strike debt, generate a massive stimulus to the economy, and revive millions of lives.

The global economic hegemony of the US has benefited from the Eurozone disaster. Rumours circulated in 2007 about the disappearance of oil that was priced in euros. Global liquidity has nowhere to go but straight to the dollar. One group of mainstream economists have described the US dollar as being the “oil standard.” According to this view, the empire kept the peace in oil-producing regions and was rewarded with cheap oil that was priced in dollars. Since the invasion of Iraq, however, the connection between a strong dollar and high oil prices has been broken.

It still makes sense to think of the dollar as a petro-currency and of its empire as being boosted by oil. In 2007, it was predicted that the US would produce about 30% of its oil needs in 2010. In fact, it currently produces about 45% of its needs, due to massive exploitation of all available resources and greater fuel efficiency. In 2005, the US wasn’t among the top ten oil producers in the world. Today, it is number three.

As a result, Big Oil is alive and well in the US.  The five largest oil companies made $136 billion in net profits in 2011, with no sign of decreases this year. US representatives receive significant campaign contributions from Big Oil, $150,000 on average. Ironically, the supposed oil man Geroge W. Bush has been replaced by a far more oil friendly regime that consists of the purportedly green-friendly Obamacans. They are supposed to be Democrats, but appear more like Republicans.

There are just two tiny problems. The oil is running out, and the biosphere is dramatically transforming. Which is why (here’s problem three) things aren’t going so well. The International Energy Authority, a totally pro-fossil fuel organisation, has been sounding the alarm for some time. According to its chief economist Fatih Birol, “we think that the crude oil production has already peaked in 2006, but we expect oil to come from the natural gas liquids, the type of liquid we have through the production of gas, and also a bit from the oil sands. But in any case it will be very challenging to see an increase in the production to meet the growth in the demand, and as a result of that… the age of cheap oil is over.”

Notably, the big five oil companies are indeed making less oil than they used to do. And then there’s the heat. 3300 temperature records were set or tied in June 2012 in the US. 172 new all-time temperature records were reached. Climate scientists are now able to tie these weather events directly to carbon emissions, while also being able to say that events like the cold winter in the UK in 2011-12 were not caused by global warming. The miserable UK summer is likely to be the result of more moisture in the atmosphere, caused by climate change. Arctic ice is melting faster than ever this summer, and was at its thinnest winter level earlier this year. The eleven warmest years on record all happened within the last thirteen years. Time’s up for pretending that everything will be OK, or that some invention will come along to sort it all out.

The consequence, as the International Energy Authority has shown, is that we have exhausted our carbon account. If we want to limit temperature rises to between 2 and 4.5 degrees over the course of the century, we have already used, or are in the process of using, all the carbon we can.

Climate justice movements speak of a carbon debt that the developed world owes the underdeveloped world. There are 393 parts per million of CO2 in the atmosphere now. Before the industrial age, that number hovered around 275. The highest level scientists regard as being able to sustain normal conditions is 350. In order to allow for global development, we have to radically cut back, starting yesterday. Empires fall, as any historian can tell you. What happens next? That’s up to us.


Nick Mirzoeff is Professor of Media, Culture and Communication at New York University. He has been involved in Occupy Wall Street since its beginning and blogs about it at He tweets as @nickmirzoeff