Margaret Atwood on debt and consequences

October 14, 2011

Margaret Atwood REUTERS/handoutWhat might be most surprising about the myriad economic problems around the globe right now is how many major world economies seem to have been taken by surprise by the concept of debt. Maybe they should have been reading more Margaret Atwood.

Atwood isn’t only one of the world’s premier novelists, she’s also the author of the nonfiction “Payback: Debt and the Shadow Side of Wealth,” which hit the presses just as the financial crisis arrived in the fall of 2008 (timing that one review described as “freakishly prescient”).

Atwood is currently releasing her new essay collection about science fiction, “In Other Worlds,” and  sat down with Reuters Money for coffee in Manhattan. We chatted about how debt has been dominating the headlines – and, perhaps, reshaping our sense of self.

Reuters Money: How did the issue of money and debt come to interest you?

Margaret Atwood: I came to this subject through studying literature. Money is everywhere. Charles Dickens, for instance, is completely obsessed with debt. His father went bankrupt, and was thrown into debtor’s prison. As a child, Dickens had to go off and work in the factory, and he never forgot it.

You’ve said that the current debt crisis was entirely predictable. How so?

MA: I’m always sorry when I’m right. It really is true that you can go back through history and trace the influence of money on crises. If you look at conditions right before the French Revolution, you’ll see that they were having a lot of money problems. They kept firing finance ministers and coming up with one new scheme after another, but those at the top wanted to keep everything for themselves. Conditions were top-heavy, with a lot of debt, the price of food going up, and many out of work — which all sounds very familiar right now.

During the boom years we barely even thought about debt and its consequences. Why is that?

MA: We were told debt financing was good. And indeed, it’s not always a bad thing, as long as you can pay the debt back. But there’s a due date for the debt, and I’m afraid that date has now arrived. When individuals can’t pay, that’s one thing; when governments can’t pay, you’re into a whole new dimension. The situation in Europe is very scary. People scratch their heads and wonder, ‘Where did all the money go?’ They’re still thinking of money as pieces of eight. But money on that scale no longer has a physical presence: It’s numbers that whip around the Internet. No human being seems to be in control anymore. So the bill has come due — but nobody knows where to deliver it.

Did the whole debt-ceiling debate fascinate you?

MA: People do love to believe in fairy dust. The idea that we can wage two extremely expensive wars and still provide needed services, and that you won’t have to raise taxes at all: That’s fairy dust. Unless you want to accumulate a debt that’s so enormous that all of your future income is going to go towards the interest. That’s what drives people really crazy — that their money is going only to service interest payments.

From all your research on debt, anything that surprised you?

MA: I learned some fascinating things about the neurology of credit cards. If you spend with a credit card, it doesn’t hurt; your brain doesn’t register that you’ve spent money. It just registers that you’ve bought this wonderful new thing and you didn’t have to pay a cent. So why wouldn’t you keep buying? But follow that trail down to where it affects peoples’ lives, when they can’t pay their taxes or their mortgages, and suddenly these virtual numbers have a very real physical impact. Then you can’t feed your family, and you’re out on the streets.

You said the Eurozone situation scares you. What frightens you the most about what’s going on?

MA: What you really don’t want is inflationary Austria after the First World War, when people had wheelbarrows full of paper money that nobody wanted to accept, because the next day it would be worth even less. Then you revert to barter systems, and then you have no taxes with which to fund services. It becomes a death spiral.

When you were writing “Payback,” did you have a sense of just how prescient it was?

MA: This book came out right as the financial meltdown was happening, so I had a lot of people asking me, ‘How did you know?’ Well, how could you not know? The handwriting was on the wall.

13 comments

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Great article from Reuters! The mathematical time limit is expiring on the West’s borrowing money for our favorite programs- all are favorite. Our elected could sell out the land under our feet, and still there is a ticking, ticking time limit on the borrowing.

Posted by oregun | Report as abusive

@nbywardslog – your Era of Denial period is one decade too late. All this nonsense started in 1971 when President Nixon took the USD off the gold standard defined in Bretton Woods. From that point on, the dollar was backed by U.S. debt, not gold. Thus, the Era of Denial runs 1971 – 201X.

Posted by razzmatazz | Report as abusive

MA is right. Money is no longer denominated in pieces of eight. Now it exists for the most part as electrons in an n-dimensional financial model. It doesn’t produce anything physical such as railroads, bridges factories, etc. , just more electronic money.

We probably should move to a market basket of precious metals but it is too late. There aren’t enough precious metals in our solar system to back up all those electrons. Plus, that would mean our free-spending world governments would have to display some fiscal responsibility (when pigs fly).

So, we will continue to see more of the same until something really nasty happens electronically and then all that artificially generated wealth will disappear with an electric sizzle and the majority of world economies will implode.

Am I pessimistic? You betcha!

Posted by stanrich | Report as abusive

Great piece of writing. I might say that many historians who are schooled in world history, especially depressions, have been saying the same thing. Politicians world wide just don’t read and absorb fine writers and great historians. Nor do Bankers who think that it doesn’t apply to them. “The Masters of the Universe” are not so masterful after all,

Posted by neahkahnie | Report as abusive

MA says, “how could you not know?” regarding to meltdown. How true. If you watched the overbuilding and obscenely high housing prices, if you watched Wall Street, if you knew about the “liar loans,” if you watched the ads begging you, yelling at you to “use you house like a cash register or ATM,” how could you not know? Like the guy who sold his fortune in 1928 before the crash of ’29, “When the taxi driver and shoe shine boy give ME advice on the stock market, it’s time to sell.”

Posted by neahkahnie | Report as abusive

IMHO, let’s not forget the role of the political class. Shouldn’t grandly intended government programs be subject to periodic, legislated reviews allowing for “course corrections” in case reallity goes amiss? Regrettably, I think that as bad as things are, they haven’t gotten bad enough for corrective action – so we should all stay hunkered down.

Posted by erin05 | Report as abusive

Awesome article. Thank you Reuters! You are the last hope for sanity in mass media.

Actually responsible, highly relevant, common-sense intelligence reporting!

Posted by pmagellan | Report as abusive

trouble is the mortgage brokers and the bankers still have your money. there has been no personal responsibility. the middle class and those who will need to depend on their 401k plans have been hurt and will not live as well. I do not have much sympathy for those who gambled with mortgage money – over bought with borrowed money – but they only hurt themselves. I hope these protests go on until the people who are responsible (those in office and those with the money that put them there) are not living as well also.

Posted by mikeld9 | Report as abusive

Great article. The governments have convinced us that we can just keep borrowing and more debt will solve our problem. The Fed gov gave money to banks, instead of giving it to homeowners, thus ensuring the homeowners become bankrupt and homeless and banks eventually go under as well. Just as Greece debt will need to be written down to give it a chance to survive, the home owners will need their debt to be written down, so they and the banks can survive.

Posted by mantra | Report as abusive

Europe, obviously, – but are you yet scared about China and Debt – Margaret Atwood or Reuters or anyone?

Posted by DarwinK | Report as abusive

Again, overindulged children who don’t want to pay back the money they owe. Somebody should give it to them, just as their parents did when they were young.

I am the mother of three. One of my children fits the above picture. He is able, but just “doesn’t”. He’s also a bit lazy. Should anybody bail him out? No.

They borrowed it. Pay it back.

Posted by notwhining | Report as abusive

MA’s comments re the neurology of credit cards can easily be applied to governments and debt markets, as well. As long as Greece had ready access to credit, there was no concern. Now that it and the other PIIGS (soon to be joined by the U.S.) are clearly insolvent (definition: unable to cover expenses before interest), it’s a bit too late. http://reasonablemannyc.blogspot.com/

Posted by ReasonableNYC | Report as abusive

Who is John Galt?

“So you think that money is the root of all evil?” said Francisco d’Anconia. “Have you ever asked what is the root of money? Money is a tool of exchange, which can’t exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?…”

Posted by GaltJohn | Report as abusive