>> ....taking out bank debt in order to speculate
>> short-term, as the US is doing right now, will someday land us in a heap
>> of trouble. ....
>
>it amy sound like a naive question, and it most likely is, but i don't
>take it as a
>fait accompli that debt will be a problem for capitalism as a whole.
>hence, i was
>asking whether or not the neo-liberal hammer of needing to'balance the
>books' is as
>much a fait accompli as it sounds, as it is wielded. (does this make sense?)
Debt can be a problem for the system when people can't service it. That may be because their incomes fall (households or businesses), or because interest rates rise, or because creditors refuse to roll over old debts as they become due. In small doses, this isn't necessarily a problem. And politically, heavy debts can be a wonderful disciplinary device - conservatizing workers and forcing whole countries into repeated structural adjustment programs. As happens now & then, though, if too many units (households, businesses, governments) default on their debt, you can get a deflationary cascade of defaults, as happened 1929-33 in the U.S. We had a hint of that in the U.S. from 1989-92, but thanks to a $200 billion bank bailout and the bottomless generosity of Alan Greenspan, disaster was averted.
The "neoliberal hammer" of balancing the books is an application of the disciplinary functions of debt. A real or concocted crisis in servicing or rolling over the debt becomes the occasion for cutting budgets - and, without known exception, what's cut is the more humane stuff. Armies and cops rarely see their budgets hacked.
On the other hand, liberals and populists are often way too sanguine about government debt finance. The more you borrow, the more vulnerable you are to your creditors' whims, and the more exposed you are to a structural adjustment program.
Doug