Debt as currency and overproduced commodity

[RedKobra]

Two part question.

1: Is the Capitalist system awash with debt because the system overproduced debt as a commodity and in so doing created its over abundance? And as such would the revival of Capitalism have to be of a debt-destroying nature? In the same way that an over production of cars would require the whole sale wastage of cars?
I understand that there is a difference between cars that you can't sell because everybody already has one and debt which to some extent can continue to be sold as long as the cost of consumption outstrips the rise in wages but a characteristic of debt which cars don't have is that the technology of cars doesn't cease to be credible as a result of over abundance. The internal combustion engine still works. The wheel doesn't stop being able to go round. Where as in some ways the over abundance of debt undermines the technology behind debt. In that the larger private debt becomes the more improbable it becomes that the debt represents a commodity that can be exchanged for real currency.

2: Has traditional currency become subordinate to debt as the method of exchange? In that actual money amounts to a small fraction of the wealth currently in circulation which is in its material essence just phantom money or debt/credit?

[Prof. Oblivion]

Two part question.

1: Is the Capitalist system awash with debt because the system overproduced debt as a commodity and in so doing created its over abundance? And as such would the revival of Capitalism have to be of a debt-destroying nature? In the same way that an over production of cars would require the whole sale wastage of cars?
I understand that there is a difference between cars that you can't sell because everybody already has one and debt which to some extent can continue to be sold as long as the cost of consumption outstrips the rise in wages but a characteristic of debt which cars don't have is that the technology of cars doesn't cease to be credible as a result of over abundance. The internal combustion engine still works. The wheel doesn't stop being able to go round. Where as in some ways the over abundance of debt undermines the technology behind debt. In that the larger private debt becomes the more improbable it becomes that the debt represents a commodity that can be exchanged for real currency.

2: Has traditional currency become subordinate to debt as the method of exchange? In that actual money amounts to a small fraction of the wealth currently in circulation which is in its material essence just phantom money or debt/credit?

Debt is different than, say, a car because it is a claim on an asset and not an asset in itself. If I borrow money from my credit card company, the money has already been spent in the economy. The credit card company simply has a claim out that I have to pay that money back by a certain period or incur interest expenses. So debt destruction - through bankruptcy, for example - isn't an actual destruction of value in the economy but rather a destruction of claims on assets.

Debt serves as a "capital lubricant". In other words, it makes businesses and individuals able to earn and spend at an increased rate. It increases the circulation of money in the economy. Because of this, it also tends to increase the volatility of market swings. Keep in mind that this applies to private and not sovereign debt.

Traditional currency is never going to be "subordinate" to debt because debt is a claim on currency. Debt is not money, and cannot be money. Even bank deposits, which for the purposes of this discussion we could claim are loans to banks by depositors, are not money.

[New International]

Lenin thought that an increased reliance and debt as its own commodity represented the epoch of imperialism. He noted that "the merging of bank capital with industrial capital, and the creation on the basis of this finance capital, of a financial oligarchy."

Modern currencies are literally based upon debt that has been packaged, repackaged and sold off in the global market with its value not dependant on underlying commodities. If paid off, capital would cease to exist. The irrational obsession with austerity policies right now reveals this contradiction: no economist from any camp believes an economy can grow under conditions of austerity. Their concern is in retaining the value of capital by ensuring the continuation of debt, which is obviously unsustainable. Pilger asked a World Bank representative why they don't just forgive certain debts of very poor countries. Their response was "we would go bankrupt."

Lenin elaborates on the trend of increased debt and finance capital:

"the creation of the "renter state", the usurer state, in which the bourgeoisie to an ever-increasing degree lives on the proceeds of capital exports and by "clipping coupons". It would be a mistake to believe that this tendency to decay precludes the rapid growth of capitalism. It does not. In the epoch of imperialism, certain branches of industry, certain strata of the bourgeoisie and certain countries betray, to a greater or lesser degree, now one and now another of these tendencies. On the whole, capitalism is growing far more rapidly than before; but this growth is not only becoming more and more uneven in general, its unevenness also manifests itself, in particular, in the decay of the countries which are richest in capital."