The farmer and the tailor: Unpaid debt doesn’t matter anyway

The Emperor has no clothes. But does it matter that he’s naked in public?

As the $1.9 trillion federal stimulus bears down on us, forgive me for saying aloud what you’ve suspected all along. Deep down, you’ve always known that America was never going to repay its $28,000,000,000,000 national debt. Like, when push came to shove, you knew that’d be impossible. And why question yet another stimulus check when there’s such a vital need?

But for those who’ve never considered the breathtaking fraud of our global financial system — or, for those who have considered it and now fear it’s all about to come crashing down — let me explain what’s really going on. Fortunately, your anxiety is misplaced; by the time our national debt becomes something to worry about, you’re going to have a lot more to worry about.

Conjure in your mind that mid-1700s colonial society wherein a farmer seeks to buy a pair of wool socks from the local tailor. The farmer barters for the wool socks with a block of his cheese, and the tailor — who really likes cheese — agrees to the trade. But, there’s a caveat (because there’s always a caveat with tailors, am I right?)

“It takes me more time to make socks than it takes you to make cheese,” the tailor says, pretentiously. “And because it’s more of a hassle for me to obtain wool, spin it to yarn, and expertly weave it into a pair of socks than it is for you to just let some milk curdle, then” — and here the tailor makes his move — “if you want this pair of wool socks, you’ll have to give me two blocks of your cheese.”

“But I haven’t got a second block of cheese,” the farmer protests.

“Oh,” the Tailor replies. “Then you can’t have my socks.”

“But it’s cold outside,” the farmer wails. 

“Tell you what,” the tailor responds, mercifully. “I’ll give you this pair of wool socks now in exchange for a single block of cheese, but — you owe me that second block of cheese within a month.”

The farmer gleefully agrees to his debt-financed part of the deal, walking off with both a pair of wool socks and an obligation to deliver unto the tailor a second block of cheese. Meanwhile, the tailor gets a block of cheese plus an “IOU” good for a second one within 30 days. Transaction complete.

What I’ve just described is the type of transaction that’s defined most of historical commerce (or, so goes the ubiquitous myth). In societies where a money system evolved, those little coins or paper instruments served merely to make more efficient the process of trade. A standardized “worth” to money enabled a transaction’s participants to easily assign a value to goods and services that eliminated the imprecision of on-the-spot bartering. 

So adapting the prior farmer/tailor example, instead of having to equalize the transaction via a promise of later payment, the “inherent” value of the products can be instantaneously reflected in the medium of exchange: The farmer buys a pair of socks from the tailor for $10, and then — separately — sells him a block of cheese for $5. Two transactions, complete. 

But now let’s presume that the farmer has neither cash nor a second block of cheese, yet still really needs those socks. 

“That’s OK,” the tailor says. “Take the $10 socks now, give me your $5 block of cheese, and pay me the remaining $5 later. But for the luxury of paying me later, I’m going to charge you an extra $1 per month until you fully pay me.” The farmer happily obtains his socks, plus a debt — with interest.

That’s how the modern economy works. Soon enough — after a few such transactions — the farmer owes the tailor $28 trillion. 

Now: Let’s examine America’s present-day $28 trillion global debt, because just as the farmer can’t possibly repay his debt, neither can America. And that compels the question of whether the tailor should have expected to be repaid in the first place.

The tailor likes cheese. Like, a lot. And although he wanted to be paid more than the farmer could give him at the time of the transaction, he was nonetheless willing to part with his handcrafted socks for less than their stated value. Sure, he bargained to be paid more later, he expected to be paid more later, yet he still nonetheless agreed to part with his socks in that moment for the price that the farmer could then pay. 

At any time during their several subsequent exchanges, the tailor could have stopped trading pairs of wool socks for blocks of cheese — but his cheese habit compelled him to keep parting with his socks in exchange for whatever cheese the farmer could offer (plus that increasingly suspect promise to pay the balance later). 

So: Was a pair of wool socks truly worth two blocks of cheese, given that the tailor was so consistently willing to part with them — in practice, in that moment — for only one block of cheese?

Unsurprisingly, the farmer eventually comes back and says, “Sorry T, turns out I’m destitute, and thus can’t give you all those second blocks of cheese I previously promised you.”

Whatever. The fact remains that, while the tailor had anticipated receiving the cheese he was rightfully owed, his belly had still been filled with that which had made parting with his socks worth it to him at the time.

Sure, had the tailor known he ultimately wouldn’t be paid the full amount of the debt, maybe he wouldn’t have sold the farmer his wool socks — but that would’ve meant forfeiting access to any cheese at all. And the tailor could not have abided such deprivation.

The reason I’m beating this wearied horse to death is to explain the significance of every single American’s $85,000 share of the national debt — a per-person obligation more than twice the United States median per capita annual income. (Incidentally, that $85K figure factors in all 330 million Americans, be they infants or your lazy deadbeat cousin who has no intention of working a single day his entire life. The share of the national debt for every adult taxpayer? A cool $909,000. Yup.)

Everybody knows America’s debt won’t be repaid, yet nobody seems to care. And the kicker is that it doesn’t matter anyway.

That’s because the myriad transactions that accounted for our present obligation to repay a preposterous number of zeroes were incorrectly valued in the first place. That $28 trillion debt is the outstanding legacy of countless exchanges that already happened.

Two parties to a deal were sufficiently satisfied with their bargain to finalize negotiations and go on their merry ways. Yes, one of those parties foolishly believed she would eventually receive the unpaid balance, in addition to interest payments in the interim. But as the balance sheet shows, that expectation was wrong.

One day the tailor says to the farmer, “If you don’t pay me the blocks of cheese you owe me, I’ll not sell you any more wool socks.”

The farmer — looking sheepish but nonetheless secure in the true dynamic undergirding their negotiations — merely shrugs, and says softly: “But if you don’t give me more socks, my feet will be too cold to make you any cheese at all.” 

Thus, the essential truth: Though the tailor is owed several trillion blocks of cheese, he’d rather have one more block than no more. The terms of the transaction were wrong from the jump.

The tailor had valued his time, labor, and the cost of raw materials to arrive at a price-per-sock-pair that was twice the cost of a block of cheese, but had overlooked one simple criterion that he hadn’t priced into his socks: to wit, that he really, really likes cheese.

So let’s finally kill off this horse (which, to keep things simple, belongs to an unrelated farmer). 

America is the farmer, and the global financial system is the tailor too afraid to permit our fiscal default. Why? Because the worldwide financial system likes our cheese. It needs our cheese.

And though cheese is horrendously unhealthy in the quantities that the world consumes, we just can’t stop. That $28 trillion debt symbolizes the American empire. It’s the price tag of enforcing the integrity of a unified international market, a.k.a., “the cheese.”

Until the world’s creditors — be they China, international financial institutions, Social Security recipients, or domestic mutual fund managers pile-driving money into allegedly safe U.S. Treasury-backed securities — wean themselves from our cheese, America will continue to expand its debt load. And a debt that won’t be repaid is just a meaningless string of zeros on a spreadsheet. 

By the time the world declares that American cheese no longer has any value, the entire construct of money will be meaningless anyway — as portended by a recent article in “The Onion” entitled “U.S. Economy Grinds To Halt As Nation Realizes Money Just A Symbolic, Mutually Shared Illusion.”

So the next time you encounter someone shrieking about a $28 trillion national debt, voice some relaxed skepticism; explain that our debt doesn’t represent what the U.S. owes its creditors so much as it represents the intangible value of outsourcing to America the responsibility for shouldering an integrated global financial system — backed by the all-mighty American dollar. 

(True: Reality does significantly depart from our hypothetical. Because when America stops by to inform the tailor that it can’t deliver all the cheese it owes but regardless still wants more wool socks, it brings along its nuclear arsenal and historical willingness to invade sovereign nations for the sport of it. But for the sake of this column, just shut up already.)

So Uncle Sam might as well keep borrowing money with fevered abandon — shorthand for “print more money,” which I presume entails some dude at the Treasury Department adjusting an Excel document with an extra “0” — while the Nations of Earth remain “involuntarily willing” to let us get away with it. At the end of the day, the real value of our debt is ZERO.

If the world community deigns to change the prevailing status quo — and actually takes responsibility for the excesses of war, environmental devastation, and wholesale socioeconomic inequality — then it need not demand that America repay its debts. Rather, the world (and all of us) must become less reliant on American cheese.

After all, the global economy wouldn’t tolerate America’s debts if it weren’t existentially dependent on the economic activity spurred by manufacturing socks in exchange for cheese. 

Until then, Americans should probably keep one eye fixated on a future after the world wakes up — when our 401Ks are suddenly meaningless and issuing stimulus checks in a crisis is mathematically infeasible. Because last month, the Congressional Budget Office projected that America’s federal debt in 2021 would exceed the size of the entire U.S. economy (i.e., the gross domestic product — a measure of the country’s total goods and services). And someday, it’s at least plausible that two plus two will once again equal four. 

I’m not saying that the global financial system will collapse but, if it doesn’t, then I guess we’re well on our way to finding out what number comes after “trillion.”

In the meantime, let’s just all keep pretending that money has value. Because although the emperor may be mostly naked, those sure are some snazzy wool socks. 

Captain Jesse Sommer is an active duty Army paratrooper and lifelong resident of Albany County. He welcomes your thoughts at