Der Spiegel: High debt levels give banks greater say than people

In an interesting column in Der Spiegel, Cordt Schnibben makes the argument that high debt levels in Western countries give markets equal or greater say over policies than the people who live in the countries.

He describes our current situation as

The attempt by countries to bolster the faltering financial system has in fact increased their dependency on the financial markets to such an extent that their policies are now shaped by two sovereigns: the people and creditors. 

Creditors and investors demand debt reduction and the prospect of growth, while the people, who want work and prosperity, are noticing that their politicians are now paying more attention to creditors. 

The power of the street is no match for the power of interest. 

As a result, the financial crisis has turned into a crisis of democracy, one that can become much more existential than any financial crisis.

Regular readers know that the choice between the Japanese Model and Swedish Model for handling a banks solvency led financial crisis is a choice between creditors and people.

Countries that pursue the Japanese Model and the protection of bank book capital levels and banker bonuses at all costs have chosen their creditors.  The result is an Japan style economic slump and a crisis of democracy as the social contract is rewritten to the benefit of the creditors.

Countries that pursue the Swedish Model and requiring the banks to recognize upfront their losses on the excess debt in the financial system have chosen their people.  The result is the real economy is protected and the social contract can be extended.

At the start of the current financial crisis, Iceland chose its people.  The EU, UK and US chose the creditors.

Given the ongoing failure of the Japanese Model policies and the social unrest they cause, I wonder when the politicians in the EU, UK and US will chose their people.