Investing in the Classics

Nietzsche’s On the Genealogy of Morality: On the Creditor and Debtor

Please note that for the purposes of this analysis, I use the Maudemarie Clark and Alan J. Swensen translation of Nietzsche’s On the Genealogy of Morality. I use the notation (X:N) to cite passages, where X refers to the essay number and N refers to the chapter. Please refer to a previous analysis which I build upon in this analysis.


In the Second Treatise of On the Genealogy of Morality (German: Zur Genealogie der Moral) Nietzsche provides an alternative, but interrelated, genealogical account for the development of morality. This essay is the most intriguing, but also the most elusive. In contrasts to the more historical approach taken in the First Treatise, in this essay Nietzsche makes a more evolutionary and psychological account of the development morality through humans’ conscience, especially the concepts of ‘bad conscience’ and ‘guilt’ which he deemed instrumental to Judeo-Christian morality. In particular, Nietzsche examines two formative forces: the pre-historical creditor-debtor contracts as well as the emergence of human civilization from a state of nature. I will focus primarily on the former, the creditor-debtor relationship, as the latter is not as applicable for investors. Note that I cannot do adequate justice to the Second Treatise as a result, for it contains several crucial ideas that are not included. Nevertheless, I will argue that Nietzsche’s genealogical account in the Second Treatise can be seen to resemble the emergence of the prudent and speculative psychologies, that is, before they were institutionalized as official schools of thought in financial markets. In this way, bad conscience comprises the speculator’s psychology, that of the debtor who is a being of ressentiment. On the other hand, good conscience comprises the investor’s psychology, that of the creditor who is a being of prudence. Ultimately, I hope to provide a psychological account for the formation these psyches, just as I tried to provide a historical account in my previous analysis on the First Treatise.


Nietzsche arrives at the creditor-debtor relationship by the same method of observation employed in the First Treatise: etymology. Just as he had noticed the etymological connection between ‘good’ and ‘noble’ and ‘bad’ and ‘plain’, this time Nietzsche notices “that central moral concept ‘guilt’ had its origins in the very material concept ‘debt’” (II:4). The concept guilt (German: Schuld) derives from the concept of debt (German: Schulden), he posits. Nietzsche affirms that, “In this sphere, in contract law that is, the moral conceptual world ‘guilt,’ ‘conscience,’ ‘duty,’ ‘sacredness of duty’ has its genesis” (II:6). The subtle point for investors today is to notice, via the genealogical method, that our moral constructs (responsibility, duty, conscience, guilt, etc.) are moral constructs arising from a non-moralized social interaction. This is not to say that their value is utterly worthless, for it is quite the contrary. Rather, it is important to note that as social constructs these values ought to be continually reevaluated instead of being taken as given.


The creditor-debtor relationship is a fundamental development in the prehistory of mankind. It is an essential step in the creation and social construction of values. In the marketplace, good and services are ascribed exchange values, which has repercussions for the value of occupations that produce them. But it is only in creditor-debtor contractual relationships that people assess their ‘exchange value’ relative to others. Nietzsche writes:

“The feeling of guilt, of personal obligation… had its origin, as we have seen, in the oldest and most primitive relationship among persons there is, in the relationship between buyer and seller, creditor and debtor: here for the first time person stepped up against person, here for the first time a person measured himself by another person… of comparing, measuring, and calculating power against power” (II:8).

In the creditor-debtor relationship, the creditor has to not only evaluate the investment potential of his loan, but he has access the creditworthiness of the debtor. In other words, the creditor has to evaluate trustworthiness and character of the debtor. Moreover, the creditor is in a position of power as the evaluator, for his act of lending (or not lending) to the debtor is a sign of distinction – a value judgment placed on the character of the debtor.  For today’s readers, this pre-historical act has reverberated as long as there have been creditors and investors in one fashion or another. What is more important is what kinds of values are being created through this process.


Nietzsche believed that the creditor-debtor contractual relationship was the formative force in the evaluation and creation of values because it was the most prominent phenomena of promise making. In order to obtain a loan, the debtor primarily had to not only offered his word that he will follow through and repay the creditor, but to provide collateral in case of delinquency. But the only thing that the debtor could provide that he possessed was himself. As Nietzsche writes:

“Precisely here there are promises made; precisely here it is a matter of making a memory for the one who promises; precisely here, one may suspect, will be a place where one finds things that are hard, cruel, embarrassing. In order to instill trust in his promise of repayment, to provide a guarantee for the seriousness and the sacredness of his promise, to impress repayment on his conscience as a duty, as an obligation, the debtor – by virtue of a contract – pledges to the creditor in the case of non-payment something else that he ‘possesses,’ over which he still has power, for example his body… or his freedom or even his life” (II:5).

The debtor’s pledge of himself as collateral is necessary for the debtor to convey and replicate the seriousness of the creditors. For the creditors took the enterprise of lending with great seriousness due to the extraordinary risk they took in trusting in others to honor their promises to repay. One would not be amiss to wonder if creditors and debtors today take these contractual relationships with the seriousness and sacredness of which humans once did took them. Indeed, the art lending and borrowing seems to have long ago lost its original sense of being a promise, instead it has become ‘professionalized’ into an enterprise of ‘calculated risk-taking’…


This is where I must break with Nietzsche’s explicit account. Nietzsche is unclear and inconsistent with regard to the origination of guilt in relation to creditor-debtor relationship in its non-religious context (for he does explain it in the religious context in II:19-22). In fact, he explicitly states several times that guilt arises in through this non-moralized relationship (e.g. II:4, 6, and 8), but he later contradicts these claims (e.g. II:14). This becomes problematic because he explicitly presupposes the existence of the non-moralized concept of guilt in order to illustrate how it was employed for religious purposes (e.g. II:20-22). Thus, I break from Nietzsche’s chronology and posit my interpretation by choosing segments from Nietzsche’s account that provide the most coherent and plausible account.


I take Nietzsche to be intending to hint that guilt is essentially related to ressentiment. This association is consistent with the ressentiment of slave morality as outlined in the First Treatise; for the slave morality was predicated on the introduction of guilt through the revaluation of ‘bad’ into ‘evil’. Thus, I posit that guilt arises from the feeling of unredeemed indebtedness. In other words, the delinquent debtor – as a result of his indebtedness – feels his social status devalued by his creditors as he is deemed untrustworthy. The delinquent debtor internalizes this criticism and begins to feel himself less valuable as a person, thereby feeling guilty. This feeling is magnified through the act of punishment. With this interpretation, it becomes clear why the investor’s psychology emerged from that of the creditor, who is a being of prudence, and similarly for that of the speculator.


Having pledged his life and body as collateral, the debtor faced punishment and/or servitude in the case of delinquency. Through the act of punishment, the creditor exacts payment from the delinquent debtor in the form of pain, or rather in the form of pleasure derived from either causing or witnessing the debtor’s pain. As Nietzsche states, by punishing the debtor, “the creditor is granted a certain feeling of satisfaction as repayment and compensation… Through his ‘punishment’ the of the debtor the creditor participates in the right of lords… the elevating feeling of being permitted to hold a being in contempt” (II:4). Note that Nietzsche is merely recounting man’s “hard, cruel, embarrassing” (II:5) history, not praising it. While punishment serves as recompense, the creditor becomes more prudent in lending as a result of the pain of the financial losses incurred. This is because the creditor still takes the enterprise of lending with great seriousness. Thus “pain [is] the most powerful aid of mnemonics” (II:3). This latter message resonates with the modern investor’s psychology (it goes without saying that the former certainly does not): financial losses hurt more than financial gains benefit. It is a distinguishing mark of the speculator to not learn prudence from capital losses, thus repeating the same mistakes over again. In this way, there is a logical connection between investors and creditors. Speculative creditors are rarely creditors for long, for imprudent lending tends to eventually result in running out of credit to lend. Therefore, prudent investors focus on capital preservation over capital appreciation.


The delinquent debtor, one the other hand, faces a dilemma. On the one hand, if he flees then the value of his word becomes worthless and he is no longer deemed a socially responsible and trustworthy individual. As Nietzsche implies, the delinquent debtor feels “the pressure of the still unpaid debts and of the longing for the redemption of the same” (II:20). The key formative force in the debtor’s psyche is that they do not feel guilt or responsibility over the repayment of debt itself. They only feel guilt as a result of their diminished social standing in the eyes of the creditor, an after effect that stems from their bad conscience. As Nietzsche states, the debtor finds the consequences incurred from his delinquency to have fell upon him “like a piece of fate, had no other ‘inner pain’ than he would have had at the sudden occurrence of something unanticipated, of a frightful natural event, of a plummeting, crushing boulder against which one can no longer fight” (II:14). Similarly, modern speculators rarely take responsibility for their actions as such, thus they do not feel guilt nor comeuppance. The imprudence of the speculator leads them to over-leverage at periods of peak valuations. Subsequently when reality comes crashing in on them, they do not take responsibility for their imprudence, but blame their failure on the market, the economy, or even more ridiculously – on ‘black swans’. In this way, there is a logical connection between being a debtor and being a speculator, for prudent individuals often stay within their means and avoid the risks of excessive leverage. But speculators, who lack prudence, gleefully add leverage, hence becoming debtors.


On the other hand, if delinquent debtor submits to punishment at the hands of the creditor, then he feels his value as a person diminished. As was stated earlier, the debtor does not feel he is responsible for his delinquency as such, but only feels guilt as a result of his diminished social standing in the case of non-payment. Thus, by submitting to punishment of the creditor in order to redeem his social standing, the debtor nonetheless feels as if he is being punished for an act that was outside his control. This creates ressentiment towards his creditors. As Nietzsche states, “[i]n general, punishment makes hard and cold; it concentrates; it sharpens the feeling of alienation; it strengthens the power of resistance” (II:14). Thus, the delinquent debtor finds himself in a paradoxical situation of feeling the guilt of needing to repay his debt while developing ressentiment towards his creditors. However, it is only by keeping his word as a through punishment that the delinquent debtor is redeemed as a trustworthy individual in society. In today’s time, it seems that most delinquent debtor’s only feel the latter; that of ressentiment for they believe that a debt is only a ‘promise’ in the modern sense of the word – i.e., something that can be broken when it’s convenient for the debtor.


Ressentiment is the unique and distinguishing psychological characteristic of the debtor and that of the speculative psychology. Ressentiment tries “to hallow revenge under the name of justice” (II:11). Ressentiment is characteristic of the human of bad conscience; the self-doubting being who is self-doubting because they lack the ability and/or willingness to set values for himself. This being of ressentiment comes to despise those whose values he comes to judge himself by, even though he is too weak and unwilling to create values for himself. As Nietzsche writes:

“The active… human is still located a hundred paces nearer to justice than the reactive one; he simply has no need to appraise his object falsely and with prejudice as the reactive human does, must do. Therefore in all ages… the stronger, more courageous, more noble one, has in fact also had the freer eye, the better conscience on his side: conversely one can already guess who actually has the invention of the ‘bad conscience’ on his conscience, – the human being of ressentiment!” (II:11).

The active human is that of the creditor and prudent investor, who create values for themselves. In this way, the creditor is like the noble morality of the First Treatise. This social responsible being, as a creator of values, is “the possessor of a long, unbreakable will, has in this possession his standard of value as well: looking from himself toward the others, he honors or holds in contempt; and just as necessarily as he honors the ones like him, the strong and reliable” (II:2). He does not need to falsely and reactively value himself in relation to others, thus he possesses better conscience as a stronger, more courageous, and self-affirming individual.


The reactive human, on the other hand, is undoubtedly that of the debtor and speculator. The debtor is reactive because they are too weak and/or unwilling to create values for themselves, which is why they possess bad conscience as self-doubting individuals. They develop ressentiment towards their creditors because they do not take responsibility for their debts, yet they hate feeling the guilt of their lower social standing in the eyes of the creditors, who are the value creators. They cannot simply flee from repayment and punishment because they need access to future credit, thus the need to earn the trust of the creditors by acting like responsible individuals – like the creditors – and they come to hate them for this… as if being responsible were the worst form of punishment! This is the basis for the origin of the psyche of speculator that still pervades to this day. One would think that injury, the pain of loss, would make one prudent. However, as Nietzsche states, “‘Injury makes prudent,’ say the common folk: insofar as it makes prudent, it also makes bad. Fortunately, it often enough makes stupid” (II:15).


Taking responsibility for one’s actions is the essential point of divergence between the psyches of the creditors and debtors, and therefore for psyche of investors and speculators. Unlike the debtors, the creditors take responsibility for their actions. This is actually a rather ironic but necessary development. The irony is that the pre-historic creditors were the least responsible party in the case of delinquency of the debtor. In those times one’s reputation and word was only form of assurance that a creditor could have for his debtor, for there were no ‘credit statistics’ in those pre-historical times. Therefore, the responsibility for the repayment of debts was undoubtedly that of the debtor, the one who promises to repay. Thus, it is hard to chide these pre-historical creditors for imprudent lending, except in the most obvious and egregious cases. Nonetheless, the creditor is the one to take pride in being a trustworthy and responsible individual, thereby fostering prudence in himself. By doing so, as the creator of values, the creditor creates an example of those values that he comes expect from his debtors. On this type of responsible individual, Nietzsche writes:

“[He] promises like a sovereign, weightily, seldom, slowly, who is stingy with his trust, who conveys a mark of distinction when he trusts, who gives his word as something on which one can rely because he knows himself to be strong enough to uphold it even against accidents, even ‘against fate’” (II:2).

Now, for those familiar on Nietzsche’s view of freedom and fate, he does not actually mean to say that the responsible individual can overcome fate (hence, the use of quotation marks around ‘against fate’). The important feature is that Nietzsche is describing how the responsible individual views himself; he takes complete responsibility in his actions, even if fate seemingly acts against him for he views himself more powerful, hence responsible. With this “proud knowledge of the extraordinary privilege of responsibility”, the creditor necessarily takes it upon himself to act prudently; “weightily, seldom, slowly, who is stingy with his trust,” thereby conveying “a mark of distinction when he trusts” (II:2). This is the origin of the psyche of the prudent investor that still pervades to this day. Even though the debtor truly is responsible for repayment, the creditor also takes success and failures of his lending practice as a reflection of his character and ability, of his prudence. As Nietzsche says, “[this sentiment] has sunk into his lowest depth and has become instinct, the dominant instinct”, which “this sovereign human being calls it his conscience” (II:2). This sentiment is the self-affirming good conscience, which is manifest today in the prudent investor.

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