This post first appeared on Shareable. 

One of the defining features of this economic crisis is massive debt: student debt, medical debt, credit cards and underwater mortgages. The last thirty years have seen a stagnation of actual wages, which, combined with government cuts, outsourcing and off shoring, has meant a stagnation of the real purchasing power of the American people (alongside many more destructive results). To offset this lag, America has turned to debt, which can only paper over the lack of real capital for so long. The current crisis has seen millions devastated by the bursting of these credit bubbles. What solutions can help get people out of these debt traps?

One idea that's received much atttention lately is the Rolling Jubilee. The strategy, developed by Strike Debt, an offshoot of Occupy Wall Street, involves the abolition of private debt through totally legal market practices. The method is graceful in its simplicity: banks that are holding debt they can’t collect sell that debt really cheap on a secondary debt market, almost always to debt collectors. What Rolling Jubilee does is purchase this debt, and then cancel it, freeing the debtor from the claims of the bank and the debt collection agencies. As of this writing, the Rolling Jubilee has raised almost $350,000, which will abolish just under $7 million of debt, a very impressive achievement.

Mike Andrews is a member of Strike Debt, the organization that helped bring the Rolling Jubilee to fruition, and has seen the Rolling Jubilee develop from its first stages. I sat down to talk to him about Strike Debt, the Rolling Jubilee, and larger term strategies for combating debt in America.

Willie: What is the genesis of the Rolling Jubilee idea? How did it get started? 

Mike: I don’t actually know who precisely within Strike Debt proposed the idea, but my understanding is that it had been the pet project of one or two people for some time, and that Strike Debt presented an opportunity to try to make it happen. There was lots of conversation about it for a long time. I heard the phrase Rolling Jubilee mentioned a lot at meetings, and at first didn’t know exactly what it was.

Then research started happening: there was a lot of investigation into the legality of buying this debt from the secondary market, what the tax implications would be for the people who bought it, and for the people who had it bought for them. Lawyers were consulted. We have moles in the debt collection industry who have been helpful. So there was a lot of cautious research that went into exploring the idea: a non-profit entity was created to purchase the debt and then eventually there was a ‘test buy’, where about $4,000 was spent to buy this secondary debt, which amounted to something like $20,000 dollars worth of debt, and it went through fine.

Willie: So what are the mechanics of the Rolling Jubilee? How is this debt bought, and how is it cancelled? 

Mike: This debt exists in a secondary market. The money raised through the People’s Bailout, the telethon, will go to buy medical debt. The people whose debt we’re buying, their lenders have given up on them, they’re in default. So the lenders, the banks sell their debt into this shadowy secondary market, where it may go through an intermediary or two, but it usually ends up in the hands of shady people, debt collectors, who buy this debt for pennies on the dollar thinking they can collect on it. And even if they don’t collect on the full amount, they may make some profit. Individuals will know that their debt has been purchased, and been cancelled. We will notify people that this debt has been purchased in the spirit of mutual aid, and this is an activist project and not just that the lender has given up on them.

The rolling part of the Rolling Jubilee- this is a gesture of mutual aid, and if you benefit from this gesture of mutual aid, you can maybe do what you can to help other people benefit, whether that means giving a few bucks or organizing a benefit concert or something where you live. The idea is to pay it forward.

 
Jeff Mangum and Guy Picciotto play the People's Bailout 

Willie: Let’s talk about that Rolling part of the Jubilee. One way you can use paying it forward is to build a network: you help someone with the idea that the person who is helped will provide aid to others, and so you slowly build this network of people in that way. How do you think Rolling Jubilee is going to roll, is it related to these processes? 

Mike: Historically, the jubilee is where the king or whoever abolishes all debts. And the idea of the Rolling Jubilee, instead of all debts being abolished at the stroke of a pen or a declaration of a king or something, is debt would be abolished in segments. That’s the kind of governing idea. There are two aspects in which this could be rolling. It’s rolling in the sense that you just described, where the people who benefit from it then organize themselves or even contribute money to other people benefiting from it. The secondary debt market makes it impossible to know who's debt you’re buying before you buy it, in order to avoid people buying up their own debt for cheap. But you can buy a specific kind of debt for a specific region, like, say, medical debt in New Jersey, and then, after you make the purchase, you get the debtors’ contact info, since a debt collector would need this info to hound people. We're going to use this info to call or send letters to people informing them that Strike Debt has abolished their debt.

The other sense in which this is rolling, the kick off event, the People’s Bailout, is just to demonstrate that this can be done. The idea is for other groups, other people to hold fundraisers so they can then buy debt. So that’s another sense in which it’s rolling. I know that already Michelle Shocked is holding a benefit concert in New Orleans soon for buying debt and abolishing it. So it seems to have started, in a small way, the rolling idea.

Willie: How do you conceptualize this, or how has it been conceptualized at least, as transforming or politically attacking the ethos of debt? I know that Strike Debt is about more than just getting people out of debt, so how does the Rolling Jubilee fit into Strike Debt’s view about how to change debt? 

Mike: One of the first things that Strike Debt did to try to alter the framework around debt is to reject the language of forgiveness, the moral language that surrounds debt. So in the things we’ve produced, whether it’s propaganda or the Debt Resistors Manual , we avoid calling for debt forgiveness, we avoid the word “debt forgiveness”. Similarly, with the Rolling Jubilee we’re not saying that we’re “forgiving” the debt we’re buying, we’re cancelling it or we’re abolishing it. So we’re trying to reject the morality around debt, and part of that is saying that these debts are illegitimate. Today we all have to go into debt just to meet our basic necessities whether its going to college so we can get a decent job or seeking medical care or anything like that. So the idea is that these debts that we incurred are not legitimate, we don’t owe, we don’t actually owe you, we reject this debt both monetary and moral. But figuring out a strategy for how to connect debt to a larger anti-capitalist program, it’s difficult to really think through those steps, so I think as a group we’re just experimenting with something we have the capacity to do, to see what happens, and then depending on the results decide what to do next. So the grand idea behind the Rolling Jubilee is to relieve a lot of people’s debt initially as a gesture of mutual aid, to make day to day survival easier for people who have a lot of this medical debt. But if this spreads widely it actually might cause some havoc. Some people have been critiquing Rolling Jubilee by saying: 'well if lenders or the secondary debt market catches wind of it they’ll just stop selling debt.' Yeah, you’re right! And that would be an amazing victory, if this spread widely enough that this shady secondary market were altered. It would just show we are doing the right thing.

 
David Harvey on the Crises of Capitalism 

Willie: I think also there’s an interesting confrontation where the banks could refuse to sell the debt to Rolling Jubilee once they know who it's going to, showing what they actually they want is the immiseration, because they’re getting the money anyway. I don’t know if that’s been talked about by Rolling Jubilee folks, or if that’s a possibility that they won't sell the debt. 

Mike: I think what's been very, what’s distinguished the Strike Debt conversation from a kind of Occupy conversation is that there have both been conversations that are practical about actions and things, but also theoretical, complex and rigorous discussions. But yeah, the banks in a lot of cases don’t actually need to be repaid, they can write it off, it may even be more trouble than its worth for them financially to be seeking this debt. But what’s intolerable to them is the refusing of the moral obligation to pay debt. The idea that the debtor says: “this debt is actually not legitimate, morally I don’t owe you”, is far more threatening. The idea that that could spread, we don’t owe, we won't pay, is far more threatening than not receiving a certain amount of money.

Willie: So you mentioned you’re sort of throwing stuff against the wall to see what sticks. Is there a longer term strategy or goal out of Strike Debt or Rolling Jubilee? 

Mike: It’s a debt strike, ultimately. In the sort of embryonic stages , when people were trying to come up with the name, and this was before I got involved, there was lots of conversation about reversing this phrase “debt strike” to “strike debt”, making it more of an active thing. Rather than just “we’re gonna stop doing something, withhold something” we’re gonna actively try and destroy something, destroy a certain system. So yeah, it’s there in the name, a widespread debt strike. But we all know that that is a very lofty ambition, something that’s very difficult to organize and something that doesn’t have much modern precedent.

But we think there are ways to do incremental debt strikes that lead up to it. There’s a lot of talk about starting a debtors’ union. One of the ideas there would be to connect people who, for example, all have student loan debt to the same lender. And do something that starts small, say you get 50,000 people to pledge to withhold their student debt payment for one month. And it’s modest because, for the most part, if you’ve been paying regularly there’s no penalty for missing a month’s student loan debt. But just the shock of not receiving that much money and seeing: “oh wow all our debtors are in communication and are coordinating” is a threatening gesture. And it’s something down the line, and we know this is a multi-year project, but you could actually have lots of debtors refusing in a way that gives them leverage to do practical things like negotiate down their interest rate or do more radical things like try to bring down a bank. So that’s the horizon.

Willie: How does Strike Debt see itself as attached to notions of alternative economy? Producing a positive alternative economy situation, how do you see that attached to the Rolling Jubilee project in specific and Strike Debt more generally? 

Mike: We’re definitely interested in certain forms of solidarity economy. Being in default is no picnic. You’re hounded by debt collectors, they can garnish your wages, there are lots of ramifications that can make your life hell. So in a lot of ways you may have to partially if not fully withdraw from the formal economy. And because Strike Debt is calling for people to stop paying their debt, we know that there has to be a corresponding increase in mutual aid, solidarity networks, so people aren’t facing the consequences of default alone. Part of our ethos is to connect people who are in debt in a similar economic condition and have them be conscious of each other as debtors. So, similarly we need to connect people to support each other when they default either voluntarily or involuntarily. On a couple of occasions we’ve actually gone around and people have said how much debt they have. A lot of people involved in Strike Debt have a lot of debt, so they’re very very personally motivated in this project. 

In an episode of South Park from March, 2009, Kyle takes on the debt of the people of South Park. 

Chances are you know someone sweating under serious financial debt. It might even be you. I’m fresh out of college and have student loans looming over my shoulder.

The hardest part of getting out of debt, in my opinion, is keeping everything straight and organized. Lenders send about ten letters a week, often with confusing or conflicting information. Due dates get pushed back to pay the electric bill. Online resources are separated by account, and it’s hard to synthesize it all. And finally, there are a legion of private companies that want to “help” you with refinancing and consultation services. Well, good riddance to all that, I say!

ReadyForZero, a new online resource recently profiled by Fast Company, tries to make paying down debts less baffling through data synthesis, minimal visual design, video game theory, and psychological mind hacking.

Here’s how it all comes together. When you sign up for the free website, you plug in account information for your credit cards, bank accounts, student loans, mortgages, etc. (Presumably, the company will find some way to monetize the data it uses, but it claims your information will never be sold. Also, the site seems to have Department of Defense level security.) ReadyForZero knows that the Internet is addicted to infographics; thus, the site uses illustrative graphs and visualizations to clearly display your financial information. You can then use slider bars to calculate different repayment schemes and how it will affect your income, savings, and interest. Playing off of popular web-based games like Farmville, ReadyForZero sets benchmarks and goals to beat (also sort of like badges on Foursquare), turning debt repayment into essentially a really responsible video game. Finally, the company is trying out little tricks to help you manage your spending habits. For example, they provide stickers to place over your magnetic strip and credit card number that remind you of what you’re buying—and of the lingering debt you’re trying to eradicate.

This is probably not the right tool for everyone. But for those that like to visualize the problem without all the cluttering details and who aren’t worried about the company’s access to your financial information, it could make a life-changing difference. I’m signing up when I get home tonight.

Source: Fast Company 

Image by Vectorportal, licensed under Creative Commons. 

This article originally appeared at TomDispatch 

***

When my old gang and I were 14 or 15 years old, many centuries ago, we yearned for immortality in the fiery wreck of a bitchin' '40 Ford or '57 Chevy.  Our J.K. Rowling was Henry Felsen, the ex-Marine who wrote the bestselling masterpieces Hot Rod (1950), Street Rod (1953), and Crash Club (1958).

Officially, his books -- highly praised by the National Safety Council -- were deterrents, meant to scare my generation straight with huge dollops of teenage gore.  In fact, he was our asphalt Homer, exalting doomed teenage heroes and inviting us to emulate their legend.

One of his books ends with an apocalyptic collision at a crossroads that more or less wipes out the entire graduating class of a small Iowa town.  We loved this passage so much that we used to read it aloud to each other.

It's hard not to think of the great Felsen, who died in 1995, while browsing the business pages these days. There, after all, are the Tea Party Republicans, accelerator punched to the floor, grinning like demons as they approach Deadman’s Curve.  (John Boehner and David Brooks, in the back seat, are of course screaming in fear.) 

The Felsen analogy seems even stronger when you leave local turf for a global view.  From the air, where those Iowa cornstalks don’t conceal the pattern of blind convergence, the world economic situation looks distinctly like a crash waiting to happen.  From three directions, the United States, the European Union, and China are blindly speeding toward the same intersection.  The question is: Will anyone survive to attend the prom?

Shaking the Three Pillars of McWorld  

Let me reprise the obvious, but seldom discussed. Even if debt-limit doomsday is averted, Obama has already hocked the farm and sold the kids. With breathtaking contempt for the liberal wing of his own party, he’s offered to put the sacrosanct remnant of the New Deal safety net on the auction bloc to appease a hypothetical “center” and win reelection at any price.  (Dick Nixon, old socialist, where are you now that we need you?)

As a result, like the Phoenicians in the Bible, we’ll sacrifice our children (and their schoolteachers) to Moloch, now called Deficit.  The bloodbath in the public sector, together with an abrupt shutoff of unemployment benefits, will negatively multiply through the demand side of the economy until joblessness is in teenage digits and Lady Gaga is singing “Brother, Can You Spare a Dime?”

Lest we forget, we also live in a globalized economy where Americans are consumers of the last resort and the dollar is still the safe haven for the planet’s hoarded surplus value.  The new recession that the Republicans are engineering with such impunity will instantly put into doubt all three pillars of McWorld, each already shakier than generally imagined: American consumption, European stability, and Chinese growth.

Across the Atlantic, the European Union is demonstrating that it is exclusively a union of big banks and mega-creditors, grimly determined to make the Greeks sell off the Parthenon and the Irish emigrate to Australia.  One doesn’t have to be a Keynesian to know that, should this happen, the winds will only blow colder thereafter.  (If German jobs have so far been saved, it is only because China and the other BRICs -- Brazil, Russia, and India -- have been buying so many machine tools and Mercedes.)

Boardwalk Empire Times 160 

China, of course, now props up the world, but the question is: For how much longer?  Officially, the People’s Republic of China is in the midst of an epochal transition from an export-based to a consumer-based economy.  The ultimate goal of which is not only to turn the average Chinese into a suburban motorist, but also to break the perverse dependency that ties that country’s growth to an American trade deficit Beijing must, in turn, finance in order to keep the Yuan from appreciating.

Unfortunately for the Chinese, and possibly the world, that country’s planned consumer boom is quickly morphing into a dangerous real-estate bubble.  China has caught the Dubai virus and now every city there with more than one million inhabitants (at least 160 at last count) aspires to brand itself with a Rem Koolhaas skyscraper or a destination mega-mall.  The result has been an orgy of over-construction.

Despite the reassuring image of omniscient Beijing mandarins in cool control of the financial system, China actually seems to be functioning more like 160 iterations of Boardwalk Empire, where big city political bosses and allied private developers are able to forge their own backdoor deals with giant state banks.

In effect, a shadow banking system has arisen with big banks moving loans off their balance sheets into phony trust companies and thus evading official caps on total lending. Last week, Moody’s Business Service reported that the Chinese banking system was concealing one-half-trillion dollars in problematic loans, mainly for municipal vanity projects.  Another rating service warned that non-performing loans could constitute as much as 30% of bank portfolios.

Real-estate speculation, meanwhile, is vacuuming up domestic savings as urban families, faced with soaring home values, rush to invest in property before they are priced out of the market.  (Sound familiar?)  According to Business Week, residential housing investment now accounts for 9% of the gross domestic product, up from only 3.4% in 2003.

So, will Chengdu become the next Orlando and China Construction Bank the next Lehman Brothers?  Odd, the credulity of so many otherwise conservative pundits, who have bought into the idea that the Chinese Communist leadership has discovered the law of perpetual motion, creating a market economy immune to business cycles or speculative manias.

If China has a hard landing, it will also break the bones of leading suppliers like Brazil, Indonesia, and Australia.  Japan, already mired in recession after triple mega-disasters, is acutely sensitive to further shocks from its principal markets.  And the Arab Spring may turn to winter if new governments cannot grow employment or contain the inflation of food prices.

As the three great economic blocs accelerate toward synchronized depression, I find that I’m no longer as thrilled as I was at 14 by the prospect of a classic Felsen ending -- all tangled metal and young bodies.

Mike Davis teaches in the Creative Writing Program at the University of California, Riverside.  He is the author of Planet of Slums , among many other works.  He’s currently writing a book about employment, global warming, and urban reconstruction for Metropolitan Books.  To listen to Timothy MacBain’s latest TomCast audio interview in which Davis discusses a possible Chinese real estate crash and other perils of the global economic system, click here, or download it to your iPod here. 

Copyright 2011 Mike Davis

[Note for Readers: A sample passage from Henry Felsen’s 1950 novel Hot Rod:

"The crushed pile of twisted metal that had once been My-Son-Ralph's Chevy was on its back in the ditch, its wheels up like paws of a dead dog. Two of the wheels were smashed, and two were turning slowly. Something that looked like a limp, ripped-open bag of laundry hung halfway out of a rear window. That was Marge. 

"The motor of Ralph's car had been driven back through the frame of the car, and its weight had made a fatal spear of the steering column. Somewhere in the mashed tangle of metal, wood and torn upholstery was Ralph. And deeper yet in the pile of mangled steel, wedged in between jagged sheet steel on one side, and red hot metal on the other, was what had been the shapely black head and dainty face of LaVerne. 

"Walt's car had spun around after being hit, and had rolled over and along the highway. It had left a trail of shattered glass, metal, and dark, motionless shapes that had been broken open like paper bags before they rolled to a stop. These had been Walt's laughing passengers. Pinned inside his wrecked car, beyond knowing that battery acid ran in his eyes, lay Walt Thomas. Somehow the lower half of his body had been twisted completely around, and hung by a shred of skin."] 

Source: TomDispatch 

Image by Dawidl, licensed under Creative Commons.