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Occupy Wall Street activists buy $15m of Americans' personal debt

409 points by sdfjkl 13y ago

jlgreco 13y ago
There's a joke about bailouts in here somewhere.
- MrZongle2 13y ago
  Unfortunately, the bailout joke is on us.
pchristensen 13y ago
Good for them. Markets are working. If the emotional and social value of forgiving debt is worth more than the expected value of collecting on that debt, then capitalism is working! Who could be opposed to this?
- pan69 13y ago
  And how many people get this debt in the first place is true capitalism as well?
  - bmelton 13y ago
    No, that's largely the result of a non-free market resultant from crony capitalism.
  - dnautics 13y ago
    A systemic (political, not free-market) policy of inflation encourages people into debt by decreasing the cost of borrowing (minus the increase in risk-cost, which most people are bad at judging), and by squeezing people by decreasing their cost-of-life margin versus their earning power. Not to mention politically motives to encourage debt, by incentivising things like mortgages, or creating educational debt systems, etc. The very dollar itself is an instrument of debt, and it is self-perpetuating -- there has to be a way to pay off the interest on that debt that was the genesis block for that dollar, of course that's done by "printing" money (adding a zero on a digital ledger), which creates inflation, which encourages people into debt, which requires more money to be printed, which requires interest to be paid off on that dollar, which...
- benched 13y ago
  Lately I'm experiencing the Baader-Meinhof Phenomenon with regard to Poe's Law.
  - davvolun 13y ago
    I don't want to get off on a rant here...
  - eli_gottlieb 13y ago
    That's not a cognitive bias happening to you. He's just in Poe's Law territory for real.
- Ilmesnkie_Jones 13y ago
  Its not working because the cost of having those people in debt, which is only worth 400,000, on the open market is probably much much higher.
- pradocchia 13y ago
  The markets probably underprice the value of forgiving debt. For instance, cancelling all mortgage debt under $300K would liquefy the housing market overnight and bring housing prices more in line w/ income, while improving public health and welfare. The market doesn't price such things in, though. That would be up to the government. How much was spent on the bailouts, and how much would that translate to per mortgage?
  - tedunangst 13y ago
    The reason the market doesn't price such things in is that the guy holding a $300k mortgage is unlikely to personally realize $300k in improved public health by forgiving the debt.
- mempko 13y ago
  food for though, capitalism != markets
  - tokenizer 13y ago
    Capitalism is a meaningless word. Does it mean currency based markets? Markets in general? The wage/labour model of business? Corporate Law? Ultimately we as humans coin many words for real experiences. In my experiences, I exchange my services, in exchange for a representation of value, and in turn purchase my necessities with this representation of value (and in this modern era purchase wants as well). Personally if you want to stick with idealism, I would coin Capitalism as "... an economic system based on private ownership of the means of production and capital goods, and the production of goods and services for profit in a market economy." We don't have that 100%. That's for sure. The government has a large part of of modern means of production. And the true public also has co-operatives, syndicates, mafias, gangs, and non-profits. We definitely have a market economy though. So I definitely agree with your point. I just think Capitalism is nothing more than an ideal. Because I enjoy this topic so much, my system classifications are as follows: The West: "Inverted Totalitarianism", EU: "Pre Natal Neo-Feudalism", China: "Party Monarchism". As far as I'm concerned, ideologies are great for discussions, but horrible at describing real things.
    - eli_gottlieb 13y ago
      > Capitalism is a meaningless word. Does it mean currency based markets? Markets in general? The wage/labour model of business? Corporate Law? It means the wage-labor model of business.
    - dnautics 13y ago
      capitalism is the idea that the accrual of property (or assets, or 'capital') is a virtue unto itself[0]. Possibly in opposition to others in the 'free market' umbrella who may see the acquisition of assets as a sign that you are providing a social good efficiently (but not necessarily a virtue in and of itself). [0]there are different styles of this, on the conservative end there are those who tend to value the individual accrual of assets; on the liberal end you might find nationalistic types who measure the greatness of society by how much in assets it accrues or trades (indirectly, by measuring GDP).
- dnautics 13y ago
  well, keep in mind that debt forgiveness is deflationary, so if you are obsessively worried about a great depression caused by a deflationary spiral, these people are causing some serious trouble.
krupan 13y ago
Nice to see people organizing and doing charitable things of their own accord.
wil421 13y ago
Seems like a good idea... How can I purchase my own debt? Rather than have someone else buy my debt at a reduced rate and abolish it, how about I buy my own?
- krupan 13y ago
  from the article, "Due to the nature of the debt market, the group is unable to specify whose debt it purchases..."
  - deleted 13y ago
    [deleted]
- jlgreco 13y ago
  You could "buy" your debt by going to the person that owns it and making them an offer.
- twoodfin 13y ago
  Debt is priced based on the debtor's expected ability to repay. If you have the means to purchase your own debt, it's probably selling at very close to its face value.
  - dragonwriter 13y ago
    > If you have the means to purchase your own debt, it's probably selling at very close to its face value. If you have the means to purchase your own debt at its face value, its probably selling at very close to its face value. But the market value of your debt should be approximately (the amount the pricing algorithms expect you to be able to pay) minus (the amount the pricing algorithms expect to be expended in extracting payment from you). So, IOW, for the average debtor (assuming that the algorithms involved are correct on average), the market price of their debt should be significantly less than they are able to pay.
    - polskibus 13y ago
      Let us speculate a bit further and perhaps coalesce multiple debtors, repackage their debt, create a debt-repurchase-vehicle that would purchase a tranche at a significantly lower cost than face value? Someone should really start securitizing that market from the other side!
LukeWalsh 13y ago
After my behavioral economics lecture this morning this is where my mind immediately went: http://ase.tufts.edu/econ/papers/separability.pdf http://ase.tufts.edu/econ/papers/separability.pdf As much as people would like this to refute capitalism and standard economic models, it really just confirms that the models are incomplete and can be updated with continuing research in to human behavior.
- mrow84 13y ago
  As someone who is being educated in the area, perhaps you can offer me some some answers to a few of questions I have: 1) What are the specific claims of capitalism that actually could be refuted by evidence? 2) Is there any evidence that does seem to refute those claims in any way? 3) Where would we most likely find evidence that the claims were innacurate? I think the main thing that confuses me is that, from a layman's perspective, we just seem to adapt our picture of what capitalism includes every time something new comes along. Model refinement is great in principle, but where is the proof that the basic theory is actually correct? There are such a terrifying number of confounding variables... To use an example from my own field: when ocean models get to a high enough resolution you start seeing a lot of mesoscale eddies. It turns out they are really important in all sorts of processes, and their effects can feed back to larger scales. For us it's not too bad; running models at sufficient resolution is expensive, but we can use higher-resolution runs to parameterise lower-resolution ones (and better comprehend our ignorance when that doesn't work). My point is that without a pretty good understanding of those fine-scale dynamics you can miss important things in the bigger picture, and I suggest that the economy-society coupled system has many more horrible to understand feedbacks than the ocean-atmosphere system. Thanks in advance to you, or anyone else who takes the time to answer.
  - LukeWalsh 13y ago
    To start off, the definition of capitalism is simply private ownership of goods, and the ability to trade those goods. A society in which even ONE good was tradable would be considered somewhat capitalistic. Specifically you could refute the efficiency of a free market reaching an equilibrium price (one that maximizes total surplus for buyers and sellers). However the experimental data suggests precisely the opposite, even in monopoly markets (double auction, perfect information) when tested in laboratory experiments. Many issues people think they have with capitalism are actually the result of a system that definitely does NOT inherently take in to account all hidden costs. This is often used by government officials to make policy decisions that add costs or incentives to a market to correctly account for all factors (environmental, public good preservation, etc.). Hope this is helpful!
Symmetry 13y ago
They still have to pay income tax on the abolished debt, but for someone in trouble like this that's probably at a pretty low marginal rate. The IRS doesn't want me paying for things by loaning the seller the price and then forgiving the debt as a way of getting around taxes, though that policy ends up being unfair in this situation.
- smsm42 13y ago
  If forgiven debt is counted as income, one can unexpectedly get into a much higher marginal rate bracket than usual. Not sure if IRS allows to amortize it over multiple years or something like that...
  - encoderer 13y ago
    That is true. And no, much like income, it's reported in the current year. It's very much just income. No different than if they gave the guy a check to pay his own debt.
nerfhammer 13y ago
so can't I take out $36750 in loans, buy the debt for $1000, rinse and repeat?
- gdulli 13y ago
  No, you can't. Can you think of why this wouldn't be possible?
- bmelton 13y ago
  Except for the fact that your rapidly lessening credit score would make it harder to get the second loan, harder still to get the third, etc. The debt you purchase isn't sold until after substantial collection efforts have been made, and debtors report on your credit worthiness when you're 30 days late, 60 days late, 90 days late, etc., with each one worse for your credit than the one before. There's undoubtedly a scam to be had, but without running debt/credit simulations, I would wager you couldn't make it very far before your resultant credit made you ineligible for any credit whatsoever.
noonespecial 13y ago
This demonstrates an interesting thing about medical debt in particular. They seem to be operating it almost like a market segmentation tool. The richest people simply pay the stated rate, everyone else pays the maximum rate that they are able as it travels down the debt staircase. A more cynical way to look at it? When you get (really) sick, the price for care is everything you have, whatever that happens to be.
- travem 13y ago
  Welcome to the joys of a market based approach to healthcare when there is inelastic demand.
  - iambateman 13y ago
    That sentence has tons of insight on the problem of health care. Thanks. As an aside, is there not some elasticity to medical care? People demand more health care for small problems when the price is lower.
    - Bognar 13y ago
      Small problems are not the majority of gross medical sales. Most of the revenue comes from expensive life-saving operations that one might argue are very inelastic.
    - bowlofpetunias 13y ago
      And who can judge if those small problems aren't symptoms of a much bigger problem? A problem that can only be effectively treated if it is caught early enough?
    - malandrew 13y ago
      Hopefully under such a scenario they would be requesting preventative care, which is almost always cheaper than corrective care.
    - jes5199 13y ago
      what I've heard is: in places with single-payer health systems, health care for small problems, while it superficially looks wasteful, pays off in preventing big-problems early, enough of the time, that it functions as an investment rather than an expense.
ffrryuu 13y ago
One of things that I was always curious about is why the govt didn't restructure mortgage debt and re-value property back to pre-bubble levels It would have cost the government $2 trillion to buy every sub-prime mortgage and retire it. But that's Communism Instead, the government (by way of the private bank known as "The Fed") gave $16 trillion - free and with no strings attached - to Wall Street, the very people who engineered the destruction of the American economy in 2008. That's known as Capitalism
- frezik 13y ago
  US GDP in 2012 was $15.68 trillion. You're saying the US government gave away more than a year's worth of productive output? You'll excuse me if I say citation fucking needed.
  - davvolun 13y ago
    That's a very good question, here's a little of what I found: http://www.investopedia.com/financial-edge/1111/how-much-has-the-taxpayer-recouped-from-tarp.aspx http://www.investopedia.com/financial-edge/1111/how-much-has... . Less than $1 trillion total (under any estimate), bordering on having broken even or made the money back.
  - cmdkeen 13y ago
    They lent the money, they didn't "give it" to the banks. The difference is that the Fed got the money back, whereas buying $2tn of debt would result in the Fed having to create $2tn. http://www.forbes.com/sites/traceygreenstein/2011/09/20/the-feds-16-trillion-bailouts-under-reported/ http://www.forbes.com/sites/traceygreenstein/2011/09/20/the-...
    - frezik 13y ago
      I think what he was actually getting at is the Discount Window. These are often very short term loans, perhaps a matter of minutes, made to cover a short term liquidity drop. If you add it all up over a year, it could very well add up to several trillions without adding those trillions to the GDP. It all gets paid back with interest, though. None of this is anything new.
harryh 13y ago
Did they ever figure out of the beneficiaries of this plan were going to have tax problems? When the idea was originally floated 6-12 months ago I remember that being a potentially large problem.
- saraid216 13y ago
  Their lawyers said it wouldn't be an issue, IIRC. I don't know the details.
  - byoung2 13y ago
    http://www.irs.gov/publications/p4681/index.html#en_US_2013_publink1000192015 http://www.irs.gov/publications/p4681/index.html#en_US_2013_... In most cases, you do not have income from canceled debt if the debt is canceled as a gift, bequest, devise, or inheritance.
nostromo 13y ago
Random idea: If a creditor is about to sell your debt to a debt collector for pennies on the dollar, what if they were forced, by law, to give you right of first refusal? For example: I owe a credit card company $20k, but I have defaulted on the loan. The credit card company is about to sell this debt to a collector for $1k, who will proceed to make my life miserable. If there were such a law, the credit card company would first have to offer the debt to me for $1k. In this scenario, I could indeed buy my own debt and we all could go on our merry way (except the debt collector). Crazy?
- chadillac83 13y ago
  I love this idea, I can't wait to default on all of my loans!
  - JumpCrisscross 13y ago
    I'd assume this maneuver would trash the debtor's credit, reducing their future access to credit - thus, limited moral hazard. The presumption, more likely, is that any price a debt collector is willing to pay for a debt is more than what a penniless debtor is able to. $20k of debt wouldn't sell for $1k unless the debtor were making so little that $1k would be a substantial amount of their time (else the cc company wouldn't sell for $1k).
    - bcoates 13y ago
      It'll trash your credit no matter who it's sold to; at least buying it yourself would relieve you of the debt.
    - DougWebb 13y ago
      CC companies have no idea what you can or cannot pay, nor do they care. What they care about is that you haven't made a payment in a while, despite letters and phone calls urging you to pay. After a fairly short time they want (and perhaps must) clear the debt off their books, so they sell it to a collection agency. They appear (based on the article) to sell at a fixed 5% rate rather than auctioning the debt to the highest bidder. So, if the debtor can afford 5% but no more, the CC company achieves their goal of clearing the bad debt for the same price they would by selling to an agency. Why not hold out for more? The debtor has already shown an unwillingness to pay under the current terms, and time has run out for holding the bad debt. Why would the debtor be willing/able to pay 5% but not the current terms? For a CC, it's probably the interest rate and interest balance. In this situation the CC company is usually charging 19% - 25% interest and including accumulated unpaid interest in the balance. If the debtor makes a payment, the terms say that the payment is applied to interest first, so the debtor's principal is not reduced at all until ALL of the interest is paid. That can be lifetime indenture to the CC company. A 5% payoff is a renegotiation of the terms which will terminate the account and prevent any further interest charges. That's worth scraping together the money needed for the payoff.
thatthatis 13y ago
Can anyone explain where to go to buy debt like this?
- jes5199 13y ago
  http://rollingjubilee.org/ http://rollingjubilee.org/
tehwalrus 13y ago
way to put your money where your mouth is. My respect for the Occupy movement just went up by an order of magnitude.
deleted 13y ago
[deleted]
jbnelson 13y ago
The Occupy Wall Street movement is frequently criticized as ineffectual, especially when compared to the Tea Party. (Here, ineffectual refers to their ability to induce legislative or regulatory change aligned with their respective movement; it is not a normative statement.) Adherents of OWS often state that it is a consequence of their movement's organic character or that it is intentional. (I find the later argument incredulous, kind of like saying, "I lost, but I wasn't really trying that hard.") In either case, this tactic could be highly persuasive. Ross says, Our purpose in doing this, aside from helping some people along the way – there's certainly many, many people who are very thankful that their debts are abolished – our primary purpose was to spread information about the workings of this secondary debt market. I suspect that spreading information about the "workings of the secondary debt market" is a very tall task. Certainly, they are getting a great deal of publicity, but I'm not convinced it will produce a lasting response. Yet, they have also purchased what I expect would be an atypically strong allegiance from almost 3,000 direct beneficiaries at about $5,000 each. They transmuted economic indebtedness for social obligation, by way of the rule of reciprocity. When you consider how vehemently, vocally, and persistently these individuals are likely to support OWS and their objectives, the influence purchased may be cheaper than traditional means (e.g. TV ads, direct mail, etc). And, it could be indirectly translated into more influence through votes.
mathattack 13y ago
The unintended consequence of this activity is that if people start negotiating their debt down, the collection firms will pay less for it. As a result, the least credit-worthy are going to have to pay even more for credit, or will be less likely to get credit at all.
malandrew 13y ago
The biggest problem with this is that they just generating a taxable event and these people now owe taxes on the "income" they received from being pardoned.
- saraid216 13y ago
  AFAIK, their lawyers checked to make sure this wouldn't happen beforehand. During the discussion of this when it started, I saw a mention that they had actually consulted the IRS directly on the matter and were told it would not do so. A quick search yielded me these statements: http://my.firedoglake.com/phoenix/2012/11/18/will-ows-rolling-jubilee-cause-tax-issues-for-debtors-irs-says-no/ http://my.firedoglake.com/phoenix/2012/11/18/will-ows-rollin...
brianbreslin 13y ago
Here is an idea, to steal from their idea I guess. What if we kickstarted a campaign to raise $50-100M to buy off random people's debts this same way they did? Target areas where people are hardest hit financially, softening the burden in those places a teeny bit? Could also be used for buying up grossly underwater properties and issuing new loans to help people? Just a thought.
- insaneirish 13y ago
  Great idea. Why should people have to be held responsible for their actions?
  - rurounijones 13y ago
    Damn straight! If someone in the US gets sick or is in an accident[1] they should suck it up and be responsible for things they cannot control / were not their fault; even if it bankrupts them. [1] RollingJubilee pays mainly medical debts.
- evan_ 13y ago
  That's exactly what they're already doing. You can contribute to their operation: http://rollingjubilee.org/#contribute http://rollingjubilee.org/#contribute
- dragonwriter 13y ago
  > Here is an idea, to steal from their idea I guess. What if we kickstarted a campaign to raise $50-100M to buy off random people's debts this same way they did? The more money you raise for that purpose, the more you'll increase the market value of the targetted kinds of debt. Succeed enough, and you'll create a credit bubble that pops when the influx of money runs out.
evan_ 13y ago
I wonder how long until we find out that this is actually being operated by the very banks that own the debt.
kingmanaz 13y ago
From Plutarch's "Lucullus": "Lucullus now turned his attention to the cities in Asia, in order that, while he was at leisure from military enterprises, he might do something for the furtherance of justice and law. Through long lack of these, unspeakable and incredible misfortunes were rife in the province. Its people were plundered and reduced to slavery by the tax-gatherers and money-lenders. Families were forced to sell their comely sons and virgin daughters, and cities their votive offerings, pictures, and sacred statues. At last men had to surrender to their creditors and serve them as slaves, but what preceded this was far worse, — tortures of rope, barrier, and horse; standing under the open sky in the blazing sun of summer, and in winter, being thrust into mud or ice. Slavery seemed, by comparison, to be disburdenment and peace. Such were the evils which Lucullus found in the cities, and in a short time he freed the oppressed from all of them." "In the first place, he ordered that the monthly rate of interest should be reckoned at one per cent., and no more; in the second place, he cut off all interest that exceeded the principal; third, and most important of all, he ordained that the lender should receive not more than the fourth part of his debtor's income, and any lender who added interest to principal was deprived of the whole. Thus, in less than four years' time, the debts were all paid, and the properties restored to their owners unencumbered. This public debt had its origin in the twenty thousand talents which Sulla had laid upon Asia as a contribution, and twice this amount had been paid back to the money-lenders. Yet now, by reckoning usurious interest, they had brought the total debt up to a hundred and twenty thousand talents. These men, accordingly, considered themselves outraged, and raised a clamour against Lucullus at Rome. They also bribed some of the tribunes to proceed against him, being men of great influence, who had got many of the active politicians into their debt. Lucullus, however, was not only beloved by the peoples whom he had benefited, nay, other provinces also longed to have him set over them, and felicitated those whose good fortune it was to have such a governor." http://penelope.uchicago.edu/Thayer/E/Roman/Texts/Plutarch/Lives/Lucullus*.html http://penelope.uchicago.edu/Thayer/E/Roman/Texts/Plutarch/L...
bdcravens 13y ago
I wonder what the legality of a consumer debt collective would be.
knodi 13y ago
Where can an individual go to buy debt. I would love to buy some debt and forgive it for Christmas this year.
- kevin_rubyhouse 13y ago
  http://rollingjubilee.org/ http://rollingjubilee.org/
biot 13y ago
It would be interesting had they sent letters to those whose debt they bought and explained exactly what they were doing. Then offer them one of three options: 1. Pay 10 cents on the dollar. This covers their family's debt and they pay it forward for two other families. 2. Pay 5 cents on the dollar. This covers them and they pay it forward to one other family. 3. Pay nothing. Their debt is forgiven thanks to another family having paid it forward. If enough people opted for #1 or #2, the fund could be self-renewing and they could purchase ever-larger amounts of debt and keep it going.
- kansface 13y ago
  This could never be self sustaining because it would increase the cost of debt (if the debtors could pay, it wouldn't have been sold).
  - avalaunch 13y ago
    If the debtors could pay 100% of what they owed it wouldn't have been sold. But the OP is suggesting that some of the debtors might be able and willing to pay 5 cents or even 10 cents on the dollar, which I think is a reasonable assumption.
    - e12e 13y ago
      Also, with the assumption that the project isn't for profit (ie, everyone choosing #3) -- someone choosing to pay more (donate) -- would help the project. Even if they only did that after a year or two (when the debt would've been defaulted under "normal" circumstances).
downandout 13y ago
That's all well and good until the IRS comes after these people for taxes on the value of the forgiven debt. Occupy essentially just indebted them to a much more formidable foe than a bill collector that must play by strict rules: the IRS.
kirbyk 13y ago
Why can't we scale this? Why aren't there nonforprofit's that allow people to donate and alleviate peoples debt?
tete 13y ago
Wow, did you see that chart in their manual (page 32, PDF-wise or page 24 printed): http://strikedebt.org/The-Debt-Resistors-Operations-Manual.pdf http://strikedebt.org/The-Debt-Resistors-Operations-Manual.p...
brianbreslin 13y ago
what percentage of personal debt is medical related? That is typically the clearest case of "life threw them a curve-ball" situations where it was completely out of their control (usually).

409 points by sdfjkl 13y ago

jlgreco 13y ago

There's a joke about bailouts in here somewhere.

MrZongle2 13y ago
Unfortunately, the bailout joke is on us.

pchristensen 13y ago

Good for them. Markets are working. If the emotional and social value of forgiving debt is worth more than the expected value of collecting on that debt, then capitalism is working! Who could be opposed to this?

pan69 13y ago
And how many people get this debt in the first place is true capitalism as well?
- bmelton 13y ago
  No, that's largely the result of a non-free market resultant from crony capitalism.
- dnautics 13y ago
  A systemic (political, not free-market) policy of inflation encourages people into debt by decreasing the cost of borrowing (minus the increase in risk-cost, which most people are bad at judging), and by squeezing people by decreasing their cost-of-life margin versus their earning power. Not to mention politically motives to encourage debt, by incentivising things like mortgages, or creating educational debt systems, etc. The very dollar itself is an instrument of debt, and it is self-perpetuating -- there has to be a way to pay off the interest on that debt that was the genesis block for that dollar, of course that's done by "printing" money (adding a zero on a digital ledger), which creates inflation, which encourages people into debt, which requires more money to be printed, which requires interest to be paid off on that dollar, which...
benched 13y ago
Lately I'm experiencing the Baader-Meinhof Phenomenon with regard to Poe's Law.
- davvolun 13y ago
  I don't want to get off on a rant here...
- eli_gottlieb 13y ago
  That's not a cognitive bias happening to you. He's just in Poe's Law territory for real.
Ilmesnkie_Jones 13y ago
Its not working because the cost of having those people in debt, which is only worth 400,000, on the open market is probably much much higher.
pradocchia 13y ago
The markets probably underprice the value of forgiving debt. For instance, cancelling all mortgage debt under $300K would liquefy the housing market overnight and bring housing prices more in line w/ income, while improving public health and welfare. The market doesn't price such things in, though. That would be up to the government. How much was spent on the bailouts, and how much would that translate to per mortgage?
- tedunangst 13y ago
  The reason the market doesn't price such things in is that the guy holding a $300k mortgage is unlikely to personally realize $300k in improved public health by forgiving the debt.
mempko 13y ago
food for though, capitalism != markets
- tokenizer 13y ago
  Capitalism is a meaningless word. Does it mean currency based markets? Markets in general? The wage/labour model of business? Corporate Law? Ultimately we as humans coin many words for real experiences. In my experiences, I exchange my services, in exchange for a representation of value, and in turn purchase my necessities with this representation of value (and in this modern era purchase wants as well). Personally if you want to stick with idealism, I would coin Capitalism as "... an economic system based on private ownership of the means of production and capital goods, and the production of goods and services for profit in a market economy." We don't have that 100%. That's for sure. The government has a large part of of modern means of production. And the true public also has co-operatives, syndicates, mafias, gangs, and non-profits. We definitely have a market economy though. So I definitely agree with your point. I just think Capitalism is nothing more than an ideal. Because I enjoy this topic so much, my system classifications are as follows: The West: "Inverted Totalitarianism", EU: "Pre Natal Neo-Feudalism", China: "Party Monarchism". As far as I'm concerned, ideologies are great for discussions, but horrible at describing real things.
  - eli_gottlieb 13y ago
    > Capitalism is a meaningless word. Does it mean currency based markets? Markets in general? The wage/labour model of business? Corporate Law? It means the wage-labor model of business.
  - dnautics 13y ago
    capitalism is the idea that the accrual of property (or assets, or 'capital') is a virtue unto itself[0]. Possibly in opposition to others in the 'free market' umbrella who may see the acquisition of assets as a sign that you are providing a social good efficiently (but not necessarily a virtue in and of itself). [0]there are different styles of this, on the conservative end there are those who tend to value the individual accrual of assets; on the liberal end you might find nationalistic types who measure the greatness of society by how much in assets it accrues or trades (indirectly, by measuring GDP).
dnautics 13y ago
well, keep in mind that debt forgiveness is deflationary, so if you are obsessively worried about a great depression caused by a deflationary spiral, these people are causing some serious trouble.

krupan 13y ago

Nice to see people organizing and doing charitable things of their own accord.

wil421 13y ago

Seems like a good idea... How can I purchase my own debt? Rather than have someone else buy my debt at a reduced rate and abolish it, how about I buy my own?

krupan 13y ago
from the article, "Due to the nature of the debt market, the group is unable to specify whose debt it purchases..."
- deleted 13y ago
  [deleted]
jlgreco 13y ago
You could "buy" your debt by going to the person that owns it and making them an offer.
twoodfin 13y ago
Debt is priced based on the debtor's expected ability to repay. If you have the means to purchase your own debt, it's probably selling at very close to its face value.
- dragonwriter 13y ago
  > If you have the means to purchase your own debt, it's probably selling at very close to its face value. If you have the means to purchase your own debt at its face value, its probably selling at very close to its face value. But the market value of your debt should be approximately (the amount the pricing algorithms expect you to be able to pay) minus (the amount the pricing algorithms expect to be expended in extracting payment from you). So, IOW, for the average debtor (assuming that the algorithms involved are correct on average), the market price of their debt should be significantly less than they are able to pay.
  - polskibus 13y ago
    Let us speculate a bit further and perhaps coalesce multiple debtors, repackage their debt, create a debt-repurchase-vehicle that would purchase a tranche at a significantly lower cost than face value? Someone should really start securitizing that market from the other side!

LukeWalsh 13y ago

After my behavioral economics lecture this morning this is where my mind immediately went: http://ase.tufts.edu/econ/papers/separability.pdf http://ase.tufts.edu/econ/papers/separability.pdf As much as people would like this to refute capitalism and standard economic models, it really just confirms that the models are incomplete and can be updated with continuing research in to human behavior.

mrow84 13y ago
As someone who is being educated in the area, perhaps you can offer me some some answers to a few of questions I have: 1) What are the specific claims of capitalism that actually could be refuted by evidence? 2) Is there any evidence that does seem to refute those claims in any way? 3) Where would we most likely find evidence that the claims were innacurate? I think the main thing that confuses me is that, from a layman's perspective, we just seem to adapt our picture of what capitalism includes every time something new comes along. Model refinement is great in principle, but where is the proof that the basic theory is actually correct? There are such a terrifying number of confounding variables... To use an example from my own field: when ocean models get to a high enough resolution you start seeing a lot of mesoscale eddies. It turns out they are really important in all sorts of processes, and their effects can feed back to larger scales. For us it's not too bad; running models at sufficient resolution is expensive, but we can use higher-resolution runs to parameterise lower-resolution ones (and better comprehend our ignorance when that doesn't work). My point is that without a pretty good understanding of those fine-scale dynamics you can miss important things in the bigger picture, and I suggest that the economy-society coupled system has many more horrible to understand feedbacks than the ocean-atmosphere system. Thanks in advance to you, or anyone else who takes the time to answer.
- LukeWalsh 13y ago
  To start off, the definition of capitalism is simply private ownership of goods, and the ability to trade those goods. A society in which even ONE good was tradable would be considered somewhat capitalistic. Specifically you could refute the efficiency of a free market reaching an equilibrium price (one that maximizes total surplus for buyers and sellers). However the experimental data suggests precisely the opposite, even in monopoly markets (double auction, perfect information) when tested in laboratory experiments. Many issues people think they have with capitalism are actually the result of a system that definitely does NOT inherently take in to account all hidden costs. This is often used by government officials to make policy decisions that add costs or incentives to a market to correctly account for all factors (environmental, public good preservation, etc.). Hope this is helpful!

Symmetry 13y ago

They still have to pay income tax on the abolished debt, but for someone in trouble like this that's probably at a pretty low marginal rate. The IRS doesn't want me paying for things by loaning the seller the price and then forgiving the debt as a way of getting around taxes, though that policy ends up being unfair in this situation.

smsm42 13y ago
If forgiven debt is counted as income, one can unexpectedly get into a much higher marginal rate bracket than usual. Not sure if IRS allows to amortize it over multiple years or something like that...
- encoderer 13y ago
  That is true. And no, much like income, it's reported in the current year. It's very much just income. No different than if they gave the guy a check to pay his own debt.

nerfhammer 13y ago

so can't I take out $36750 in loans, buy the debt for $1000, rinse and repeat?

gdulli 13y ago
No, you can't. Can you think of why this wouldn't be possible?
bmelton 13y ago
Except for the fact that your rapidly lessening credit score would make it harder to get the second loan, harder still to get the third, etc. The debt you purchase isn't sold until after substantial collection efforts have been made, and debtors report on your credit worthiness when you're 30 days late, 60 days late, 90 days late, etc., with each one worse for your credit than the one before. There's undoubtedly a scam to be had, but without running debt/credit simulations, I would wager you couldn't make it very far before your resultant credit made you ineligible for any credit whatsoever.

noonespecial 13y ago

This demonstrates an interesting thing about medical debt in particular. They seem to be operating it almost like a market segmentation tool. The richest people simply pay the stated rate, everyone else pays the maximum rate that they are able as it travels down the debt staircase. A more cynical way to look at it? When you get (really) sick, the price for care is everything you have, whatever that happens to be.

travem 13y ago
Welcome to the joys of a market based approach to healthcare when there is inelastic demand.
- iambateman 13y ago
  That sentence has tons of insight on the problem of health care. Thanks. As an aside, is there not some elasticity to medical care? People demand more health care for small problems when the price is lower.
  - Bognar 13y ago
    Small problems are not the majority of gross medical sales. Most of the revenue comes from expensive life-saving operations that one might argue are very inelastic.
  - bowlofpetunias 13y ago
    And who can judge if those small problems aren't symptoms of a much bigger problem? A problem that can only be effectively treated if it is caught early enough?
  - malandrew 13y ago
    Hopefully under such a scenario they would be requesting preventative care, which is almost always cheaper than corrective care.
  - jes5199 13y ago
    what I've heard is: in places with single-payer health systems, health care for small problems, while it superficially looks wasteful, pays off in preventing big-problems early, enough of the time, that it functions as an investment rather than an expense.

ffrryuu 13y ago

One of things that I was always curious about is why the govt didn't restructure mortgage debt and re-value property back to pre-bubble levels It would have cost the government $2 trillion to buy every sub-prime mortgage and retire it. But that's Communism Instead, the government (by way of the private bank known as "The Fed") gave $16 trillion - free and with no strings attached - to Wall Street, the very people who engineered the destruction of the American economy in 2008. That's known as Capitalism

frezik 13y ago
US GDP in 2012 was $15.68 trillion. You're saying the US government gave away more than a year's worth of productive output? You'll excuse me if I say citation fucking needed.
- davvolun 13y ago
  That's a very good question, here's a little of what I found: http://www.investopedia.com/financial-edge/1111/how-much-has-the-taxpayer-recouped-from-tarp.aspx http://www.investopedia.com/financial-edge/1111/how-much-has... . Less than $1 trillion total (under any estimate), bordering on having broken even or made the money back.
- cmdkeen 13y ago
  They lent the money, they didn't "give it" to the banks. The difference is that the Fed got the money back, whereas buying $2tn of debt would result in the Fed having to create $2tn. http://www.forbes.com/sites/traceygreenstein/2011/09/20/the-feds-16-trillion-bailouts-under-reported/ http://www.forbes.com/sites/traceygreenstein/2011/09/20/the-...
  - frezik 13y ago
    I think what he was actually getting at is the Discount Window. These are often very short term loans, perhaps a matter of minutes, made to cover a short term liquidity drop. If you add it all up over a year, it could very well add up to several trillions without adding those trillions to the GDP. It all gets paid back with interest, though. None of this is anything new.

harryh 13y ago

Did they ever figure out of the beneficiaries of this plan were going to have tax problems? When the idea was originally floated 6-12 months ago I remember that being a potentially large problem.

saraid216 13y ago
Their lawyers said it wouldn't be an issue, IIRC. I don't know the details.
- byoung2 13y ago
  http://www.irs.gov/publications/p4681/index.html#en_US_2013_publink1000192015 http://www.irs.gov/publications/p4681/index.html#en_US_2013_... In most cases, you do not have income from canceled debt if the debt is canceled as a gift, bequest, devise, or inheritance.

nostromo 13y ago

Random idea: If a creditor is about to sell your debt to a debt collector for pennies on the dollar, what if they were forced, by law, to give you right of first refusal? For example: I owe a credit card company $20k, but I have defaulted on the loan. The credit card company is about to sell this debt to a collector for $1k, who will proceed to make my life miserable. If there were such a law, the credit card company would first have to offer the debt to me for $1k. In this scenario, I could indeed buy my own debt and we all could go on our merry way (except the debt collector). Crazy?

chadillac83 13y ago
I love this idea, I can't wait to default on all of my loans!
- JumpCrisscross 13y ago
  I'd assume this maneuver would trash the debtor's credit, reducing their future access to credit - thus, limited moral hazard. The presumption, more likely, is that any price a debt collector is willing to pay for a debt is more than what a penniless debtor is able to. $20k of debt wouldn't sell for $1k unless the debtor were making so little that $1k would be a substantial amount of their time (else the cc company wouldn't sell for $1k).
  - bcoates 13y ago
    It'll trash your credit no matter who it's sold to; at least buying it yourself would relieve you of the debt.
  - DougWebb 13y ago
    CC companies have no idea what you can or cannot pay, nor do they care. What they care about is that you haven't made a payment in a while, despite letters and phone calls urging you to pay. After a fairly short time they want (and perhaps must) clear the debt off their books, so they sell it to a collection agency. They appear (based on the article) to sell at a fixed 5% rate rather than auctioning the debt to the highest bidder. So, if the debtor can afford 5% but no more, the CC company achieves their goal of clearing the bad debt for the same price they would by selling to an agency. Why not hold out for more? The debtor has already shown an unwillingness to pay under the current terms, and time has run out for holding the bad debt. Why would the debtor be willing/able to pay 5% but not the current terms? For a CC, it's probably the interest rate and interest balance. In this situation the CC company is usually charging 19% - 25% interest and including accumulated unpaid interest in the balance. If the debtor makes a payment, the terms say that the payment is applied to interest first, so the debtor's principal is not reduced at all until ALL of the interest is paid. That can be lifetime indenture to the CC company. A 5% payoff is a renegotiation of the terms which will terminate the account and prevent any further interest charges. That's worth scraping together the money needed for the payoff.

thatthatis 13y ago

Can anyone explain where to go to buy debt like this?

jes5199 13y ago
http://rollingjubilee.org/ http://rollingjubilee.org/

tehwalrus 13y ago

way to put your money where your mouth is. My respect for the Occupy movement just went up by an order of magnitude.

deleted 13y ago

[deleted]

jbnelson 13y ago

The Occupy Wall Street movement is frequently criticized as ineffectual, especially when compared to the Tea Party. (Here, ineffectual refers to their ability to induce legislative or regulatory change aligned with their respective movement; it is not a normative statement.) Adherents of OWS often state that it is a consequence of their movement's organic character or that it is intentional. (I find the later argument incredulous, kind of like saying, "I lost, but I wasn't really trying that hard.") In either case, this tactic could be highly persuasive. Ross says, Our purpose in doing this, aside from helping some people along the way – there's certainly many, many people who are very thankful that their debts are abolished – our primary purpose was to spread information about the workings of this secondary debt market. I suspect that spreading information about the "workings of the secondary debt market" is a very tall task. Certainly, they are getting a great deal of publicity, but I'm not convinced it will produce a lasting response. Yet, they have also purchased what I expect would be an atypically strong allegiance from almost 3,000 direct beneficiaries at about $5,000 each. They transmuted economic indebtedness for social obligation, by way of the rule of reciprocity. When you consider how vehemently, vocally, and persistently these individuals are likely to support OWS and their objectives, the influence purchased may be cheaper than traditional means (e.g. TV ads, direct mail, etc). And, it could be indirectly translated into more influence through votes.

mathattack 13y ago

The unintended consequence of this activity is that if people start negotiating their debt down, the collection firms will pay less for it. As a result, the least credit-worthy are going to have to pay even more for credit, or will be less likely to get credit at all.

malandrew 13y ago

The biggest problem with this is that they just generating a taxable event and these people now owe taxes on the "income" they received from being pardoned.

saraid216 13y ago
AFAIK, their lawyers checked to make sure this wouldn't happen beforehand. During the discussion of this when it started, I saw a mention that they had actually consulted the IRS directly on the matter and were told it would not do so. A quick search yielded me these statements: http://my.firedoglake.com/phoenix/2012/11/18/will-ows-rolling-jubilee-cause-tax-issues-for-debtors-irs-says-no/ http://my.firedoglake.com/phoenix/2012/11/18/will-ows-rollin...

brianbreslin 13y ago

Here is an idea, to steal from their idea I guess. What if we kickstarted a campaign to raise $50-100M to buy off random people's debts this same way they did? Target areas where people are hardest hit financially, softening the burden in those places a teeny bit? Could also be used for buying up grossly underwater properties and issuing new loans to help people? Just a thought.

insaneirish 13y ago
Great idea. Why should people have to be held responsible for their actions?
- rurounijones 13y ago
  Damn straight! If someone in the US gets sick or is in an accident[1] they should suck it up and be responsible for things they cannot control / were not their fault; even if it bankrupts them. [1] RollingJubilee pays mainly medical debts.
evan_ 13y ago
That's exactly what they're already doing. You can contribute to their operation: http://rollingjubilee.org/#contribute http://rollingjubilee.org/#contribute
dragonwriter 13y ago
> Here is an idea, to steal from their idea I guess. What if we kickstarted a campaign to raise $50-100M to buy off random people's debts this same way they did? The more money you raise for that purpose, the more you'll increase the market value of the targetted kinds of debt. Succeed enough, and you'll create a credit bubble that pops when the influx of money runs out.

evan_ 13y ago

I wonder how long until we find out that this is actually being operated by the very banks that own the debt.

kingmanaz 13y ago

From Plutarch's "Lucullus": "Lucullus now turned his attention to the cities in Asia, in order that, while he was at leisure from military enterprises, he might do something for the furtherance of justice and law. Through long lack of these, unspeakable and incredible misfortunes were rife in the province. Its people were plundered and reduced to slavery by the tax-gatherers and money-lenders. Families were forced to sell their comely sons and virgin daughters, and cities their votive offerings, pictures, and sacred statues. At last men had to surrender to their creditors and serve them as slaves, but what preceded this was far worse, — tortures of rope, barrier, and horse; standing under the open sky in the blazing sun of summer, and in winter, being thrust into mud or ice. Slavery seemed, by comparison, to be disburdenment and peace. Such were the evils which Lucullus found in the cities, and in a short time he freed the oppressed from all of them." "In the first place, he ordered that the monthly rate of interest should be reckoned at one per cent., and no more; in the second place, he cut off all interest that exceeded the principal; third, and most important of all, he ordained that the lender should receive not more than the fourth part of his debtor's income, and any lender who added interest to principal was deprived of the whole. Thus, in less than four years' time, the debts were all paid, and the properties restored to their owners unencumbered. This public debt had its origin in the twenty thousand talents which Sulla had laid upon Asia as a contribution, and twice this amount had been paid back to the money-lenders. Yet now, by reckoning usurious interest, they had brought the total debt up to a hundred and twenty thousand talents. These men, accordingly, considered themselves outraged, and raised a clamour against Lucullus at Rome. They also bribed some of the tribunes to proceed against him, being men of great influence, who had got many of the active politicians into their debt. Lucullus, however, was not only beloved by the peoples whom he had benefited, nay, other provinces also longed to have him set over them, and felicitated those whose good fortune it was to have such a governor." http://penelope.uchicago.edu/Thayer/E/Roman/Texts/Plutarch/Lives/Lucullus*.html http://penelope.uchicago.edu/Thayer/E/Roman/Texts/Plutarch/L...

bdcravens 13y ago

I wonder what the legality of a consumer debt collective would be.

knodi 13y ago

Where can an individual go to buy debt. I would love to buy some debt and forgive it for Christmas this year.

kevin_rubyhouse 13y ago
http://rollingjubilee.org/ http://rollingjubilee.org/

biot 13y ago

It would be interesting had they sent letters to those whose debt they bought and explained exactly what they were doing. Then offer them one of three options: 1. Pay 10 cents on the dollar. This covers their family's debt and they pay it forward for two other families. 2. Pay 5 cents on the dollar. This covers them and they pay it forward to one other family. 3. Pay nothing. Their debt is forgiven thanks to another family having paid it forward. If enough people opted for #1 or #2, the fund could be self-renewing and they could purchase ever-larger amounts of debt and keep it going.

kansface 13y ago
This could never be self sustaining because it would increase the cost of debt (if the debtors could pay, it wouldn't have been sold).
- avalaunch 13y ago
  If the debtors could pay 100% of what they owed it wouldn't have been sold. But the OP is suggesting that some of the debtors might be able and willing to pay 5 cents or even 10 cents on the dollar, which I think is a reasonable assumption.
  - e12e 13y ago
    Also, with the assumption that the project isn't for profit (ie, everyone choosing #3) -- someone choosing to pay more (donate) -- would help the project. Even if they only did that after a year or two (when the debt would've been defaulted under "normal" circumstances).

downandout 13y ago

That's all well and good until the IRS comes after these people for taxes on the value of the forgiven debt. Occupy essentially just indebted them to a much more formidable foe than a bill collector that must play by strict rules: the IRS.

kirbyk 13y ago

Why can't we scale this? Why aren't there nonforprofit's that allow people to donate and alleviate peoples debt?

tete 13y ago

Wow, did you see that chart in their manual (page 32, PDF-wise or page 24 printed): http://strikedebt.org/The-Debt-Resistors-Operations-Manual.pdf http://strikedebt.org/The-Debt-Resistors-Operations-Manual.p...

brianbreslin 13y ago

what percentage of personal debt is medical related? That is typically the clearest case of "life threw them a curve-ball" situations where it was completely out of their control (usually).