The Rolling Jubilee

[Koyaanisqatsi]

I eagerly await the Apolyton reaction to the Rolling Jubilee idea proposed by Occupy Wall Street. Deluded communists trying to exploit the system? Charitable arch-conservative plan to resolve debt without government interference? Boon for banks getting nothing from toxic debt; moral hazard slippery slope; job destroying debt collection industry killer; unscalable lottery ticket? Only your Poly arguments can determine which!

http://rollingjubilee.org/

How does that work? Well, all kinds of debt gets "securitized" these days. Instead of a bank just lending money and collecting interest, it sells the rights to that income stream as an Asset Backed Security. By buying up a diverse array of ABS you can end up with less exposure to idiosyncratic risk than if you're just lending. But what happens when securitized loans go bad? Well they become "distressed debt" that can be purchased for pennies on the dollar. So in theory you can find a loan with a face value of $100 and buy it for just $15. That's supposed to be a kind of risky investment—a bet that the loan will actually pay off in the end. But the Rolling Jubilee concept is to turn it into a random act of kindness. Just write off the loan!

[Kidlicious]

[Alexander's Horse]

weird ****

[notyoueither]

Is it possible to buy individual debts once they get packaged up in these things?

[notyoueither]

It is an interesting concept.

Take someone who is about to lose a lot or all, and suddenly relieve him/her of the burden that is driving them under. I wonder what effects that would have on individual behaviour.

[kentonio]

Is this possible? Maybe if the debt is bundled, OWS could bundle donations to buy debt en masse?

[Alexander's Horse]

can someone pay my debts?

[Jaguar]

This is without doubt the stupidest thing that OWS has ever done, and God knows I don't make that statement lightly.

[Kuciwalker]

That is obviously false.

[giblets]

What exactly happens if you buy an asset backed security and then decide you don't want the income stream? Does that actually kill anybody's debt? Does the bank just keep the income stream after you inform them you don't want the money?

[Jaguar]

The bank is out of the picture if you're buying from debt collectors.

[Uncle Sparky]

I thought this would be about the anniversay of ZigZag papers.

[Jon Miller]

If done properly, I am not sure how this is significantly different than a private form of the recent quantitative easing that the Fed implemented.

JM

[giblets]

I think that not increasing the money supply is a significant difference. It's not clear to me that private citizens spending money to eliminate a debt that had a low probability of ever getting paid back will stimulate the economy.

[Jon Miller]

In both cases it is freeing money to be used for other things (like consumption or investment).

There are a lot of people I know in debt right now who would be even or better if you look just at their consumption/income. However, because of their debt (when they were unemployed/etc), they are getting more and more in debt even with minimal consumption.

If this debt were eliminated, they would be able to consume more.

The end result is that they will go bankrupt. This wil obviously limit their ability to consume in the future, in addition to being destructive to physical assets (and not just financial assets). And the creditors will end up not getting all their money anyway. It is just a net loss.

It is more efficient when someone like the Fed does it who can just print money.

But if it is done properly (no clue if it can be, or if it can be if it will be in this case), it seems to me that this will also multiply the movement of money.

JM