The Rolling Jubilee

[giblets]

I think it depends on what the donors would have done with the money if they weren't donating to this cause. If they would have spent it on consumption themselves, then I don't see a net increase in the level of consumption. If they would have donated to some other charity, that charity might spend it and provide demand for goods and services.

[Jon Miller]

Except people with bad debt that they can't escape often have physical assets which lose value due to the debt and additionally spend all their money servicing the debt which could instead go to consumption (and yet, they can't even properly service that debt).

It isn't a 'I spent 1 dollar, they have 1 dollar less of debt and can consume with it'.

Instead it is 'I spent 1 dollar on 10 dollars worth of debt because right now the bank is only getting 10 cents and will soon get 0 (at bankruptcy). They have an extra 10 cents per month, which not only enables them to consume, but since they aren't bankrupt they will be able to move/etc as needed for jobs and will be able to keep the physical value of assets higher'.

If things are done well.

JM

[Jon Miller]

Also you should remember that the return on a lot of investments is really low right now. For long term people this is a great time to buy stocks/etc (unfortunately, I can't).

But for people who want shorter term, safe investments (savings account/etc), you don't get anything.

A better time to 'help'.

Maybe other ways to help would be better.

JM

[Kuciwalker]

Also you should remember that the return on a lot of investments is really low right now. For long term people this is a great time to buy stocks/etc (unfortunately, I can't).

No.

[giblets]

Except people with bad debt that they can't escape often have physical assets which lose value due to the debt and additionally spend all their money servicing the debt which could instead go to consumption (and yet, they can't even properly service that debt).

It isn't a 'I spent 1 dollar, they have 1 dollar less of debt and can consume with it'.

Instead it is 'I spent 1 dollar on 10 dollars worth of debt because right now the bank is only getting 10 cents and will soon get 0 (at bankruptcy). They have an extra 10 cents per month, which not only enables them to consume, but since they aren't bankrupt they will be able to move/etc as needed for jobs and will be able to keep the physical value of assets higher'.

If things are done well.

JM

But they can only be providing additional consumption using money that would have gone to paying down the debt, and the reason the debt is so cheap is because of the low probability that they will actually pay it off. If someone has a 15% chance of paying back $100 and an 85% chance of paying back nothing, then my $15 can be spent to relieve their debt, but it should only increase their consumption in the 15% of cases where they would actually have the $100 at their disposal.

[notyoueither]

How much economic destruction occurs when someone goes bankrupt or is foreclosed? I'm thinking quite a bit. If it is significant, and you could avoid that for pennies on the dollar it could be a good thing.

Interesting tidbit here:

http://www.businessinsider.com/how-rolling-jubilee-works-2012-11

Could it work? Alex Hern at the New Statesman points out that, while the law is on OWS's side, the banks may not be. Hern points to Felix Salmon's discussion of the American Homeowner Preservation, which sought to buy up distressed mortgages and find ways for the homeowners to stay in there homes and pay off their debt.

Here Salmon explains why that plan didn't work:

The idea might have been elegant, but it didn’t work in practice, because the banks wouldn’t play ball: they (and Freddie Mac) simply hated the idea of a homeowner being able to stay in their house after a short sale, and often asked for an affidavit from the buyer saying that the former owner would certainly be kicked out.

[Jon Miller]

No.

Return you get from savings accounts is 0 (negative with inflation).

Return you get from T-bills or whatever is negative with inflation ( I believe ).

I know numerous people who say that the stock market is too volatile for their investing desires. They wish to save now and be able to pull it out in 0.5-3 years and be pretty sure that in that time it has increased a bit.

Yes, right now (even more a couple of years ago) was a great time to invest if you wanted to wait 3-10 years before realizing your return.

A lot of people have different needs. They desire to be able to buy a house/pay for a medical bill/pay for being unemployed/etc and can't take the chance that their money has lost value in the short run.

JM

[Jon Miller]

To Gribber:

No, because a lot of harm happens when foreclosures/bankruptcies happen.

This harms not only the current consumption, but future consumption as well. In addition to the lost of labor efficiency (people are less able to move to where work is, due to credit/asset lost/time lost/etc), the worth of real assets (homes that are foreclosed lose value that they wouldn't otherwise lose) reduces future consumption.

JM

[Kidlicious]

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.

Wealth/debt has a significant effect on spending. Actually lifetime income is a better determinant, but eliminating people's debt definitely encourageous them to spend.

[Kidlicious]

But they can only be providing additional consumption using money that would have gone to paying down the debt, and the reason the debt is so cheap is because of the low probability that they will actually pay it off. If someone has a 15% chance of paying back $100 and an 85% chance of paying back nothing, then my $15 can be spent to relieve their debt, but it should only increase their consumption in the 15% of cases where they would actually have the $100 at their disposal.

There is more to consider but if consumption increases by 15% that's a win situation.

[giblets]

To Gribber:

No, because a lot of harm happens when foreclosures/bankruptcies happen.

This harms not only the current consumption, but future consumption as well. In addition to the lost of labor efficiency (people are less able to move to where work is, due to credit/asset lost/time lost/etc), the worth of real assets (homes that are foreclosed lose value that they wouldn't otherwise lose) reduces future consumption.

JM

Couldn't there be problems down the road if we let people default on debt without their credit rating suffering? A good credit rating would mean less in that case.

[notyoueither]

Their credit rating is already trashed by the time the banks are selling the non-performing loans, no?