Daniel Willis of the Oakland Tribune also has this story, and is a much better writer and economist than me.
I was surprised to see nothing about the Rolling Jubilee on the front page today. From the Occupy-affiliated group Strike Debt, the organization is raising funds to buy debt on the secondary market. The secondary debt market is where your debt goes before you start getting collections calls. They buy your debt for 5% of its face value and make a huge profit off of getting you to pay some or all of it.
There's no law that says what you have to do once you acquire the debt. So, what Strike Debt is doing is simply erasing that debt. And can potentially be a big deal. As of this writing they've raised more than $200,000, with which they'll erase four million dollars in debt.
From Willis's article:
The way this new plan works is this: The money raised with this telethon and other activities will be spent on the secondary debt market buying loans, usually in default, at random. This costs, on average, about 5 cents per dollar of debt. The debt will then be forgiven outright.
What proposal for economic stimulus promises a 20-to-1 multiplier on investment? We're usually lucky to get 1-for-1 with bureaucratic expenses and inefficiencies on distribution. At 20-to-1, the $25.1 billion not expected to be repaid from the auto industry bailout could cancel out 59 percent of the credit card debt in the United States.
And that's just the cold, hard dollars and cents. Eliminating debt doesn't just convert a person's monthly payment into disposable income they can put back into the economy. It takes a weight off a person psychologically so they feel comfortable putting money into the economy. The things that go first when times are tough -- travel, consumer goods, even a night out at a local restaurant -- would also be among the first to come back without the specter of debt looming, creating jobs at a local level.
Willis goes on to exhort the wealthy to donate massively -- if not to the Rolling Jubilee, then on their own -- as a do-it-yourself stimulus. But anything you can do will help -- a five dollar donation cancels $100 of someone's debt. Consider how much direct help you can give someone who obviously needs it.
Seriously, it's a good cause, and it's good for the country. The numbers are eye-popping. The amount of money expected to be repaid from the auto bailout could cancel out 59% of all credit card debt in the country. So go! Donate now!