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The Moral Economy of Debt

LONDON – Every economic collapse brings a demand for debt forgiveness. The incomes needed to repay loans have evaporated, and assets posted as collateral have lost value. Creditors demand their pound of flesh; debtors clamor for relief.

Consider Strike Debt, an offshoot of the Occupy movement, which calls itself “a nationwide movement of debt resisters fighting for economic justice and democratic freedom.” Its Web site argues that “[w]ith stagnant wages, systemic unemployment, and public service cuts” people are being forced into debt in order to obtain the most basic necessities of life, leading them to “surrender [their] futures to the banks.”

One of Strike Debt’s initiatives, “Rolling Jubilee,” crowd-sources funds to buy up and extinguish debt, a process that it calls “collective refusal.” The group’s progress has been impressive, raising more than $700,000 so far and extinguishing debt worth almost $18.6 million.

It is the existence of a secondary debt market that enables Rolling Jubilee to buy debt so cheaply. Financial institutions that have come to doubt their borrowers’ ability to repay sell the debt to third parties at knock-down prices, often for as little as five cents on the dollar. Buyers then attempt to profit by recouping some or all of the debt from the borrowers. The US student-loan provider Sallie Mae admitted that it sells repackaged debt for as little as 15 cents on the dollar.