Throwing off the shackles of debt

by Guy R. McPherson, Keith Farnish, Dave Pollard, and Sharon Astyk

Indebtedness is a form of servitude, usually involuntary, and, in extreme cases imprisonment. Consider, for example, current rates of interest, usurious compared to what savers earn on their savings in the same banks that charge that interest. Many religious organizations loath interest rates as immoral and criminal. According to all four gospels in the Christian bible, even the normally passive, peaceful prophet of Christianity got so worked up about usury in a temple he started acting like Bobby Knight on the sidelines of a basketball game.

Purchases by consumers (this awful word is used here only because that’s what we have become — involuntarily) drive the world’s industrial economy. And purchases by consumers depend on the confidence of those consumers, so that consumer confidence underlies commercial success. If a potential consumer has no confidence in his ability to purchase an item, then he won’t. If enough potential consumers lose confidence in their abilities to purchase and pay for any particular item, the sales of that item will plummet, causing the manufacturer and sellers of that item to fail.

Considering the current financial situation, which will no doubt crash again within the next year, we can help create a situation that will both change behavior for the better and prevent people from getting into financial trouble. The latter portion is vital to getting wide support, and will be a huge challenge for hopelessly optimistic, reality-challenged members of the industrial economy.

How do we convince people they definitely cannot afford to take out loans to buy things? More impact will be realized by targeting luxuries such as houses, cars, and appliances than small “goods.” The Obama administration recognizes this, and has therefore rewarded people for purchasing houses, cars, and — most recently – appliances, by giving them huge financial incentives (i.e., taxes on other Americans who might not even be tempted to play the “consumer” game).

Loans are required for most people to purchase these “durable goods” (which are no longer durable or good). Loans traditionally are seen as safety nets, but it has become clear they really represent traps. Never mind the psychological or ecological implications of consumerism — there exists no evidence suggests anybody has minded so far — the focus here is on the trap into which each potential consumer falls by taking out a loan to mindlessly invest in transient baubles. Every loan is a bad deal for the borrower, although credit cards represent the largest trap (even with the new rules).

The system needs you to keep borrowing. If you stop borrowing, then who knows what could happen.

The risk levels described below are approximate and will vary according to your personal situation and the jurisdiction in which you operate. Seek legal advice if you are uncertain.

No risk:

Don’t take out a loan for anything. If you need it — and probably you don’t — save your money and buy it, or barter for it.

Encourage others to join you. Start by sharing your car, your garden, your yard, and your lawnmower. Pass stuff on. Give it away. You don’t need that loan, and neither do the people you care about. Caveat: Sharing leads to liability.

If you already have loans, and most recent students do, then seek deferral under economic hardship. Odds are pretty high you’re actually experiencing economic hardship, so this is no big deal. And even if you’re not, there’s no sense feeding the beast if the beast defaults down the road. Caveat: If you lie about economic hardship, your claim about hardship is legally fraudulent.

Low risk:

Start a “misinformation” campaign (from the point of view of the loan companies).

1) Via snail mail, send out false press releases from loan companies and banks to media outlets such as local radio stations, local press and even the nationals if you are brave enough. These press releases should discourage people from taking out loans because, after all, people don’t really need all the toys they buy on credit. If you make the “press releases” as complete as possible, and word them so that responses are not required, then there is a good chance they will be run without questions being asked.

2) Do a bit of subvertising, on the internet or (for a little higher risk) on billboards: focus on loans companies and banks changing the messages to emphasise the theft aspect of loans. Alternatively, just remove loan adverts entirely. For more information on techniques, read this post.

Other potential actions along these same lines include:

  • Organizing “default-ins” along the lines of the “love-ins” and “sit-ins” of the 1960s,
  • Devising and publicizing satiric, fake get-rich-quick schemes that exploit government mortgage subsidies and the overvaluation of real estate: “Get $1 million in real estate free from Obama mortgage subsidy program with no risk or money down!” or “Sell real-estate short before the crash and make $1 million with no risk or cash!” and
  • Helping organize and formalize the exploding “gray” market for overpriced real estate: Thousands of people are moving or retiring and unable to sell their homes at anywhere near their mortgages, so they are renting out their homes for a fraction of current market rents, and likewise renting others’ homes in areas to which they are moving at far below market rents. Everyone hopes prices will somehow bounce back and save them from default but a more likely scenario includes these homeowners threatening default to get mortgage companies to write off the excess of mortgage value over real property values. We can prove useful by helping them find “gray” market properties in the interim.
  • Obvious satirical routines can be developed for a variety of venues. This strategy should hold particular appeal to artists.

    Medium risk:

    Walk away from your mortgages, as suggested by Dave Pollard: Many Americans are now living in homes with mortgages that are greater than the value of their property. Why would anyone continue to pay a debt that is higher than the asset it secures? After all, big corporations view pulling the plug on unsuccessful ventures and sticking the debtholders and shareholders a key business strategy. The whole idea of “risk capital” is that the interest and other fees you earn for lending to risky borrowers compensates you for the risk, so that if the borrower defaults you accept the loss and chalk it up to experience. Yet for some reason homeowners feel some moral obligation to throw good money endlessly after bad. This of course is exactly what the corporatists, who have no such moral compunction, are counting on, what economists call moral asymmetry. The logical response would be to tell the lender to write off the excess of the mortgage beyond the property value, and refinance the mortgage accordingly. Apparently in some US states (called “recourse” states) this moral asymmetry is institutionalized — that is, lenders can go after a mortgagee’s personal assets if they default. There is, of course, no recourse when the corporatists walk away from debts, offshore their operations, and stiff the taxpayers whose subsidies and bailouts paid for the corporatists’ ventures.

    Where is the sense of outrage here? Have the education system and media so dumbed down the citizens that they can’t see this scheme for the cruel and criminal con it is? If everyone with a mortgage greater than the value of their home either walked away from it, or was legally empowered to require the excess to be written off as the “bad debt” it is, then of course there would be many bank failures and plunging profits. That’s how the market system is supposed to work. The lenders, of course, want it both ways, and Obama and the citizens consumers seem blithely willing to let them have it.

    Walking away from your mortgage entails medium risk because it will damage your credit rating. Obviously, this doesn’t matter in the long term, but it still causes concern for many people. Additional risks vary among states, up to and including loss of assets for every person named on the mortgage.

    Via electronic communications, send out false press releases from loan companies to media outlets. These press releases would discourage people from taking out loans because, after all, citizens don’t really need all the toys they buy on credit. This scheme requires technical expertise: The instigator will hide behind an alter-ego and fake domain.

    High risk:

    Taking a step beyond abandoning your underwater mortgage, don’t pay off your mortgage even if you’re not underwater. Simply default but continue to occupy your house. Ditto for other loans (but kiss your car goodbye when the repo man does his job). In many cases, lenders can ill afford to tell their stockholders about toxic loans, so — if you avoid undue attention and your loan is too small to “bother” with — the borrower gets the loan for no payments while the lender gets stuck. This point was viewed as radical as little as a year ago, but the idea has been receiving plenty of attention from the media, and even CNBC is on board.

    Tactics for throwing off the shackles of debt

    These actions are high risk because they could bring criminal proceedings related to fraud. Probably they won’t. But stranger things have happened, so we issue the following disclaimer:

    Recognizing that even civil disobedience is illegal, the authors and the host of this web site do not condone any actions that break the law under the jurisdiction where the described activity is taking place.

    Which, of course, doesn’t mean you shouldn’t do them at your own risk.

    What we’re trying to do here is help bring down a house of cards: People feeling forced to pay debts far greater than the real value of the assets that secure them. People seduced into getting into debt needlessly. People paying usurious interest rates and fees because the banks own the politicians. It’s a debtors’ prison without locks and doors, and it’s immoral. Please help us bring an end to it.
    ________________________

    This essay is part of a larger collaboration between the authors. It represents the third month of the Monthly Undermining Tasks

    Comments 18

    • If anyone has any doubts that the system is corrupt and criminal,they should read the editorial,”When Greece Met Goldman”,available from your
      search engine,which was in the March 1,2010 Barron’s,written by Thomas G. Donlan.

      The sub title reads”What happens when countries hire bankers to do their dirty work?”.

      This confirms that Goldman Sachs,the keystone of the U.S. financial system,is essentially a criminal conspiracy.

      You won’t find a more pro-business publication than Barron’s.The fact that this story appeared on their pages,tells you everything you need to know about the Capitalistic system.

      Frank Mezek

    • I beg to differ. IMO the system is neither corrupt nor criminal, it’s working just as intended. The problem is what people SAY IS THE INTENTION — allow people to buy things and pay over time — is quite different than the ACTUAL INTENTION — make money for the people who lend money so people can buy things and pay over time.

      The key is “pay over time.” Pay how much? Over what length of time? Thus the question is what kind income does the lendee have during that length of time? If more is coming in than what has to go out, it’s OK, otherwise, “Houston, we have problem.”


    • Thank you, Frank. “First Goldman helped create a problem, then it stands to profit from it.” What astonishes me how ignorant we are of the ways of power. They have been playing the same con games for the last 10,000 years, and we keep playing along? Acting surprised? Taken off balance? Privately outraged, publicly helpless?

    • There is a lot of complexity in today’s financial system, and my quick reading of Guy’s piece leads me to believe that he covered only the most minor aspects of what is wrong with “the system”.

      Forty years ago, real wages and real productivity were rising for the American work force and most married women did not work in the marketplace. Yet, men earned wages that could support their families, buy houses and cars, etc. The elite (bankers, industrialists and such) did several things that have been described by Michael Hudson. For one, they removed government taxation from property and put it on income. They allowed the wealthy to write off huge portions of their income and not pay taxes at all, while the working class paid the bulk of the funds to the national treasury, even as their real wealth declined.

      De facto wages have dropped for decades, and instead of higher wages to buy houses, cars and widgets, much higher debt availability was combined with relentless marketing to promote crass consumerism. Then bubbles were intentionally created to produce excessive “value” in the marketplace, such as home prices. Thus, consumers could get illegitimate loans based on piss poor principles of loan qualification and borrow yet more money on the inflated valueations of their houses, and then spend that additional borrowed money on granite countertops in their remodeled kitches, big SUV’s flat screen plasma televisions, trips to the Caribbean, etc.

      While this was going on, the big players arranged an end to effective government regulation and began to employ financial instruments of great complexity and potency, such as derivatives, credit default swaps, and the like. In certain cases, the institutions were borrowing at extremely low cost from the Fed and gambling on these financial instruments to the tune of hundreds of billions or trillions of dollars. And the system was totally rigged — with insiders like Hank Paulsen in the Treasury Department, the big banks were guaranteed replayment for their enormous losses under the completely bogus proposition that they were needed for the loans necessary to keep the “real economy” afloat and that they were “too big to fail.”

      The fact is that the bailouts were only designed to protect the banks from the consquences of their own malfaesance and corruption, and the consumers are still having difficulty getting loans and credit despite the bailouts. That was the intent all along.

      The very fact that the banks can borrow money from the Fed at essentially no interest and then loan out that money to the government in the form of bonds is a form of corruption.

      For the life of me, I cannot understand why the public thinks we need private for profit banks any more than we need private for profit health insurance companies. The Treasury Department could loan all the money needed to American businesses and consumers at reasonable interest rates and earn money to operate government, provide healthcare, and everything else needed without the private banks operating at all! They are parasites to the economy, not the backbone of it!

      There is much more that could be said about the design of the tax system to benefit the wealthy, the shameless deceit used in all the government responses to the recent years of financial turmoil and so forth.

      The average American consumer is part of the problem, but primarily because he/she has been manipulated, hoodwinked, sold a bill of goods, and now put in a situation where he/she can be subject to debt peonage while the elite arrange for their own “golden parachutes” at public expense.

      It is such a mess that methinks collapse is the only way of resolution, and equitable distribution of wealth (highly unlikely EVER) is the only way a fair system could be set in place to replace what we have now.

    • Here, things are little different.

      House prices have increased in value by 12.8% to January.
      The medium house price in Melbourne is about $540,000.
      We know of people who have taken out investment loans
      on rental properties to roughly this amount.
      Rental yields are around 3%. (people/investors are mental!)
      Our variable mortgage interest rate is just under 7%.
      Interest rate on credit cards is around 20%.
      The unemployment rate is 5.3%, apparently another mining boom
      is just around the corner.

      If you default here, the banks will chase you relentlessly.
      (I don’t know anyone who has defaulted).
      On the other hand in the interests of ‘fairness’, the government will let
      business’s fail. Invariably mum and dad share holders
      get pummelled, very little sympathy from the general public
      for making poor investment choices.

      My self inflicted voluntary simplicity enviro/moral austerity measures has allowed both my wife and I to reduce our working week to 3 days each. I own my home and have no debt. The ‘absurdity’ of the situation is that being debt free and relatively ‘non consumerist’ in outlook has allowed us to save a lot of money. Roughly $35,000 pa. Having a significant amount of money in the bank gives me the hibee gibbees. What to do with it? What is it?
      Stored labour? The share market reads like a casino. These are serious
      questions! Keith – help!
      Buy a boat like Orlov? Mooring fees (30ft) are $10,000 pa!

      Frank, if ever we catch up the drinks are definitely on me. 

      Friends of ours reckon we are ‘mad’, ie we should invest the money in real estate. The tax on property purchases is 6% of the purchase price. So on a
      half million $ property the government gets $30,000. That seems like a waste of money to me.

      As expressed before it’s a topsy turvy world, the GFC never reached our shores.

      Keith, Shaz – love your work

      matt

    • Keith, Guy, Shaz, Dave

      Just a thought/question.

      If the $US 350 trillion (niall’s estimate) in outstanding CDS
      can never be paid, and the companies/governments default on mass.

      What happens to the value of paper money?
      Surely, in some ways the value of paper money is
      = to the ability of the debtor being able to repay the debt.
      If they cant pay then what is the true value of paper money,
      ie the debtor has not taken the transaction seriously enough!

      If the debtor defaults, then surely money becomes worth much less?
      What would this do to savings? Just zeros in an account as I currently suspect.

      Surely mass defaulting would devalue currencies everywhere.

      I guess holding physical gold, food, tools, spare bicycle tyres :),
      is my hedge against a ‘currency accident’.

      Thoughts?

    • matt, I’ve been writing and saying for years that expensive oil will lead to hyperinflation. To date, most industrialized nations have been using Keynesian money-printing to prop up their economies. I cannot imagine the U.S. will manage to avoid default — our current debt exceeds the value of all the currency in the world PLUS all the gold ever mined.

      And, as Edward Abbey said, all gold is fool’s gold. Food, tools, spare parts for your bicycle all seem like excellent investments to me. You’ll want a secure water supply, too, and investing in your community is always a good idea.

    • just watched the video, some of the my questions answered – well sort of.

      agreed, a rising housing market is a game of musical chairs

      I often wonder what money really is,

      gold is valued against a paper currency – so what is it really worth?

      soil is the only wealth there is

    • Dave McLane, thanks for your first-time comment. I’m astonished you find the system neither corrupt nor criminal. You see nothing at all wrong with a system that privatizes profit while socializing risk? You see nothing wrong with a system that bails out corporations with taxpayer money when the corporations default on their debt? You see nothing wrong with seven- and eight-figure bonuses (in addition to salaries) for the executives who drive their companies into default, only to be saved by your tax dollars?

      If the system is working just as intended — and it is, which does not negate the corruption or the crimes — don’t you think that’s a problem? If not, what’s your definition of moral symmetry?

    • Guy McPerson: All I’m saying is that while the system may look like it’s corrupt or criminal, it only looks that way because you think you know how it SHOULD BE. But that’s not how it ACTUALLY is. Once you educate yourself as to how things actually work, you don’t get burned. That’s step one.

      Step two is to realize that any time you read only about how much things cost you’re getting scammed because if something costs somebody something it’s got to pay something to somebody else. Can’t have one without the other.

      As it is, the American Mind Space has two sets of ordinary working people: those who work to be paid, and want the highest wages for the least amount of work, and those who want to buy the best quality goods for the least amount of money. The trouble is, they’re the same people.

      IMO, the people you’re claiming to be “corrupt” or “criminal” are those who take advantage of this impossible fantasy. If you don’t want to be taken advantage of, best to understand how things actually work.

      I’m not talking theory here, I’m talking actual life experience. But just because I got over my head in debt, it didn’t seem useful to forgo borrowing money when it was to my advantage.

    • Mike Ruppert is out of retirement and now predicing catastrophic war in the intermediate, maybe short term (http://www.mikeruppert.blogspot.com)

      The whole system is corrupt at its very core and many, many people will be tragically hurt when all is said and done. The collapse is in its infancy still…

    • I’d have to recommend not getting arrested soon, and ending up in the big house when the cards collapse. By all means, do what is reasonable to starve the beast, and many of us here do that already, to varying degrees…stop using credit, shop locally, barter, make your own doo-dads, grow food, monkeywrench…

      I must agree, Stan, there’s deeper war on the horizon (do we really think Venezuela will be allowed to sell oil to China over the US? What fallout comes of a US default? Will the US allow the arctic to fall to Russian control? Whither Pakistan? And, if the Pentagon wants to spend it’s ageing inventory in order to have taxpayers produce a new, shiny set, suitable to a world entering a period of climate change; what better way than to tackle Iran?)
      There will be opportunities to fall between the cracks then, for those of us who aren’t rounded up by the Teabagging minions of President Mrs. Todd Palin and burned at the stake.

    • Guy,

      We must find ways to face our problems and look them squarely in the eye. Mortgage lending exists, so we must confront it.

      In my observation of the last two blog postings, there is something that disheartens me. My reaction to the previous posting was that (1) I would not be interested in the book and (2) that it was sort of old-hat/irrelevant. Who even wants to read such a negative review of a poor offering by some author that I never heard of?

      Then there was this posting, which is a serious statement, and one that helped me to connect some dots. Even if I am not going to default on a mortgage, I have been avoiding endeavors that cause me to pay tribute to the empire for awhile now. (Not evading taxes mind you, but evading ‘work/war’ and so forth, as a peace activist.)

      My point is that we as your audience are letting you down. If you speak much about ~ little, you have the most popular posting (rated by the number of comments and my judgment). But if you rock the foundation of our society with a righteous commentary, then nobody says anything much ABOUT it. (I do not mean to call the previous commentors nobody, or the previous posting worthless.) But, we could not really ask for more than this from a single posting. The question is what are we going to do about what is (more or less) the truth?

      I hope to work for a better future through non-violence. Thanks for fuel. I still think ‘Sometimes A Great Notion’ is the best book about the absurd apocalypse that is the American way of life. Even after the fistfight, we are going to have to get back to work chopping trees down and burning stuff. After all, there is not one of us who will volunteer to be, well, voted off this wee little island. I don’t know about you, but I am determined to win the cakewalk even after the music stops.

    • If you put in Paul Watson’s name on Google you see they show 12,400,000
      hits for him.He’s the hero of Whale Wars.you can see past episodes on the Planet Green channel.

      Frank Mezek

    • Hi Guy,

      Thank you very much for this. I personally would like to see more writing along these lines. The links were very useful too.

      — Chad

    • Another thought-provoking post, Guy! But I have to disagree, slightly.

      For whom is debt a burden?

      Famous people are notorious for having huge amounts of debt that they never repay. Among them, Thomas Jefferson.

      Notably, recently, Michael Jackson died with $400m of debt.

      But, I think, the title of King of Debtors has to go to Donald Trump.

      Here’s an article about “The Donald,” however, that will shed some light on how he manages to stay afloat, despite constantly loosing millions of dollars and declaring bankruptcy:
      http://www.legalzoom.com/legal-headlines/celebrity-lawsuits/how-does-trump-repeatedly-file

      The system is more complicated than simple savings/debt or cost/profit ratios. Since the US left the Gold Standard in 1971, “money” has been only a numbers game. Numbers for numbers. There is nothing physically real backing any of it up (at the macro-level).

      At the micro-level, you are correct. Banks will foreclose on your house and take it from you if you default on your mortgage.

      But I think what this points to is the need for a new understanding of money and how it works, within the general populace. Kids in school are still taught simple profit/loss ratios as “economics.”

    • Guy, et al.,

      Great article! I am especially thankful for the three-tiered “action” plans. It doesn’t necessarily apply to me, however, because the only debt I hold is education-related, and the Obama administration has recently transferred ownership of that debt from the private sector (Citibank) to the American people. While this is by no means ideal (what the hell am I doing paying for education anyway!!), but it does come as a minor benefit for me because it will ensure (I’ve been told) a lower, fixed interest rate and the promise of total debt forgiveness once I fulfill my time obligations as a working school teacher. But I digress into personal nonsense…

      In any case, I really appreciate this post. I agree with most everything that has been written… with one minor caveat. You said:

      “And purchases by consumers depend on the confidence of those consumers, so that consumer confidence underlies commercial success. If a potential consumer has no confidence in his ability to purchase an item, then he won’t. If enough potential consumers lose confidence in their abilities to purchase and pay for any particular item, the sales of that item will plummet, causing the manufacturer and sellers of that item to fail.”

      Much of this is seems to be premised on the idea that “consumers” are necessarily logical. I just finished a book from pioneering behavioral economist Dr. Daniel Ariely called “Predictably Irrational” that documents a variety of ways in which humans beings do NOT make consistently sound economic decisions. While I’m certainly no expert, the data suggests that individuals will often buy shit whether they have confidence in it or not, especially Americans, who have elevated the act of “consuming” to a religious arts practice.

      With this in mind, I am a big, big advocate for some of the tactics you proposed in the “low risk” category — essentially, you’re talking about “culture jamming.” With perception supplanting reality and the overall belittlement of rational thought, it seems prudent to, as it were, fight fire with fire. These “low risk” approaches may actually yield a greater results.

      I was wondering what your thoughts might be on this? Do the aforementioned risk categories also reflect a hierarchy of potential impact?

      Thanks for the post. Good work!