Apr 252012
 
 April 25, 2012  Posted by at 3:47 pm Finance
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captivechristmas

December 1919. “Christmas tree at the District Jail, Washington, D.C., and some of the prisoners.” National Photo Co. Collection glass negative.

One foundational piece of advice here at TAE as been to get out of debt and stay of debt – not only because the monetary costs of such debt will grow, but also because debt can be used as a means of physical repression and enslavement. It gives public (government) and private institutions the sufficient amount of leverage they need to take control of both your possessions and your body, with the latter being a much more pronounced risk during a period of credit contraction. Here are a few snippets about this issue from Our Depraved Future of Debt Slavery (Part II):

If you are allowed to voluntarily downsize your living standards and retain some freedom of movement/action, then you are not really a slave. And that’s not meant to demean the existential struggle of the chronically unemployed and/or homeless people living on the streets or in the subway, whose numbers are bound to increase and many of whom will die of sickness, cold and hunger, but it’s hard to say that they are “attached” to our economic system of complicity and coerced participation. The most obvious way this slavish attachment forms is through personal debts/obligations.

 

That’s why it’s very important to pay off your mortgage(s), car loans, student loans, outstanding balances on past bills, etc., throw away your credit cards and generally avoid taking on debt at all costs. However, that is not a panacea for avoiding debt slavery by any means. One reason is that, as mentioned in Part I, creditors and third party debt collectors may literally conjure up debts for people who never agreed to take on those debts, by failing to account for payments, illegally jacking up interest rates, retro-actively inserting penalty clauses and other similar tactics. Or, they may simply doctor up brand new “contracts” that never existed.

 

 

Where can any of these people turn to for relief or protection? Can they seek help from their local police departments or court systems? Traditionally, those have been potential avenues for at least a modicum of justice. Soon, however, even these institutions will be well into the process of being privatized in the name of “fiscal responsibility” and “market efficiency”, which is really code for corporate control over all facets of the modern state. Wealthy corporate conglomerates will not only have seized the “power of the purse”, but also the state’s dispute resolution mechanisms and its monopoly to use coercion and violence in pursuit of vaguely-defined goals.

A recent article in the Daily Mail begins to paint the picture of how many Americans are already well within the confines of debt slavery, with almost nowhere or no one to turn to for help. It shows us how the American legal system is like a big glop of silly putty for the powerful institutions – it can be deformed, twisted and redesigned into almost any shape they desire. First, we hear the story of Lisa Lindsay – a breast cancer patient and survivor who was jailed over a $280 medical bill which was sent to her in error, since she had already paid it off.

Breast cancer survivor handcuffed and thrown in jail over a mistaken $280 medical bill as ‘debtor’s prisons’ return to the U.S

 

A breast cancer survivor who was sent to prison over a mistaken $280 medical bill has highlighted the return of debtor’s prisons in the U.S.

 

Illinois resident Lisa Lindsay had received the medical bill in error and was told she did not have to pay up.

 

However, the bill was turned over to a collection agency and state troopers arrived at her home and took her away in handcuffs.

 

The Illinois teaching assistant eventually had to pay more than $600 to escape prison, as legal fees were added to the bill.

 

‘I paid it in full so they couldn’t do it to me again,’ said Lindsay whose plight has alerted law-makers in Illinois to the growing problem.

 

The case of Lindsay as well as others suggests that more people than ever before in the U.S are being thrown in ‘debtor’s prisons’ for not being able to pay back loans.

So, first of all, Lindsay represents all the people out there who are being saddled with debts that they don’t even owe, conjured out of thin air. How many times have you heard of someone receiving a medical bill “in error”, or bills in general? Sometimes we are talking about honest mistakes by the institution involved, but it’s easy to see how this can be done intentionally for the benefit of private creditors, as well as a state/local governments that are primarily concerned with squeezing revenue from their citizens (Lindsay had to pay $600+ to make up for the $280 she never owed).

The second important thing to not here is the technical reason for why these people are being hauled off to jail for failure to pay debts. It is NOT because failing to pay a debt is a jailable offense – in fact, the Supreme Court has ruled that it is unconstitutional for the state to imprison people for civil debts (especially those who cannot afford to pay). What is happening here is that people are being jailed on contempt of court rulings due to their failure to appear at judicial hearings and/or violation of court orders. We see how this works with the story of Jack Hinton:

Disabled roofer Jack Hinton sat in jail until he could come up with $300 on a debt he owed a lumberyard.

 

According to a hearing transcript, a central Illinois judge listened to Hinton’s story, noted he’d recently been paid after finishing a roofing job, and said: ‘Mr. Hinton, you had $1,000 in your pocket, you chose to spend it elsewhere in violation of the court order. That lands you in jail.’

 

Hinton’s wife took out a loan to buy his freedom. Her $300 went to the debt collector.

 

Debt collectors have become so aggressive claim some that poor people who are behind on payments of as little as $25 a month are being sent to jail.

 

Even though debtor’s prisons have been illegal since 1833, lenders are being accused of exploiting legal loopholes to have their borrowers found and sent to jail until they pay up.

 

Acting within the law, debtors aren’t arrested for nonpayment, rather for failing to arrive to court hearings thereby falling foul of contempt of court laws.

 

This results in a police arrest warrant being issued for ‘failure to appear’, the debtor is tracked down, packed off to jail and can only get out by paying the set bail bond which of course matches the amount owed.

 

Critics of legal loopholes allowing prison time to be dished out to bad borrowers say it is reminiscent of 19th century Victorian debtor’s prison like this one at St Briavels Castle in Wales

 

Indeed, it is extremely easy for creditors and third party debt collectors to engage in these work-arounds with the complicity and the resources of the state. The only thing these collection agencies are required to do is file a complaint in court, give the defendant “notice” (via mail) and post an attorney in the courthouse, who will sit back and wait to see if the debtor shows up. If they never receive a copy of the complaint and the summons, or they are simply unable to show up for court, then the creditor gets a default judgment and every available taxpayer-funded means at their disposal to enforce it.

If they do manage to show up, then the creditor will most likely get a judgment anyway, including court costs and interest. Technically, the burden of proof for establishing the existence and the amount of the debt is on the plaintiff, but practically it ends up being on the defendant, who will not have counsel in a civil proceeding. At this point, the new class of alleged debtors have pinned all of their hopes on state legislatures reacting quickly and swiftly to close the various loopholes and provide them with the slightest degree of protection (I wouldn’t hold my breath).

Affecting everyone who owes money from health care services to automobile loans, debt collectors are using publicly funded courts, sheriff deputies and county jails to pressure people with prison to pay back their money reports CBS News.

 

And now some state legislators are trying to plug this loophole by making court notices be served in person rather than mail, arrest warrants to expire after a year and the bail bond returned to the debtor not the lender

 

 

In fact in Illinois alone, legislation designed to plug loopholes aimed at debtors is waiting to pass through the state senate.

 

Creditors have been manipulating the court system to extract money from the unemployed, veterans, even seniors who rely solely on their benefits to get by each month,’ said Illinois Attorney General Lisa Madigan last month in a statement voicing support for the legislation.

 

‘Too many people have been thrown in jail simply because they’re too poor to pay their debts. We cannot allow these illegal abuses to continue.’

 

A 2010 report by the American Civil Liberties Union that examined five states – Georgia, Louisiana, Michigan, Ohio, and Washington — discovered that people were being imprisoned at ‘increasingly alarming rates’ through legal debts.

 

Some of the examples cited included a woman who arrested four individual times for failure to pay $251 in fines and costs related to a fourth-degree misdemeanor conviction.

 

Another example that the ACLU used was of a mentally ill juvenile imprisoned by a judge for a conviction for stealing school supplies.

 

‘The sad truth is that debtors’ prisons are flourishing today, more than two decades after the Supreme Court prohibited imprisoning those who are too poor to pay their legal debts,’ said the ACLU.

 

‘In this era of shrinking budgets, state and local governments have turned aggressively to using the threat and reality of imprisonment to squeeze revenue out of the poorest defendants who appear in their courts.’

As made clear in my series on debt slavery, the truth is that most state governments are a) complicit in the process of debt enslavement and b) unable to do much about it, anyway. These states rely heavily on the federal government for funding, especially in recent years as their public finances have collapsed, and the Feds have never been hesitant to lace those funds with strings. On top of that, the federal government can simply supersede state laws in this area by making issues related to debt forgiveness a federal concern, under the guise of interstate commerce or “national security”, and invoking the supremacy clause.

The point is that this form of debt slavery will be a very real risk for people in upcoming years, and only has the potential to get much worse before it gets any better. It is especially a risk for those with limited means and/or unserviceable debts, but the people with sizable assets and relatively few debts can fall victim as well. This is not an issue of what people rightly owe to other parties, but rather of how much labor and surplus wealth can be extracted from a formerly wealthy population by any means necessary. While we can justifiably expect that this wealth conveyor will break down in the future, along with the associated risks of debt slavery, we should also remember that it will not disappear overnight.

Home Forums Revisiting the Physical Risks of Debt

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April 25, 2012 at 3:47 pm #8552

ashvin

December 1919. “Christmas tree at the District Jail, Washington, D.C., and some of the prisoners.” National Photo Co. Collection glass negative. One f
[See the full post at: Revisiting the Physical Risks of Debt]

April 25, 2012 at 11:42 pm #2796

ks

Ash,

Would you mind filling me in on TAE take on FOFOA? I have to admit that guy scares the hell out of me sometimes. His recent post on Peak Exorbitant Privilege made a lot of sense; namely, that our perpetual trade deficits are no longer funded with recycled dollars, but w/ Fed printing, which means that for the last few years we’ve been pumping dollars out of the country – dollars that have not come back to us in Treasury bond purchases, but are being used instead to bid up oil, metals, real estate, and other actual stuff. More dollars chasing the same amount of goods and services…

FOFOA’s conclusion – “I’m talking about a near-term dollar super-hyperinflation that will make your hair curl and make Weimar and Zimbabwe seem like child’s play in the rearview mirror.”

OK, that our trade deficits are more inflationary now then when our trading partners used the surplus to buy our debt is clear enough. How you get from there to a super-hyperinflation I don’t quite understand. Apparently he thinks this glut of dollars we’re creating abroad is akin to an inflationary pressure cooker, poised to explode without warning.

http://fofoa.blogspot.com/2012/04/peak-exorbitant-privilege.html

April 26, 2012 at 12:29 am #2797

jal

I have heard that, in the far east, India and other countries, that the suicide rates have been rising due to the pressures being put on by the money lenders.

:-(

Its not a bright future for those owning assets.

April 26, 2012 at 5:25 am #2800

JoeP

Debt Collector Is Faulted for Tough Tactics in Hospitals

Hospital patients waiting in an emergency room or convalescing after surgery are being confronted by an unexpected visitor: a debt collector at bedside.

This and other aggressive tactics by one of the nation’s largest collectors of medical debts, Accretive Health, were revealed on Tuesday by the Minnesota attorney general, raising concerns that such practices have become common at hospitals across the country.

continued at…

April 26, 2012 at 9:39 am #2801

Reverse Engineer

It’s Deja Vu all over again!

Haven’t we beaten this topic to death already?

I will grant you it’s generally better not to be in debt than to be in debt, however probably at least 50% of the population is in debt in some form and likely has negative equity as well. You like to examine probabilities, and the likelihood that 50% of the population can be dropped into debtor’s prisons is exceedingly small here.

The key is to understand how to work the system and not let your opponent get the drop on you. If you are deep in debt, be proactive and file bankruptcy first of all. On top of that, file a lawsuit against your creditor for harrassment, contract fraud, and whatever else you can think of that applies. Check the court docket for all your pending cases so you don’t miss any court dates and wait for the opponent to be so busy with other cases he misses a court date. Stretch it out with postponements and extensions.

If its a student loan which can’t be discharged in BK, if you have no income they have nothing to garnisheer anyhow. You can make it your job to tie the thing up in court as long as possible, and since you are not working anyhow it gives you something worthwhile to be doing.

On the probabilities end, its true that it is currently unlikely we will get a complete collapse of the Dollar overnight here, but its increasingly likely said collapse will occur long before your 30 year mortgage or even 15 year student loan could be paid off.

If you are currently destitute and Da Goobermint will guarantee you loans to pay for you to go bang some coeds for the next 4 years, you can weigh the odds you’ll ever have to pay it all off against the clear near term benefits of a Dorm Room, the Meal Plan in the Cafeteria and regular Nookie.

When the Iranians go Pearl Harbor, you’re likely to be Conscripted anyhow, and in return for signing up to be Cannon Fodder, Da Goobermint will probably wipe your loan off the books if you manage to make it back alive. If you do not make it back alive, you got no worries and you can go to the Great Beyond in Peace, knowing you left them holding the Bag on your loan.

RE

http://www.doomsteaddiner.com

April 26, 2012 at 3:15 pm #2805

Michael

When 7 billion humans start to go feral after the bursting of the greatest credit fueled ponzi scheme in history, no amount money will save you.
The first to slavery will be the 99%. The first to the guilotine will be the 1%.

April 26, 2012 at 7:51 pm #2806

jal

http://www.oftwominds.com/blogapril12/peak-housing4-12.html

Its not a bright future for those owning assets.

Note that property taxes declined significantly in the previous recession (2000-2002), but they rose steeply in the 2008-9 recession, and continued climbing. The recent modest slippage may have several factors: lower valuations in states that set property taxes on assessed values, tax revenues declining as homes in foreclosure languish with unpaid property taxes, and so on.
Anyone claiming that property taxes have peaked will have to support that claim with evidence that local governments have found other sources of tax revenues to replace property taxes. Until that dynamic changes, then local government will have every incentive to jack up property taxes by any and all means available.

April 26, 2012 at 8:33 pm #2807

ashvin

Reverse Engineer post=2412 wrote: You like to examine probabilities, and the likelihood that 50% of the population can be dropped into debtor’s prisons is exceedingly small here.

Who said that 50% of the population would be kept in prison? That’s just one tactic that is currently being used to harass/threaten people and squeeze them for whatever they have to offer, including their cheap labor after they are released. I do believe that it will continue to occur and will get worse in upcoming years, but it’s not the only way people will be slaves to debt.

The key is to understand how to work the system and not let your opponent get the drop on you. If you are deep in debt, be proactive and file bankruptcy first of all. On top of that, file a lawsuit against your creditor for harrassment, contract fraud, and whatever else you can think of that applies. Check the court docket for all your pending cases so you don’t miss any court dates and wait for the opponent to be so busy with other cases he misses a court date. Stretch it out with postponements and extensions.

Agreed.

If its a student loan which can’t be discharged in BK, if you have no income they have nothing to garnisheer anyhow. You can make it your job to tie the thing up in court as long as possible, and since you are not working anyhow it gives you something worthwhile to be doing.

Yes, IF you are the ones smart/lucky enough to have no discernible income and still make ends meet (big IF). And then you must still hope the corporate government complex has reached max prison/jail capacity.

On the probabilities end, its true that it is currently unlikely we will get a complete collapse of the Dollar overnight here, but its increasingly likely said collapse will occur long before your 30 year mortgage or even 15 year student loan could be paid off.

If HI of the dollar represents a complete end to centralized control through forms of debt, then this may be true. If not, and another system of debt-based money (in whatever form that money takes – perhaps energy credits?) and taxes is established, then the risk of enslavement is still present.

If you are currently destitute and Da Goobermint will guarantee you loans to pay for you to go bang some coeds for the next 4 years, you can weigh the odds you’ll ever have to pay it all off against the clear near term benefits of a Dorm Room, the Meal Plan in the Cafeteria and regular Nookie.

Remember to factor in the odds of some kid going postal and executing dozens of people in nearby classrooms. That’s what happened my last month of college.

If you are “destitute”, make it through high school, are able to get a loan and have absolutely no better way to spend the next 4 years of your life, then, yeah, maybe you’re right.

When the Iranians go Pearl Harbor, you’re likely to be Conscripted anyhow, and in return for signing up to be Cannon Fodder, Da Goobermint will probably wipe your loan off the books if you manage to make it back alive.

That counts as enslavement in my book.

Also, keep in mind that we are not only talking about people who borrowed money in the conventional sense. We are also talking about anyone who has been processed through the judicial system for any criminal/civil violation and owes fines/taxes of any sort, as well as people who never owed anything in the first place, like Lisa Lindsay.

April 26, 2012 at 8:54 pm #2808

ashvin

ks post=2407 wrote: Ash,

Would you mind filling me in on TAE take on FOFOA?

I can fill you in on my general take.

FOFOA makes a lot of valid points in his posts, and clearly understands the structural problems with our current monetary order, i.e. the $IMFS. Where we disagree is why those structural problems have really arisen, and what the near-term implications will be in terms of deflation/HI.

The idea that China or other trade creditors of the US have already or will soon stop recycling our dollars into treasuries (or other dollar-based assets) is an assumption, not a fact. It is an assumption characteristic of the Austrian school, which believes markets are inherently self-regulating and any major imbalances (such as the trade imbalances between surplus/deficit nations) can be fixed in a moment’s notice.

I do not agree with that assumption. Instead, I believe that countries such as China cannot afford to voluntarily defect from the debt-dollar system, i.e. one of their largest export markets, until they can generate sustainable growth from internal consumption, which is a LONG way off (and perhaps will never happen). Therefore, they will only jump ship in a haphazard manner when they are forced to by circumstance, i.e. when the dollar is already hyperinflating and will not buy them energy or other commodities at remotely affordable prices.

If that is true, then the time line for the dollar’s viability as reserve currency may be stretched out significantly longer than FOFOA expects (it’s already much longer than A/FOA expected), even though we are well past the point of “peak exorbitant privilege”. In a nut shell, I believe that FOFOA is greatly under-estimating the momentum of this structurally imbalanced system, failing to see the fundamental inter-dependencies that have been created.

I also have major issues with the theory of Freegold, but that’s a different (yet related) story.

April 27, 2012 at 4:08 am #2813

Reverse Engineer

Of course Conscription is Enslavement. Thing is, you will be Conscripted whether you are in Debt or not so you might as well go in for the whole 9 yards while you can here.

BTW, there are some neat tactics you can use for getting out from under Student Loans. One I actually used :-) When I decided I was going to declare BK, I took my remaining Student Loan debt and paid it off with Credit Cards :-) Of course, you have to have enough working credit to do this, and at the time I did. I was only recently Unemployed and had nice long lines of credit on Visa and Master Card still open. As I mentioned also, the banksters didn’t even bother to show up in my hearing. I was out of the courtroom in less than 15 minutes, Free & Clear Chapter 7. Of course, this was 20 years ago also, but I suspect many of the same tactics will still work.

As to the future inside the new Fascist State, we’re all slaves here anyhow until it fails. In many cases, it’s worse for people to be out of prison than in prison now. 3 Hots and a Cot. I don’t recommend the option, but at least for the moment if you are sick and can’t afford the price of the drugs to keep you alive, if you get imprisoned you’ll get some treatment.

RE

April 27, 2012 at 6:30 am #2816

Karpatok

RE Actually, I am sorry to say, that is not exactly true here in PA where some prisoners are not given their meds, are made to sleep on bare concrete in solitary confinement and are tormented by guards with next to no education and minimal training. Some prisoners have recently committed suicide (or have been murdered by their guardians.) No appeals to wardens, psychiatrists or DOC have been really attended to. Doesnt this fit in nicely with taking out surplus population? Especially in light of privatization of prisons. Better be careful not to wind up in the justice system at all. Stay under the radar until you can actually take some of the one percent out because by then you have nothing to lose!

April 27, 2012 at 8:23 pm #2827

gezelle

A very ill friend of mine, living of less than, $800. SSDI, had a 3 year running battle with a hospital and later a series of collections agencies regarding a bill for HIS pap smear and hysterectomy!!
First a fight with the hospital, which after much “investigation” claimed that yes, they would concede that HE didn’t have these procedures, but it much be a coding error for something that he did have done. They couldn’t place him in the hospital within 6 months of the date of billing…so they investigated some more before saying yes it was indeed a mistake and they would take care of it. They sent it to collections.
Even though it is illegal to freeze accounts into which disability checks are deposited, the agency and the banks did so…causing checks to bounce and huge fees to accumulate.
After a judge told the 1st agency that this was not a justifiable claim and dropped the case it was then sold to another agency and it started all over again. More bogus claims, more illegal actions, more illegal bank fees.
He couldn’t have paid the bill, even if he had wanted this to just go away, as he is that poor, although I’m sure that’s what the collections people were aiming for.
Several long years later this was somehow resolved with both the collections people and the banks, but my friend now has to get himself to a check cashing place to cash his SSDI check and pay large fees for money orders to pay his few bills as he no longer trusts banks. Even if he is sick he has to get there anyway because Gov’t checks expire after 30 days and it takes forever to get a replacement. Without friends to literally hold him up he would be sunk.

His experience reinforced my belief in living debt free and keeping a large stash of cash available.

May 1, 2012 at 4:12 pm #2948

einhverfr

A few thoughts here.

In 1912, Hilaire Belloc suggested (in “The Servile State”) that class warfare was inherent in industrial capitalism and would eventually lead to the capitalists enslaving the laborers. He defines slavery as a legal obligation, on pain of penalty enforced by the state, to labor to the benefit of another person. Prison labor is slavery by that definition, and it fits his view of the dynamics, namely that the corporations want productivity and that the poor want subsistance. Prison slavery is thus fast becoming our social safety net, just as formal slavery was the social safety net of ancient Rome. That ought to scare the living daylights out of any American.

I think it is against this background that the physical risks of debt have to be understood. Legalizing prison slavery for mere nonpayment of debts is problematic because of the 13th Amendment which restricts slavery to that for punishment of a crime. I greater likelihood would be to create laws to allow prisoners to work off debts while in prison. Then you can get busted for smoking a joint and whether you get prosecuted can depend on how much you owe people. Add some vague laws and extra surveillance, and you get to the point where people might be able to be prosecuted on a “show me the man and I’ll find you the crime” basis. So I dont think the 13th Amendment is a magic bullet here.

The second major risk is that if there is a rapid collapse, it may result in local areas breaking away. This may change dynamics, but I can’t imagine that creditors would be able to utilize the power of the state in such an environment. However for local debts, it may be the case that it is a lot easier to go after someone with fewer laws in the way. So I am not sure that would be necessarily pro-creditor or pro-debtor. It may depend a lot on physical distance, administrative issues, and relationship between creditor and debtor.

Modern prisons are new institutions born of social complexity. The old institutions for dealing with debt were formal slavery. The story of Virginius and Virginia should be instructive there as a warning.

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