Debt slavery

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Major Concepts

Debt slavery or Indentured Servitude seems to be a popular term bandied about by cranks and conspiracy theorists, especially on personal finance websites, since the credit crunch of 2008. It comes from the peculiar idea that everyone is enslaved by evil debt holders (rich people, banks, corporations, the Rothschilds, etc.) and if people all stop paying their debts to financial institutions that were run up during the housing boom the economy will reset, everyone will have jobs again, and everyone will be absolved of their debts while keeping all the stuff they bought.

Why the idea might be wrong[edit]

Most ardent cranks realize that it's better to pay off your debt and not get more (it's always good not to have excessive debt). It isn't just the rich who have money in the bank, as banks often pool many depositors' funds to loan out to people who need it. It is part of the benefits of fractional reserve banking. Not paying that back would cause the bank to fail, wiping out everyone's funds or making everyone pay more (via taxes) to bail everyone out.

Many eschew taking on even the most reasonable of mortgages for fear of being a "debt slave for 30 years", ironically being beholden to a landlord for 40, 50 or more years. Far-gone nuts don't realize that a bank[1] can seize the asset (and other assets for liquidation), or garnish wages, to recoup as near to 100% their loans as they can get… or they think that if too many people do it only good things can happen from bank failures, no money to cover deposits, and sudden staggering deflation.

Why the idea might be right[edit]

The above supposes a pure system which ignores many other factors. A good example would be purposefully misleading government programs or predatory loans, especially when those loans are marketed using professional strategies and specifically to vulnerable demographics. The arguments throughout this page very much "buy in" to the feeling of guilt that makes the machine work. It seems intuitive to think those who don't pay debts are to blame and should feel beholden to cough up their money. But if the system has been rigged so that the lender makes money regardless of whether the loan is paid and used predatory tactics to make a loan that they knew would the borrower would likely never pay off, the dishonest party is the lender. He is using a rigged system to create a "debt slave"

Ignorance and Wishful Thinking[edit]

This is often pushed by conspiracy theorists who seem to think that fractional reserve banking is a tool used by the elite to enslave the poor.[2] Many (for example, known conspiracy theorists the Bank of England[3]) seem to think that loans given out by the banks are just numbers on a spreadsheet and not real money.[4] Largely because these people don't understand the concepts well enough to pass a basic course involving these subjects at the local community college, and think the education to do so is also some sort of conspiratorial indoctrination.[5]

So, the only way to take it back is to topple them from "power" and owning everything is to stop their cash flow.[6] This just happens to be the way they can keep their money, and the object they desired enough to take out the debt in the first place. Funny how it can work like that.

This is not to say that there aren't real abuses by lenders which keep the poor and the desperate in perpetual debt, even after the original principal has been paid off many times over.[7]


Debt slavery cranks will sometimes work a good deal of religion into their conspiracy theories, invoking the Bible's restrictions on usury. Some of the more moonbatty types will advocate the abolition of international finance so that we may return to the way things were before the rise of the banksters.

Third World dictators[edit]

Coincidentally, debt slavery on a macro level has been a major government concern in many corrupt third world nations since World War II.[8] This is where the ruling dictatorship takes out massive loans from the World Bank, deposits them into their bank accounts, then pleads poverty and debt tyranny by the wealthy nations that provided funds expecting them to be paid back.[9] This concept is related to "onerous loans" — credits that should never have been given in the first place that a democratic government is forced to pay back after an authoritarian regime squandered the money or — worse yet — used it to finance repressive measures.

Debt bondage[edit]

Debt bondageWikipedia's W.svg[10] and human trafficking are a real thing in a number of developing countries. A lender will often charge excessive amounts of interest on loans that can rarely be paid back without bankruptcy law or credit security. It can in many cases be transferred to the family of the debtor, including children, which can affect generations. Bonded labor is especially a problem in India where many NGOs have worked to eradicate it.

Similar results may occur by other routes. For example, workers in remote and poorly supplied locations may have basic daily needs (housing, food, clothing, etc.) provided by their employers, with the associated costs deducted from their pay — or else may have no option but to fill those needs by buying from the "company store" at inflated prices. If those accumulated costs (or deductions) become large enough to overwhelm employees' nominal income, then a different type of genuine debt bondage exists.

The terms might be purposefully similar in name so people can feel persecuted, but it has little relation to people buying too much and being incredulous at being responsible for paying for it. Garnishing wages or selling the asset (such as a home) is a great deal different than actual enslavement...except for people with little connection to reality who like to blow things dramatically out of proportion.

Conditions worsen[edit]

If anything has happened in the years from 2008 through 2010, it has shown that if people stop paying their debts things get much worse. The market plummets (where all the 401(k)/403(b) retirement accounts are), banking institutions would have lost everyone's money if not guaranteed by the government, businesses fail as credit becomes more expensive, hemorrhaging jobs, and more people lose their homes as rates adjust upwards.

Safe to say, time and time again as people tell their stories, the only people who seem to be really persistent on this are ones that owe incredible amounts of money and are incredulous that they would actually have to pay it back.

See also[edit]