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Iceland Experiments With A Jubilee Of Debt Forgiveness

A jubilee is an idea that dates back to Biblical times. The idea was that every 50 years or so there would be this moment where debts would be forgiven. The jubilee has not gotten a lot of traction in the modern world, but right now, Iceland is actually trying it.

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Transcript

ROBERT SIEGEL, HOST:

A jubilee can be a dessert or a special event. In Biblical times, a jubilee was a year in which debts were forgiven, and that kind of jubilee never got much traction in the modern world. But Planet Money's David Kestenbaum has this story about one country giving it a try - Iceland.

DAVID KESTENBAUM, BYLINE: Heida Dora Jonsdottir got into debt the way most people do. She bought something she loved that she didn't quite have the money for - in this case, a small wooden house in Reykjavik.

HEIDA DORA JONSDOTTIR: I really liked the place because it had such a homey feel. I mean, the floors are wooden, and everything was kind of, like, old style. It was quite cute somehow.

KESTENBAUM: Her friend Baldur Hedinson - same story. His place has a view, kind of.

BALDUR HEDINSON: There are, like, two little holes in between the big houses where I can see the ocean.

KESTENBAUM: So you have an ocean view.

HEDINSON: (Laughter) I have an ocean view.

KESTENBAUM: In Iceland, a lot of people have these odd mortgages that adjust with inflation. And when the financial crisis happened, there was a lot of inflation in Iceland. Heida remembers getting these statements saying she owed more and more. And I don't mean she just owed more that month. The total amount she owed to the bank went up by 30 percent. It's, like, if you'd borrowed $100,000 for your house, all of the sudden, you owed a $130,000.

JONSDOTTIR: It's kind of like you are drowning. That's the feeling.

KESTENBAUM: After the crisis, people were stuck with much larger mortgages than they'd started with. It was this wound that just would not go away. So last year, when Iceland's Progressive Party found itself with very low poll numbers, it proposed the jubilee, though it didn't call it that.

HEDINSON: They call it...

JONSDOTTIR: They call it the correctment.

HEDINSON: Yeah, like, the correction.

JONSDOTTIR: The correction.

HEDINSON: Like there was something, you know, wrongly calculated, and they need to correct it. Or just putting it right - they want to put things right. That's how they frame it.

KESTENBAUM: Say it in Icelandic.

JONSDOTTIR: (Speaking Icelandic).

KESTENBAUM: The party promised to go back and correct everyone's mortgages - basically, forgive the additional debt everyone had built up in 2008 and 2009. It's a beautiful idea that you could go back in time and try to undo this one very painful part of the financial crisis, make it like it had never happened. One problem with the jubilee idea of forgiving debt is that there's always someone on the other side, someone who lent the money.

But there is a plan to make even this part feel painless. The money to pay for the jubilee would come from a tax on three dead Icelandic banks - banks that many people blamed for Iceland's part in the financial crisis. A lot of people were really into the proposal. The Progressive Party ran on the jubilee idea and won.

(APPLAUSE)

KESTENBAUM: This was the scene at a hotel in Rejkavik last April - everyone celebrating. It took a while to sort out the details, but the other week, Heida was finally able to go online and see how much money she'd be getting from the jubilee. It was about $12,000. She was surprisingly subdued about it.

JONSDOTTIR: I don't know if I'm really skeptical or if I'm not this trusting, but if I see the money in some form, then I will be quite happy.

KESTENBAUM: Baldur?

HEDINSON: Yeah?

KESTENBAUM: How much money are you getting?

HEDINSON: Nil, nothing.

KESTENBAUM: This is the other reason Heida was not celebrating. Her friend Baldur also has a mortgage - that apartment where he can kind of see the ocean - but he bought it just after the cut-off for the jubilee. On paper, a jubilee is this nice, simple idea, but in practice, it's complicated. You can't forgive all debt, so what debt exactly are you going to forgive? You've got to pick. And whatever you pick, there are going to be people who benefit from the jubilee living next to people who get nothing.

Baldur, how does it feel not to be getting any money?

(LAUGHTER)

HEDINSON: It doesn't feel great. I mean, I had a student loan during that period, and that went up like crazy. I don't see why they - if they're doing this for mortgages, why don't they do this for student loans, as well? So, I mean, I'm happy for Heida that she's getting it, but the overall thing - it feels very unfair.

KESTENBAUM: Once you get over the thrill of the idea of a jubilee, you realize it's just a government policy. Baldur and Heida have decided it's a bad policy. They wish the government had spent the jubilee money on health care or education - something that would benefit a broader group of people.

Is there something silly about the idea of thinking we could go back and fix something like this?

JONSDOTTIR: We should correct the future and not the past, right?

HEDINSON: Yeah, create an environment that's good for the future.

KESTENBAUM: There you go. You guys have a political campaign now. You can run.

(LAUGHTER)

KESTENBAUM: Correcting the future is, of course, the path that we usually take. It's an easier sell. The future is unwritten. You can dream it will be whatever you want. The past has already happened. It's complicated and surprisingly hard to fix. David Kestenbaum, NPR News. Transcript provided by NPR, Copyright NPR.

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