Tuesday, March 24, 2009

# 274: The Dark Side of Debt

Before 1913, only a millionaire could live like a millionaire. When the Federal Reserve was established in 1913, it became easier for those with good-paying jobs to borrow since the Federal Reserve was now backing all banks in America. Then and now, they could live like millionaires without a penny in the bank. At this time they could live almost completely on credit by going into debt for everything possible. As long as they hung on to their jobs, all was peaches and cream.

The main culprits behind the establishment of the Federal Reserve were the wealthiest bankers and businessmen in America. Their aim was not so much to use the Federal Reserve to save our country from another financial disaster like in 1907, which was its main purpose, but to get money (interest) flowing from borrowers into the pockets of financial investors.

The New Testament (NT) is mainly a book of rules and regulations that are given exclusively to Christians so we may learn to live in a way that brings glory to God and Jesus Christ. Also, it teaches us how to live holy lives for our eternal benefit, etc. and thus we become role models for others so they also may have the same benefits.

When we don’t obey these rules, it not only displays our lack of faith and knowledge, but also leaves us prone to the repercussions for our disobedience. Ephesians 2:2: “. . . and of the ruler of the kingdom of the air, the spirit who is now at work in those who are disobedient.” One reason for ignoring Biblical rules is that some “Christians and clergymen/women” believe that some of the NT teachings are only friendly suggestions that we can take or leave, even though they wouldn’t dare to say it publicly. That is a grave mistake.

Sometimes ignoring a seemingly trivial command can lead to catastrophic consequences. One such teaching is found in Romans 13:8: “Let no debt remain outstanding, except the continuing debt to love one another . . .”

Why would the apostle Paul put down a rule that seems to have nothing to do with the worship of God, except to emphasize our debt to love one another? Because when a person borrows money (debt) for something that is not absolutely necessary, he/she is most often ENGAGING IN AN ALLUSION OF PROSPERITY. The only possible exception to this command is if an immediate medical emergency needed attention.

I can see why living like kings and queens seems quite alluring. But the dark side of living on credit is that the interest one pays monthly is money bet on a dead horse. What those in debt are doing is feeding the mouths and filling the pockets of many who are not their kin. We are talking about any kind of debt. If I were to go in debt, I would do it to feed the mouths of those in desperate need and not the rich bankers.

Buying a house on credit can be financially disastrous and is the riskiest of all types of borrowing. The nasty thing about those pending house payments is that for the first several years, ninety-some% of the house payments goes to interest. Only a small fraction goes toward paying the principal. When one buys a house valued at $100,000.00, after making payments for ten years, the principal may still be fairly close to the original buying price. And if one were “fortunate” enough to pay off a complete 30- year mortgage for that $100,000.00 home, they would have paid double or more than the purchase price. The longer the mortgage, generally, the more profit the banks make. That means those homeowners may have paid over $100,000.00 in interest.

The rebuttal to that argument is: What choice do we have other than renting? Here is an answer not most will agree with: There are three verses in Proverbs that can be an answer when modified a little. Proverbs 21:9 and 21:19, and also 25:24: “Better to live on a corner of the roof than share a house with a quarrelsome wife.” Verse 21:18 says: “Better to live in a desert than with a quarrelsome and ill-tempered wife.” I would change the last part of those verses: Better to live on a corner of the roof or in a desert than pay a mortgage that feeds the faces of people for many years that you will never see.

Here is a little- known tidbit: How did the word “interest,” as the interest one will pay for borrowing whatever, come to be used? Many years ago, when a person or financial institution loaned out money, the money they earned as interest was called usury—in fact, the King James Version of the Bible still uses the word “usury.” Usury implies the lender will be using the borrowers to their advantage. Someone thought the word “usury” was not the best word to describe the money the borrowers had to pay. There must be a better word that doesn’t imply a greedy transaction. They came up with an excellent euphuism: the word “interest.” What they wanted it to mean was that the borrowers had the INTEREST of the lenders, by paying them compensation for loaning the money. That is how the word “interest” came into existence as a term for the percentage owed each month, above and beyond the principal. In short, using the word “interest” means both parties supposedly have each other’s best interests in mind; instead of thinking, they are being used.

What did people do when home mortgages were not easy to obtain? There were many options: live with in-laws, live in a tent, buy a junk house trailer, sponge off of close friends, share a small rental with friends, buy whatever you can with the money you have. Certainly, none of these options would satisfy the vast majority of modern Americans who have been spoiled rotten. I am sure there are many other options that will never satisfy America’s taste to want more than the cash they have on hand. And still, genuine Christians must obey the command that teaches not to leave any outstanding debts unpaid, and for good reasons. Sure!

Let me tell you my story: I got married when I was 18 years old and still wet behind the ears. My new wife and I rented a downstairs apartment from my parents for about $20.00 a month—that was the average price for rentals in that dilapidated part of town. After a few years, I followed my in-laws to another state and lived with them in a 35-foot mobile home for a short while until we saved up enough money to buy a building lot for next to nothing. This was in the 1950s. Then we saved up more money to build a foundation. This house was very small. We saved up a little more money to do some framing. We saved up more money and bought windows and a front door. We moved into an almost unlivable house, according to standards of the time, even though it did us well, and in a little over a year the house was completely finished. We did not borrow a cent. Three years later, we sold it for $7,000.00, made some profit, and built an average- sized house with the money we made from the sale. We lived in that home for a few years and sold it for $16,000.00.

That was over fifty years ago. Since then, I have built many houses and never borrowed from any bank. In fact, I started a house-building business and never borrowed. Now I am an old man living on a small pension. I have never borrowed money for any reason. Everything I bought was with cash. Can that be done nowadays? Yes, for Christians who are aware of the potential dangers of going in debt.

You see, borrowed money feels like free money, but in its stead is money that will make borrowers into slaves, of sorts, to their taskmasters (lenders). They have to pay if they have it or not, or have whatever repossessed. Isn’t that what is happening in America today?

This tells me that a nearly secluded verse in the NT teaches us (American Christians) not to go into debt, because it can have an overpowering consequence. A good example is the potential downfall of a powerful and “rich” debtor nation--$13 trillion in debt and counting. That doesn’t sound rich to me. We are deeper in debt than all the countries in the world combined.

The problem we have created for the majority of the 20th century going into the 21st is that we thought we could defy Scriptural teaching and never pay the fiddler (God’s wrath). Well, it is catching up with us and at breakneck speed.

President Obama and the Federal Reserve believe we can solve our economic problems by going into debt. He is putting us in debt to help those who are in debt. It is very shortsighted when we borrow money to help people who borrowed more than they could afford, never thinking what would happen if a debilitating sickness or disaster occurred like being unemployed. I am not an economist, but something smells very fishy with American-type borrowing.

Even though I like Obama, it looks like he is making a serious mistake. Evidently, President Obama must not be aware of the dark side of debt. Does he realize what effect global warming will have on America in a few years? No one knows exactly how it will affect our climate, but one thing is for sure: It will not be pretty. When that potential hot weather and lack of rain is the norm, this present recession will feel like a birthday party in comparison.

There is little doubt that Obama’s economic stimulus package, along with loaning the banks over a trillion dollars, will help put the unemployed back to work, but with no thought of the debilitating stress it will cause to future generations.

At that time, the possible lack of employment will mean less revenue taken in by the IRS. When or if there is not enough money coming in to pay even the interest on that humongous debt, this country would be in the identical shape as those homeowners who made risky and possibly dishonest decisions. The only thing is that the consequence would be of a much greater magnitude—the end of America as we now know it. The countries that loaned us those trillions may take whatever they please as collateral.

The reason I give this negative view—even though the word “negative” is not a strong enough word—is because who knows what the future will bring? It is like counting one’s chickens before they hatch. I hope and pray this will not happen. Regardless of how much hope and prayer there is, they cannot stop global warming. That means Obama’s up beat (Pollyanna-ish, optimistic, fool-hearted) demeanor will not and cannot alter the pending disaster on the world, especially in a sophisticated nation like America.

Concerning auto loans, a new motor vehicle is not necessary every year or two. Put your pride aside. Fix up your present one. Forget about keeping up with the Joneses. If you must buy a new vehicle, save up the money first, then buy it. Another thing: Almost any automobile, etc. will lose value very quickly; this fact almost everyone knows. When financing the vehicle, by the time the last payment is made, it will be worth only pennies on the dollar of the original price. Sounds to me like a foolish venture. That is the way it is in America.

Don’t forget that there are others means of transportation where we don’t have to go into hock: Take public transportation, get a ride with a friend, carpool, ride a bike or walk. This may sound strange to many people for two reasons. As I already have said, we are spoiled, and the other reason is that we are lazy. We all were born with a tendency to be lazy. Therefore, mark this on your thinker: Laziness is the easiest addiction to get hooked on, and possibly the most difficult to break clean of. That is the best reason we must never give in to it.

Now the stupidest investment of all—if one can call it that—is paying high interest on a credit card. The average money owed on all credit cards in America is a staggering $10,000.00; that to me is unbelievable. If you must, file for bankruptcy or jump off a bridge. Just kidding. I heard that the average interest on all credit cards is between 15% to 20%. It is no wonder that the amount of money we save in the bank is for the first time in the negative numbers. Just think how much money we could put in the bank each week if we didn’t have to pay out on the dark side of debt. It sounds to me like we Americans are a little on the stupid side.

Here is a subject not many have ever thought about: subconscious stress. Let me tell you about a checker working in a nationwide grocery chain. I am guessing she is about 55 years old. She is a very nice lady. I often chat with her whenever she has the time. For several weeks, she was walking with a limp. I asked what it was. She said she has a little pain in her knee. I didn’t think much of it. Then a few days later, as she was behind the counter, she could hardly move from the cash register to put the groceries into the bags. I asked her, “Why don’t you take a short leave of absence?” Her answer was, “and then who is going to pay my mortgage?” This poor lady was not only in physical pain, but also in a constant state of subconscious stress. This is not an isolated incident.

That silent killer, even though many are not aware of it, is tormenting nearly everyone subconsciously because of their unpaid debts. Then you wonder why there is so much sickness in America nowadays. I believe stress is the number-one killer, especially in America. And there are no statistics to prove it. Stress is normal on occasions to outwit a pursuing lion, but when that lion is chasing you all day long, a slow, sickening death is pending.

In ending, this short post may not do much good for those Christians who are in debt over their heads already, but it is Godly advice for the future. For now, they must just grin and bear it. Just remember this: I believe it is better to live on the corner of a hot tin roof with a few possessions than to feed those legitimate crooks so they can live a super easy life as you live with pain while struggling just to get by.

I believe the main actions that set off this financial and economic predicament—I call it a debt crisis—is our pride and naïveté of Spiritual matters, along with the poorly controlled, unethical practices (fraud) inspired by greed of the large financial institutions.


debt collection services said...

There are several things that we can do to avoid debt. Creating a budget and sticking to it can be a great start. We should also learn to avoid credit card debt.

JC said...

jc says

It could not have been said any better. jc

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