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Economic Avalanche

Q. I am trying to understand what's going on in our economy. But, it's too complicated for me and I can't get a handle on what Congress or the Federal Reserve should do. What happens if they don't approve a billions in bail-out money? What is it that the church and Christians should be doing?

Answer:

Those are good questions and I'm not sure we can provide complete answers, either. First, the bail-out of large financial firms like Fannie Mae, Freddie Mac, and AIG rescues some of the bankers, but it does not help the individual homeowners much. We must continue to pay our bills.

Banana Republics

When the Federal Reserve takes over control of firms like these they are just "monetizing" the debt - like we've seen in Argentina and banana republics. They are able to "hide" bad debt and stick tax payers with rising costs for everything as the dollar becomes more and more diluted and loses its value.

This is because the government is just "printing" money to "paper over" bad debts. If you or I did this we would be accused of counterfeiting and fraud. It would be like we owned a printing press in our garage to make fake money to pay for daily expenses.

Property Flippers

This doesn't mean that our citizenry is completely innocent, though. Many of us already know people who became too greedy in the real estate market. They accepted loans they knew they could not pay back - with the goal of "flipping" properties to make a quick "buck."

But then when their properties started to go down in value they just walked away - leaving the banks and the mortgage companies in the lurch. This is a new business "ethic" - very immoral and unethical.

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Neglecting God's Financial Plan

Sadly, Christians are just as guilty as anyone else. All too often we ignore God's Word concerning finances - advice such as avoiding debt and paying back our loans (Romans 13:8) and not relying on government "bailouts."

Entitlements Biblical?

The Bible tells us to work for what we get. Paul clearly tells us,

"For even when we were with you, we gave you this rule: 'If a man will not work, he shall not eat'" (2 Thess. 3:10).

Biblical entitlements are an option only for those who truly can't work such as the aging and disabled among us (1 Thessalonians 4:11-12). There are of course times when each of us needs a helping hand and believers are told to help when we can. (1 John 3:17)

The Wicked Walk Away from Loan Repayments

Psalm 37:21 notes that "The wicked borrow and never repay, but the godly are generous givers."

We recognize that our readers have heard this before. But, we ask for your patience in identifying where we went wrong so that we won't repeat our mistakes in the future.

Faulty First Priorities

How can we say that we follow the Bible in our daily walk when many of us took out equity loans from our homes to buy plush, expensive furniture and granite countertops in our kitchens?

Some of us became obsessed with "keeping up with the Joneses" and borrowed huge amounts just to "look good" to others. We wanted huge mansions, fancy cars, expensive clothing and vacations, and other things that Christians should never make their first priority.

Jesus told us not to store up treasure on earth but to store up treasures in heaven (Matt. 6:20). He reminded us not to worry (Matt. 6:27) but to "seek first His kingdom and His righteousness, and all these things (food, clothing, shelter) will be added" (Matt. 6:33).

Jesus did not say that He would add plush, elaborate furniture and McMansions to satisfy our wants rather than our needs - like many prosperity preachers say. (Now they preach miracles to rid us of debts)!



We Quit Saving for our Futures

We quit saving for our future and depended upon "hot tips" to make tons of money in the real estate and stock market. Yet, Proverbs 6:6-8 tells us,

"Go to the ant, you sluggard - consider its ways and be wise! It has no commander, no overseer or ruler, yet it stores its provisions in summer and gathers its food at harvest."

We Disregarded Reputation&Stewardship

We threw away our godly stewardship of all that God has given us and earned a poor reputation as Christian stewards. Paul warned the Christian to "have a good reputation with outsiders, so that he will not fall into disgrace and into the devil's trap" (1Timothy 3:7).

Borrowers are Servants

Most Christians already know that "the borrower is servant to the lender" (Proverbs 22:7). Yet, many believers willingly became indentured servants - defying God's warning. Then, just like pagans Christians walked away from repaying their loans. This was not right.

Christians are also warned not to cosign for another person's debt. The Bible says, "Don't agree to guarantee another person's debt or put up security for someone else. If you can't pay it, even your bed will be snatched from under you" (Proverbs 22:26-27, NLT).

Yet, this is exactly what many of us did. Not only did the borrower walk away from paying back loans, but Christians who co-signed for another family member's debt or a neighbor's debt, walked away, too.

All of this has made our economy very shaky - and there are few who avoided its traps.
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Moving Funds to Safety

Once citizens realized their banks, mortgage companies, and brokerage firms were in trouble these past few months, they began to pull out massive amounts of cash to move it to safer places.

In just the past few years the public began to recognize that the only safe place might be in Treasury bills guaranteed by the government. So they removed cash and monies from banks and moved it into Treasury bill mutual funds or Treasury bills bought directly from the Treasury Department.

Cascading Cross Defaults

This caused banks to "seize" up their normal credit lending practices. It became harder and harder to move money between institutions or to make payroll through "float" (using temporary credit to pay bills).

This began a process of what are called "cascading cross defaults" as one person or one business at a time could not get cash to pay for normal business needs and then defaulted on loans or bill paying.



The Great Freeze

So now we are in a situation where the entire U.S. economy is freezing up. Something similar happened in the Great Depression when people desperately tried to get their money out of banks causing "bank runs." But, today "bank runs" are electronic. That is the only difference.

Economic Avalanche

One of the reasons Treasury Secretary Paulson originally asked for $700 billion to ease this situation was because of the ensuing "freeze" on credit.

At that time people were selling stocks, removing cash from the banking system, and were moving funds to whatever system they think was safer than banks or brokerage firms.

It is an economic avalanche of bad credit, bankers who are terrified to lend, and borrowers who are escalating their practice of walking away from loans they can't pay.

For Congress not to allow the Federal Reserve to print new money to paper over this freeze means extreme financial pain like that which occurred in the Great Depression. However, we must remember that in the process of printing more money we could also enter a Weimar Germany situation where hyperinflation is the ultimate result, too. Neither solution is preferable.

Plan of Action?

The entire United States banking system and the practices of borrowers needs to change. Banks and mortgage companies must reinstitute ethical lending and borrowing rules. People should never get loans who cannot prove they can pay for those loans. This will take time and will cause hardship for most Americans.
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The Church

In such cases where we as Christians have fallen into this trap we need to get back to sound Biblical practices. Husbands and wives need to submit first to God and to the needs of each other and the household (see Ephesians 5).

Then they must do what is necessary to get out of the "holes" we have dug for ourselves. If this means extra jobs or part time work, or tearing up credit cards, or whatever… let's do it! But do it as a team. Stop the blame game and help each other.

God is our Father - not Cranky Bernanke

The issue of money causes bickering, blame games and divorce. As Christians we must stop this immediately. Almighty God is our Father - not Treasury Secretary Bernanke.

The Lord of the Bible does not want us seeking help from the government to "paper over" our sins from the recent past! The apostle Paul tells us that "my God will supply every need of yours according to his riches in glory in Christ Jesus" (Philippians 4:19, ESV).

However, His "supplying our needs" may mean that we sell off our junk, scale down our living standards, use one car rather than two, reduce our debts, and return to moderate lifestyles.

We are told to "not be anxious about anything, but in everything by prayer and supplication with thanksgiving let your requests be made known to God" (Philippians 4:6, ESV).

Let's all return to the Lord of the Bible rather than supplying all our needs through Capital One or VISA.

Amen?

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References:


Panzner, Michael J. 2007. Financial armageddon. New York: Kaplan.

Prechter, Robert R. 2003. Conquer the crash. West Sussex, England: John Wiley&Sons.

Schiff, Peter D. 2007. Crash proof. New Jersey: John Wiley&Sons.



Note that all of the books shown in the margins throughout this article are timeless and recommended. God's Word and advice is never obsolete.







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