Wednesday, December 19, 2018

Lies of Debt

I'm not sure which time of the year may be the most likely for people to go into debt, but the holidays, with all of the social pressure and all the retail messaging, seem like a prime time for people to be susceptible to the temptation of spending more than they have.

Debt tells us that our work is worth more now than it actually is, or at least more than we're getting paid. It allows us to pretend we got paid more than we did and live accordingly.

Debt tells us that our time later is worth less than our time is worth now. We reap what we sow, and eventually the bill becomes due. That means while we got to enjoy a little extra now, we end up enjoying a lot less later because then we're not only paying for then, but also the past that wasn't paid for in the past.

Romans 13:8 tells us to “Owe no one anything except to love one another.”

When Charles Finney preached this text, he taught that it meant it is a sin to go into debt.

The world tries to soften this message and draws a distinction between “good debt” and bad debt. Exorbitant interest is bad, but “investments” in our future like our education are good debt. After all, they increase our value and earning potential later, right?

Debt is fuel for inflation. Since the 1960's, the areas of the economy that have inflated the most are also the most subsidized by the government: health care, education, housing.

Inflated debt is especially bad. A friend of mine once told me, “You want to be in debt when there's inflation” because then the cost of, for instance, your education, is actually going down for you—it's easier to earn the cost and repay it back later. This is really backwards thinking because it destroys the value of everything else by fundamentally eroding the value of the currency.

Sure, some people are able to game the system and make money off the system while it's currently working the way it is. Some people make money from slot machines, too.

Inflation is step 1 to undermine the value of the currency. Step 2 happens when the bill comes due. America has racked up a huge tab. This won't last forever. When this debt unwinds, the inflationary funds dry up for public funding of health care, education, housing, and political projects. This will be quite noticeable—worldwide.

The generation that lived through the Great Depression understood the value of owing no man any thing. If we won't learn from their lesson, we may have to learn it ourselves.

No debt is “good debt.” No debt is a good way to live. No debt makes for sound monetary and fiscal policy.

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