The bondage of debt

Renew America ^ | 2009-12-19 | Ken Connor

[rabscuttle385]

The rich rules over the poor, And the borrower is the slave of the lender. (Proverbs 22:7 ESV)

In the Old Testament book of Proverbs, King Solomon details the differences in thought, word, and deed between a wise man and a fool. In addressing the foolishness associated with borrowing money, he makes clear the relationship between debt and servitude: No man can truly be free when he is bound by financial indebtedness to another. It's clear, however, that the danger of debt is something a majority of the American people — including members of Congress and our President — have yet to take seriously. Even though our national debt is spiraling out of control, we appear unwilling to change our spendthrift ways.

Congress has just taken action to increase our national debt limit by $290 billion — bringing our debt ceiling to a whopping $12.4 trillion. This, after two years of unprecedented spending during which time we accrued the same amount of debt that we accumulated in the first 200 years of our nation's history. No matter how much money Uncle Sam extracts for his coffers, however, it appears it's never enough. The demand for entitlements continues to grow and liberals in government are only too willing to accommodate that demand by expanding the power of the nanny state. Contemporary society has been taught that when it comes to the world of finance, credit is king. Credit, we are told, is how we finance the good life. When Gordon Gekko told us that greed was good, we apparently believed him, and set about to prove his point.

But, as the old saying goes, there's no such thing as a free lunch. The United States cannot continue on this path of fiscal gluttony indefinitely. With every dollar we borrow, we sacrifice more and more of our freedom.

As individuals, we've come to rely increasingly on those credit cards in our wallets, charging 40 cents out of every dollar we spend. We finance everything: our homes, our vehicles, our educations, our entertainment...even basic essentials like food and clothing are more often than not purchased on credit in today's marketplace. Thanks to the folks at American Express, Visa, MasterCard, and Discover, the American worker's penchant for champagne and caviar need not be stymied by the constraints of a beer budget.

As a nation, we've racked up nearly $12 trillion in debt and have seen the budget deficit soar from $455 billion to $1.4 trillion in the last year alone. And in the same way a strapped homeowner takes out a second mortgage on his house to stave off financial ruin for one more year, Congress has time and again — in the name of the people's "general welfare" no less — voted to take on more and more debt to fund a ballooning list of appropriations and entitlements.

In the face of this grim economic picture, only one of Solomon's fools could say with a straight face that the American government and her people are economically free. To keep up with our consumption habits, we have surrendered the freedom that comes with true ownership and live in service to our lenders. Because we have lost the discipline and maturity to distinguish our needs from our wants, we find ourselves surrounded by material goods bought on credit. But, one too many missed payments and that luxury vehicle in the driveway will be repossessed, and that McMansion in the suburbs will fall into foreclosure.

The risks associated with excess borrowing are no different at the federal level. As it now stands, 35% of the United States' gross domestic product is comprised of foreign debt. Each year, we are financing a larger and larger chunk of the nation's day to day operations on borrowed money, and each year the cost of servicing this debt goes up. This debt burden not only impacts our fiscal strength, it also significantly compromises our political and diplomatic position on the world stage. When the U.S. Government is beholden to foreign nations because of its debt, it is not free to act in the best interests of the American people, particularly when those interests conflict with the interests of our lenders.

Up to this point, America's approach to dealing with the pressures of our debt has been to take on still more debt and leave the headache to future generations. This folly must end. If we truly value our freedom we must overcome our addiction to debt and learn how to live within our means.

For more information on how to take control of your finances and achieve freedom from debt, visit Crown Financial Ministries at www.crown.org.

© Ken Connor

[SkyPilot]

Yes, I know exactly what I am talking about...

Put me down in the "disagree" category concerning that statement.

You cannot even grasp that China owns so much of our debt that if they called it in, our economy would implode.

You didn't even watch that entire video link, did you?

The ingraditude of present day Americans toward their unprecedented prosperity is one of the greatest moral outrages in human history, and I for one and profoundly sick of it. Stop your whining, you useless ingrates...

You sir are someone who cannot seem to control their keyboard strokes before engaging their brain. Further, you mistakenly believe you can lecture people about a subject you clearly do not grasp nor understand.

Any gratitude I do have goes to the Almighty, where it belongs. Furthermore, I served this nation for 21 years in the military as a pilot, and endured more hardship than you ever dreamed of for its cause. I'll put my record next to yours any day of the week.

Merry Christmas.

[Toddsterpatriot]

You cannot even grasp that China owns so much of our debt that if they called it in, our economy would implode.

How does one "call in" a Treasury note?

[GOPJ]

If China quits buying our treasuries, we’re sunk. I suspect you know what SkyPilot’s talking about...

[Toddsterpatriot]

If China quits buying our treasuries, we’re sunk.

From Oct 2008 to Oct 2009, China went from $684 billion to $799 billion in Treasuy holdings. During that same period, our deficit was what? $1.7 trillion, give or take? Our much bigger problem is our out of control deficit spending, not what small chunk of it is purchased by the Chinese.

I suspect you know what SkyPilot’s talking about...

So you suspect T Notes cannot be "called in"?

[JasonC]

Wrong. One, they have cut their purchased my a factor of about 4 and we aren't sunk. Their trade surplus halved, that was the major reason, not policy.

Savings rates drive trade surpluses or deficits. If the Chinese want to save less and consume more, the world as a whole necessarily sells more to them.

If they specifically refrain from buying our debt and buy, save, Europe's instead, with an unchanged savings rate and surplus, then the Europeans buy more of our debt instead.

If we want to fund our entire debt ourselves, we readily can. We simply save more of our income. The increase in the US savings rate just since the start of the crash in the autumn of 2008, exceeded the entire rate of Chinese purchases of US debt, by a factor of 2. We replaced Chinese savings sent here twice over by adjusting our own, in six months.

American income dwarfs out debt issuance, therefore modest percentage changes in our savings rate cover large portions of our debt issuance.

This is not a reason to issue debt for crap we don't need, nor is there any reason to instead pay higher taxes for crap we don't need, without any debt in the transaction.

But the continual nonsense that pretends that Americans have a negative net worth because there is debt, it nonsense. American households own $54 trillion in assets after all of their debts. China doesn't own $54 trillion anything.

[SkyPilot]

China threatens 'nuclear option' of dollar sales (2007)

As far as treasury securities, yes they have a maturity range, but they could burn down their own house if they wanted to. The Chinese are not just the Chicom bureaucrats. Our debt to them is unevenly split between their own central banks and institutional investors.

Moreover, any "nuclear option" by the Chinese (while affecting about 6% of our total debt) could be the spark in the dry forest that would ignite our own whole house. The Chinese are determined to ruin the dollar. They want oil traded in a new currency.

The US dollar has been artificially propped up by being the reserve currency. Once that is taken away, America's credit card is taken away.

Why people think this is fantasy is beyond me. Is it whistling through the graveyard?

I remember Freeper real estate agents coming on threads back in 2007 and getting into huge arguments with anyone (anyone) who posted a thread saying the housing and lending crisis was coming.

[Toddsterpatriot]

As far as treasury securities, yes they have a maturity range

So we're off the "calling in debt" idea?

Moreover, any "nuclear option" by the Chinese

Nice link?

The Chinese are determined to ruin the dollar.

Because a weaker dollar will kill their sales in America?

The US dollar has been artificially propped up by being the reserve currency.

And by export dependent economies, like China and Japan.

[GOPJ]

The US dollar has been artificially propped up by being the reserve currency. Once that is taken away, America's credit card is taken away. Why people think this is fantasy is beyond me. Is it whistling through the graveyard?

The other "horror" is that once we're NOT the world's reserve currency, we can't "inflate" out way out of debt. We'll actually have to pay it all back. If broke countries like Haiti could "inflate their way out of debt" they would... any poor country would. That's going to be us soon...

[Toddsterpatriot]

The other "horror" is that once we're NOT the world's reserve currency, we can't "inflate" out way out of debt. We'll actually have to pay it all back.

Our debt is in dollars, of course we can inflate and pay it all back.

If broke countries like Haiti could "inflate their way out of debt" they would...

Their debt is in dollars, so they're out of luck.

[GOPJ]

When “dollars” aren’t the reserve currency - our money will will be as powerless as any other South American banana republic..

[Toddsterpatriot]

When “dollars” aren’t the reserve currency - our money will will be as powerless as any other South American banana republic..

I guess that will make the holders of dollar debt pretty sad.

[GOPJ]

I guess that will make the holders of dollar debt pretty sad.

Yeah - they'll take a one time hit. Citizens in our country will be broke, broken and poor for a decades...