In days gone by, it was common for people to save up for land and then build their own house. To even try and build your own house these days (without many regulatory licenses and tens of thousands of dollars of council requirements) would be illegal. So Australians are now forces to fork out hundreds of thousands of dollars for land and hundreds of thousands of dollars for regulated and taxed construction of buildings.
HECS / HELP Debt
University and college debt has increased to the point where many graduates plan on never paying back their loans. In the US, the deferral default rate on college loans for those aged 40-49 (peak earning years) is 47%. We have entire generation who will retire in debt. Many students casually indicate that they have no plans for even trying to pay of education debt.
The end results is that our citizens are making social decisions due to the financial consequences of excessive debt. Marriage is being delayed or discarded and children are not being conceived at even a replacement rate. These social decisions cannot be reversed as menopause waits for no man (or woman more precisely).
Corporations build their business models on obtaining daily funding, to the point where if credit markets seize up as they did in September 2008, that many companies are on the verge of bankruptcy. Governments and nation states have become so reliant on debt to bribe (sorry, serve) their democracies, that they can only survive by print more money from their central banks. Even self-funded retirees are dependant on investors acquiring more debt so they can sink money into the stock market and drive their continued returns. Corporate debt is needed on a daily basis to support the livelihood of retirees, the employment of workers and the tax revenue of nation states.
Western economies borrowed truckloads of money and for awhile this money made everything seem great. Now it’s time to pay down the debt and guess what, we can’t without taking a serious hit to our standard of living. So the politician’s and banker’s solution is to borrow more money to pay down the debt while maintaining the current standard of living. It’s not working.
The US official debt clock is fast approaching $16,000,000,000,000,000. (that is trillion). Europena countries are hemmoraging as a result of their inter-bank and inter country debt arrangements. Australia, while it seems like it is better off, has move from a net positive surplus to over $200,000,000,000,000 (billion) worth of debt. On a per captia basis our story is not good. The stage is set for governments and nations to give their power to a universal leader who can deliver us from the beast that is debt.
So how should we think about Debt?
Is Debt an intrinsic sin? No. However, Greed is a sin. – a serious sin which the church is told to separate from. Is it possible to have debt with sinning by being greedy? Maybe, but it is hard. So much of today’s debt is based on greed. However, there is also an element of truth that in today’s society – it is nearly impossible to operate without debt. The bible tells us that ‘Debtors’ are ‘slaves’ to ‘lenders’. As followers of Christ we are called to be slaves to Christ and not serve God and money. So:
- How should we view debt?
- Practically, how much debt should a person on average earnings take on?
- What type of purchases are valid for going into debt for?
- How can we effectively extract ourselves from our debt bomb before it explodes?
I look forward to your thoughts and insights.