The Great Moderation
If you’re like me, you’ve been watching the news and stocks as we witness history in the making. Yesterday, after the House defeated the bailout plan from the Senate, the DOW Jones Industrial Average fell 777 points, the largest one day fall in its history. Economically speaking, we are in the middle of a major turning point in our country, and our world. The days of unfettered spending and reckless, limitless greed are numbered.
The national debt hangs at about 9.3 TRILLION dollars. I’m no economic expert, but even I understand that’s a big, hairy problem. I can’t even type that number out on a normal calculator! US families aren’t much better; and now that teens can hold credit cards in their name, they are graduating HIGH SCHOOL with an average of $6,000 dollars in debt. What a way to start a life!
Trina and I left college in debt. School loans were sold to us like a bottle of snake oil. Trina talks about how signing her name on that first “financial aid” package was a major negative turning point in her relationship with God. What sounded like “aid” before our college days now sounds more like “bondage” and “debt.”
Around the time I graduated in May, we had some friends point us to Dave Ramsey’s Financial Peace University. We listened to all the sessions during our long move from Texas to Chicago, although we had begun to learn some of the principles while in Abilene.
Ramsey describes his plan as, “Giving you the same financial advice your grandmother would, (only we keep our teeth in).” His main goal – help people live within their means, and climb out of debt. Through sort of a baby step process, he gives couples, churches, and businesses steps out of the insanity of credit, mortgages, car leases, and much of the monstrosity that comes from living on the thin wire of excessive debt. He was against the $700 billion dollar bail-out, and after hearing from both sides of the issue, I side with Ramsey. The market will course correct – we are not headed for the Great Depression Part 2. The Government in the ’30′s developed the FDIC to secure banking deposits – there is more regulation over private banks (and doubtless there will be more in the near future because of this mess).
What is more likely to happen is that banks will not be able to sell 30 year no-money-down mortgages for families looking to buy a mansion they can’t afford. Along with that, it will be tougher for people to be approved for credit cards or car leases that they have no business applying for in the first place. Businesses and banks will have to reel in their liquidity rates that resemble some sense of sanity, while other banks and institutions will undoubtedly continue to fail, the wise will survive.
We are not moving into the Great Depression, we are entering “The Great Moderation.“ This is the time when Cash is King – pull out some envelopes and follow a budget. Save money, don’t spend it. Live simply, give generously. This is a time when the whole nation may begin to heal from its drunken hubris. Followers of Christ can learn much from their earliest brothers and sisters – “who shared their possessions, and had everything in common, and not a needy person could be found among them.” (Acts 2)
This is not the end of Capitalism, but in this age we must think about a Creative Capitalism that doesn’t only reward a few and neglect millions more. Do what V-8 Juice is doing, giving away fresh produce to the working poor with some of the profits they make on their nutrition drinks. Or do what Ethos Water does, putting many of their proceeds on bottled water toward water-well development in Africa. Or do what the first century Christians did, in sharing a common purse. Health insurance would be a lot simpler if you were paying into a pot shared by others who actually care about you and worship Christ with you on Sundays.
We as a nation are learning from our mistakes – many of them were lessons already learned during the ’30′s – we can not live beyond what God has given us.
…Give us TODAY our DAILY bread.
Vanessa, and 
chad, and 
Vanessa 10:11 am on October 1, 2008 Permalink
Great thoughts. I agree; this needs to be our wake-up call. And even though I hate being in debt because of student loans, I am thankful that they gave me an education that does not depreciate in value. Still, the thought of paying them off for the next 15-20 years is a bit daunting.
Mark 3:22 pm on October 1, 2008 Permalink
Vanessa,
Good point – our education is an investment that “doesn’t depreciate.” Or at least – the education doesn’t – my mind however is sort of…forgetful…
Kat and I downloaded some debt elimination software that helps us get a “debt snowball” rolling – our dream is to be debt free in 3 1/2 years. It’s kinda scary, and it means hard work and part time jobs for us now – but it’ll be worth it for us down the road!
Vanessa 9:14 am on October 7, 2008 Permalink
What a great dream. I think we need some ideas like that. We have a lot of debt, just from school, nothing else. But the school debt is great enough to overwhelm me! I’d like to get it all paid off in 10 years, but that is a lofty goal considering what we owe.