Hot Off The Press! - August 2000

Recent Financial News That Might Interest Readers Of Both
The Bible & The Economist

The July 5th Wall Street Journal reported that "Americans have gone on an unprecedented borrowing binge in recent years, even as the U.S. government has started slashing its debt and is looking forward to paying it all off. The numbers are startling. A record $4.5 trillion in debt has been accumulated by U.S. nonfinancial corporations, up 67% in the past five years and household borrowing has risen almost 60% to $6.5 trillion." The August 1st Journal detailed that corporate debt has now risen to 80% of the net worths of our corporations. That's below the 90% peak we experienced during the recession of 1990 but it has soared from 70% in 1997, which is where it was during the mid-eighties when hostile corporate takeovers were being financed by junk bonds. This deterioration in private and corporate balance sheets has undoubtably played a major role in prompting investors to recently mark down the stocks of our lending institutions and junk bonds as well.

Ask an assembly of modern Christians how many have ever heard the biblical injunction to "neither a borrower nor lender be" and over two-thirds will raise their hands. Then ask if we should borrow to build a much needed church and many will reply that it is unbiblical to borrow. Yet many will also have large mortgages on their homes and will have borrowed money for businesses. Worse, many will have inadvertently financed, for example, highly-leveraged casinos in Las Vegas by investing in junk bond funds! Thus, capital is diverted from the "kingdom" to the "world."

Ideally, spiritual investors would finance all kingdom-building projects without using debt. But does our dualistic thinking indicate that we believe our homes and businesses, even casinos, are more needed than our churches and charities? If not, wouldn't we also prudently finance a church or non-profit building by borrowing, say, up to one-half of the building's value when necessary?

Our confusion on the subject of debt is only one example of how we have mixed--or "syncretized" to use the theological term--Victorian values with the biblical ethic. For "neither a borrower nor lender be" is actually Shakespeare. In subsequent verses Moses even called it "evil" not to make needed loans. On the Mount, Jesus commanded, "When someone asks you for something, give it to him; when someone wants to borrow something, lend it to him (Mt. 5:42). The key of course is that Moses and Jesus were talking about fulfilling human needs, not necessarily wants and desires. In short, the biblical ethic recommends that we make plenty of needed loans but also discourages our maxing out credit cards for luxury consumer items.

If you've read my books, you know that there are several ways to have your money reflect that balanced biblical ethic in our modern world. A long-time favorite is to deposit a portion of your long-term bank deposits into one of the "community development banks" that serve our inner-cities and poorer rural areas. The South Shore Bank of Chicago is perhaps the best known of such banks. It was recently featured in Christianity Today largely for making church construction loans that many traditional banks won't make.

Located in what was a rapidly deteriorating inner-city area, the bank was established with the help of religious and ethical investors. It accepts federally-insured deposits from all over the country and pays competitive rates. It uses those deposits primarily to make loans to inner-city residents who want to refurbish affordable housing. This not only makes it possible for them to own private homes and create wealth, it creates jobs that help people escape welfare. Turning government projects into private housing and welfare recipients into taxpayers obviously adds to the interest we receive from the bank, enriching us indirectly. Society is enriched. And we're enriched spiritually.

Interestingly, understanding what the Bible rather than Shakespeare says about debt can also enrich us directly. During the nineties, millions of Americans grew quite pessimistic over the federal debt. Yet it was moderate relative to our national income, assets, and the debts of World War Two. It was borrowed from us by our government in order to win the Cold War, a much "needed" cause. Yet confused pessimists missed much of the great bull market. That is a perfect illustration of the riches of conforming our thoughts to all God's thoughts rather than isolated Bible verses that conform to Shakespeare and political ideologies. Which may also be why Jesus cautioned about those who "teach man-made rules as though they were my laws!" (Mt. 15:9)

That is why it's so important to differentiate between true morality, sound economics and simple politics. For example, at the end of the Cold War, our national debt in relation to our national income was around 50%, about one-half of what it was at the end of World War Two. Around $5 trillion in the early nineties, the debt, which everyone knew, was about 10% of the value of our nation's assets, which no one knew but was estimated at about $55 trillion at the time.

So while 90% to 100% mortgage loans and junk bonds are common in the private sector, there were several books written about the irresponsible nature of the federal debt during the early nineties. Many of the worst were written by politically active authors, some of which were also religious. Yet while our government's debt is now being retired, and many expect it to be paid off entirely during the coming decade, no one seems concerned enough about soaring private and corporate debt to write another book. If our concerns were truly moral and economic, we would be as deeply concerned with our private debts as we were with our public debts.

Of course, that get close to home. But it's always more enriching to start with the "man or woman in the mirror" than to fix the problems of others. That's why Jesus told us to "take the log out..."!

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