Living In Debt – A Song of Immorality

The whole world is floundering in debt.  Greece barely has its nostrils above water and the U.S. markets plunged 4% in one day because of worries that the rest of Europe may follow.  Meanwhile, large numbers of Americans are underwater on their mortgages and many are walking away from them, even as the Obama administration plans another bailout to “help” them at the taxpayers’ expense.  All this got me thinking about debt.

Is debt IMMORAL?

Interestingly, the history of debt indicates it was long considered just that.  While the early Romans toyed with loans and interest, the Catholic Churchcondemned it in the Middle Ages and considered the very charging of interest, then called usury, the equivalent of heresy.  Usury later came to mean only unreasonably-high interest.

According to a good article in Wikipedia, usury, meaning the charging of any interest at all, has been denounced by a number of religious leaders and philosophers in the ancient world, including Plato, Aristotle, Cato, Cicero, Seneca, Plutarch, Aquinas, Muhammad, Moses, and Gautama Buddha.  The sense was that people who charged interest were demanding something without themselves performing any useful work or trading any thing of material value.

In The Devine Comedy, Dante places the usurers in the inner ring of the seventh circle of Hell, below even suicides.  The usurers shared the ring with blasphemers and sodomites.  (How does that make you bankers feel?)

Not only did the early Christians condemn the charging of interest, Judaism did as well, but with an interesting twist.  It was kosher for Jews to charge gentiles interest, but not each other.  The rule was cleverly exploited by English nobility when they opportunistically used Jews as middlemen to collect interest and taxes, thus deflecting criticism from themselves.

As for Islam, the Qur’an condemns “.. . those who persist in usury . . . ” to “…incur Hell, wherein they abide forever.”  (ibid.)  As I understand it, Islamic banks don’t charge interest, but accept part ownership in return for loans.

Being the son of Great Depression (GD) parents I absorbed as though by osmosis their instinctive distrust of debt.  If they needed something and didn’t have the money to buy it, they waited until they did, or we did without.  If something broke, we repaired it (if at all possible).  Shoes?  Re-sole.  Tires?  Retread ’em.  Sock got a hole in it?  Darn it.  (Pun intended.)  Food too expensive?  Grow a Victory garden in the back yard.  Can (verb, transitive) the vegetables for winter.  What a different world that was!  I still remember using my first credit card, circa 1965, with an abundance of caution and always paying the full balance.

One reason, perhaps, for the linkage of immorality to usury is the history of violence when the rate is too great (the modern definition of usury).  If you default on the mob, you know what happens.  Nowadays of course it is a federal offense to threaten violence to collect. Instead we rely on the denial of more credit as a punishment for defaulting.  That seems to work, more or less, for citizens, but it’s more awkward, and less certain, for whole countries.  Greece was close to defaulting on its debt (bonds).  They did get bailed out, but now it’s the whole EU that is shaky and that is what caused last week’s precipitous market decline.  After all, who is left to bail out the EU?

I would be remiss if I did not note that Greece got into its jam through flagrant and profligate (aren’t those great adjectives?) abuse of its finances.  They didn’t want to live within a &#$@<* budget, so they didn’t.  This is one of those teachable moments, IF we will pay attention.

If the Congress had a Great Depression mentality we wouldn’t be in the mess we are in, but let’s face it, Congress is a reflection of the culture it represents.  While some say it is invalid to compare the U.S. to Greece because of the vast difference in size, others, rightly, point to the similarities in stats like the debt-to-GDP ratio.

The Tea Party seems to sense that the incumbents HAVE been immoral, somehow, and since they can’t consign them to the 7th circle of Hell, the next best thing is to vote them out.  (The Pope is busy with other matters these days.)

Now that I think of it, a pay as you go (PAYGO) scheme was enacted by Congress in 1990.  (It was probably responsible for Clinton’s relative fiscal success.)  PAYGO expired at the end of 2002, was brought back in 2007, but has since been the subject of various “exceptions”, not least for the Great Recession.  Seems to be ancient history now.  Congress now has even decided to forego the annual charade known as a budget resolution.

So, if like Greece’s our house of cards tumbles, what then?  Maybe China and Japan will come and, in an ironic fit of righteousness, break our knees.

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About Jim Wheeler

U. S. Naval Academy, BS, Engineering, 1959; Naval line officer and submariner, 1959 -1981, Commander, USN; The George Washington U., MSA, Management Eng.; Aerospace Engineer, 1981-1999; Resident Gadfly, 1999 - present. Political affiliation: Independent, tending progressive as the GOP recedes from its Eisenhower roots.
This entry was posted in Economics, Ethics / Morality, Fiscal Policy, Government size, Philosophy, Politics and tagged , , , , , , . Bookmark the permalink.

6 Responses to Living In Debt – A Song of Immorality

  1. Jim says:

    Jim one, The Hebrews had some especially stringent property laws – much stranger to today’s world than mere lack of financial charges. (I might have written ‘lack of interest’, but that’s a whole different older-guy issue.)

    Every 7th year was a Sabbatical year, with special provisions (literally! they had to provision crops for a fallow year). Every 7th Sabbatical year brought a Jubilee. Most property had to be returned to the original owners or their heirs. Hebrew indentured servants got their freedom.

    Imagine the gimmicks that folks had to devise to diminish the effects of such laws. Isn’t it wonderful that we live in a simpler society, where people have learned that simplicity and honesty are more profitable than deviousness and deception? – Jim too

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    • Jim Wheeler says:

      Right you are, Jim too. Interesting. One thing that’s universal for sure is the human need to constantly tinker with the rules. This is the main reason Congress will never simplify the tax code.

      Thanks

      Jim 😉

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  2. Duane Graham says:

    Jim,
    As you know, I just can’t go with you on the Greek-America comparison. Just as our major banks were too large to let go down the tubes (and take the rest of us down with them), the U.S. is simply too big for other nations (most of whom are in the same jam) to do to us what they did to Greece. So, whatever the fate of the U.S. is in the future, it is not the fate of Greece (or near-fate, if the EU is successful).
    Having said that, I want to point out something related to your excellent summary of the concept of usury, which concept caused me much consternation when I tried to defend it as a conservative, particularly as a conservative Christian, many years ago.
    I have always had a big problem with the payday loan industry, which I believe is just loan sharking in a suit and tie. Naturally, as a former free market guy, I defended it, albeit uncomfortably, on the grounds that it served a purpose in our economy because it functioned to allow people who have bad credit to get some type of credit in a time of need. I also argued that the market ought to set interest rates, not the government.
    Boy, was that stupid. Why would I or anyone believe that it was okay to take advantage of usually poor folks and get them in a never-ending spiral of debt and at ridiculous rates of interest? (Car dealers often have buy-here, pay-here lots, which—in my opinion—make money off other’s misfortune, too, but that’s another story.)
    Sadly, in Missouri, Republicans have shown little interest in regulating this quasi-criminal business . Look here for an example from three years ago and here is the latest:

    Republicans leaders in the House acted disgracefully in killing a much-needed proposal for payday loan reform. After weeks of stalling, the bill was assigned to an unfriendly committee. There, GOP leaders held a hearing but invited only representatives of the short-term loan industry.
    The reluctance of Republican leaders to even hear testimony from the other side proves the point that more needs to be done to limit the influence of campaign money in Missouri politics.

    Who do you suppose is one of those “Republican leaders in the House”? Do you think he will ever be asked about this failure (among others) by our local paper? I hope so, and I hope he is made to answer for years of inactivity on the issue.
    Duane

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  3. Jim Wheeler says:

    Duane,

    I’m puzzled about what you think “other nations” DID to Greece. You can’t be referring to the EU bailout (which, as you note, might not work after all) because that makes no sense. If you are implying that the rest of the EU contributed to the cause of Greece’s problem, that doesn’t jibe with the facts either. The Greeks did it to themselves. Here is a link to the sordid tale, from that liberal rag, the NY Times no less, of how that happened.

    http://www.nytimes.com/2010/05/05/business/global/05iht-greece.html?pagewanted=all

    You say that the U.S. is “too big to fail”, but that only works if there is someone else to bail you out. Who’s going to do that? China? Anyway, I make the comparison with Greece because, as we have discussed before, our economic statistics are following the same path that theirs did. I’m thinking in terms of models. Right now our trend is along the same debt-to-GDP curve followed by Greece. You may not be worried, but I am. There IS no one to bail us out. BTW, have you noticed the Dow lately?

    Your comment on the payday loans is a good one in this instance. It profoundly goes right to the essence of the big versus small government argument, i.e., to what extent should society, through government, protect people from themselves?

    You might assume that government is efficient at doing that, but that’s a stretch. I saw a national TV news item last night about rife abuse in the Head Start program, surely one of the better ideas for dealing with societal insufficiencies. People are bypassing income limits, apparently too stingy to spend their own dough for their kids. One guilty couple had an income of $110,000. Moral: the more the subsidy, the more the demand.

    While I agree with you that things like the payday loan business are justifiable targets for government regulation, you surely must admit that there is SOME POINT at which we can not afford to protect people from their own weaknesses and mistakes. (I would like to think that we could educate young people in high school to be good consumers, but just getting the 3R’s down them is problematic so far. But, that’s no reason not to try.)

    In this corner we have the Liberal Tribe, all cozy with plump pensions, full medical care with all the bells and whistles for everyone, war on obesity, war on hunger, war on cancer, war on poverty, house in the suburbs, car in every garage, appliances on every porch, and a legion of lawyers at the ready to defend against any political incorrectness or unfairness. Everyone is above average. (See Brave New World – Aldous Huxley, for what their world will eventually look like.)

    In the other corner, across the moat, we have the Libertarian Tribe, fiercely independent, fully armed with an ample supply of trail mix, venison jerky, fallout bunker, first-aid manuals, anti-government posters, 2,000 mile wall along the Mexican boarder (complete with land mines), and large-caliber weapons and ammo. They are clad in animal skins because there is no more cheap stuff coming in from the third world, but obesity problems have disappeared – no more food abundance from Big Ag.

    Somewhere in the middle is what we can afford. But, we don’t know what that number is. We don’t even have a guess, which in the good old days was quaintly called a budget.

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  4. ansonburlingame says:

    duane,

    You seem to believe Greece cannot happen here because of our size economically. To me IF we continue to live beyond our means our size has nothing to do with it (assuming “beyond our means” is a huge number which to me $trillions per year meets the definition)

    Accepting your lack of concern, no wonder we should just keep on keeping on with deficits of huge proportions based on “needs” into the unforeseeable future. Balderdash I say.

    “OUR” failure will simply be a bigger splash, perhaps consuming the world as we know it. If Greece goes down, so what. Let the US default on debt and watch what happens. AND where exactly we will find someone to bail us out.

    I for one would like to change this whole debate. I firmly believe we should ALL agree that our debt and deficit is out of control without laying specific blame for why that is the case.

    In so agreeing we could then focus on WHAT TO DO ABOUT IT. That in itself would be a huge argument but at least one moving us in the right direction to regain control.

    For now you and your progressive friends seem to say Not a Problem, let’s just keep spending until….?

    Anson

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  5. Duane Graham says:

    Jim and Anson,

    My point about Greece and the EU is that austerity was forced upon them by the bailout: You do X or else. Now, there is no one who can make such a threat to the U.S. because the “or else” is too bad to contemplate. That’s my point. The rest of the world has it in their own self-interest to make sure we don’t utterly fail. We can imagine a world in which Greece fails; we can’t imagine one in which the U.S. fails. The world’s economy is so intertwined that even small governments like Greece can have worldwide effects, but our economy is infinitely more important to the wellbeing of the world’s economic system. So, to the extent that foreign governments can induce that collapse (if that is even possible) there is no way they would do so. To me, that’s just plain common sense.

    Having said that, I don’t argue that we “should just keep on keeping on with deficits.” At some point, paying interest on the debt becomes problematic because it will eat up too much of the budget, crowding out other things. And there is the problem of government sucking up capital that would otherwise contribute to an increasing prosperity—although government itself does have a contributing role in our prosperity. So, like President Obama and his economic advisors, I agree something needs to be done to begin bending the deficit curve back to sustainable levels. And I agree with both of you that there is a limit to what government can and should do. But just because the revenue stream has been dammed up by Republicans—causing the deficits to increase—doesn’t mean that we should abandon programs that actually make life better for our citizenry.

    Finally, I don’t know how many times I must say that both parties are to blame for not coming to terms with our problems. Dems don’t want to cut programs and Reps don’t want to raise revenues. But over the past 30 years, Republican philosophy is the major contributor to our debt problems. I don’t even see that as controversial, if one looks at the evidence. My point in making that claim is that we don’t want to repeat the same mistakes we made beginning in 1981 with the election of Ronald Reagan. As it is now, Tea Party philosophy (cut taxes and make tiny cuts in government) is a repeat of the same thing that got us here. I don’t know why that’s not important, even if Anson tires of hearing it.

    In any case, yesterday’s Globe contained an article about the reality that Republicans in office are facing: they have cut as much as they can cut—without pissing off the public—and now the more pragmatic among them are voting for tax increases. So, maybe we are getting somewhere.

    Duane

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