We are basically a country of indentured servants. We agree to a system where the poor (who are the vast majority) are forced to ask those who have more than enough to loan them money at interest in order to acquire the non-essential luxuries that they desire–Extravagancies like a college education and a roof over their head. But here’s the thing: Money is not real. We give it its value by agreeing as a society that it has value. If we decided that socks were the new currency, that would be how I would pay for filling up my gas tank–I would slide some socks into that little tray to give it to the lady behind the bullet-proof glass, and she would hand me my change in paper clips–per our new social contract.
I have been struggling with this post for a few days now. It started out with my thoughts about debt–College loan debt in particular. Then it became about debt in a larger sense, and how America has woven debt into its plan for its citizens in order to keep them working like good little workers. And then today, I had to stumble upon an episode of This American Life called “The Invention of Money” (Here is the story. I would rather you listen to it than read one more word of this blog… Actually, I would rather you do both). This amazing and interesting story about how money is basically fiction did nothing to tighten the focus of this stupid blog entry. So now I’m completely lost in marco-mode, sitting here in my underwear on the couch listening to Yanni on Spotify, with 1500 words below this introductory paragraph that are basically a bunch of one-sentence thoughts–any one of which would be plenty for a blog entry of its own. This is not a blog topic; it’s a book. But now I have too much written down to not try to make sense of it all, so here goes….
Around 1 B.C., Roman author named Publilius Syrus said, “Debt is the slavery of the free.” So now I’m thinking–If money isn’t real, then debt isn’t real either.
So here’s what has struck me recently: It costs poor people more for things than it costs rich people. And here’s the kicker: That extra money that the poor have to pay? That money gets paid to the rich people. Let’s take the two examples of education and owning a home. If you want to go to college (The average for public colleges is a little more than $10,000/year, and the average for private colleges is $28,500/year, so let’s say $20,000/year for 4 years) and your family has the money to send you to college, it costs about $80,000. If you don’t have the money and you have to borrow, after you pay it back it could cost you an extra $20,000-$40,000. Same goes for paying for a place to live, except that paying off a $150,000 mortgage over 30 years will end up costing you about $250,000 compared to someone who has the money to pay it off right away.
Now sure, I know that college isn’t everything. There is a giant list of people who go on to do great things who never went to college or who are college drop-outs (here is a list of drop-out billionaires), but the point is that, to kids, it is presented as the only way you’ll ever get a job. We’ve all played The Game of LIFE–If you take the short-cut and skip college, it’ll save you about 6 spaces, but every payday you and that thin little pink wife you’ll meet in a few spaces are going to get screwed. Of course, it doesn’t put you $20,000-$80,000 in debt to take that first right turn….
Basically, we’re all just a bunch of indentured servants. We go into debt to get some letters behind our name (and, admittedly, to learn some stuff) so that we can get hired so that we can pay off our newly acquired debt. Then, if we’re lucky enough to get a job that allows you to pay off your college loans (by the way, student loan debt in America is expected to top a trillion dollars this year–that’s a pretty big liability), we buy a house (It’s either that or throw your money away paying rent to someone who is rich enough to own apartments) and go into debt again. All of the sudden, it’s very important that you be a good employee and toe the line, or you could lose you job and your ability to pay back your mortgage debt (though it looks like you might owe more than it’s worth). Also, if you lose your job, you lose your health insurance–Another chain around the ankles of free men and women.
Okay, here’s how things work in America right now:
- If your family is poor, chances are you live in a poor neighborhood.
- If you live in a poor neighborhood, chances are you probably are going to a crap school and getting a crappier education (Unless your parents can afford to send you to a private school–which they can’t, because they’re poor).
- If you’re lucky enough to graduate from high school (with an education that increasingly pushes the burden of that year’s education to the next year’s teacher), you are informed that “a Bachelor’s degree is more like a high school diploma now-a-days” and if you want any hope of success in the world and getting a good job, you need to go to college.
- Turns out college is expensive, and you and your family can’t afford to pay for it. Because you’re poor. So now you need to “make the investment” of going into debt in order to insure bigger gains in the future.
- When you graduate (with an average $25,250 worth of debt–That’s quite a hole to dig out of), you figure out that what they said about “a Bachelor’s degree is more like a high school diploma” is actually true, and there are surprisingly few jobs. Maybe at this point you decide to go back to school (and more into debt) for a master’s degree–again, no guarantees. Or….
- Maybe you get a job. Maybe you’re lucky enough to get a job that supplies health insurance. Don’t lose your job, though. Be a good employee, or you’ll lose your job, your health insurance, and your ability to pay off your debt.
- Now you’ve got the choice of either pissing away your money to live in an apartment, or you can go even MORE into debt by borrowing money (in the form of a mortgage) in order to supposedly make your monthly payment (that we each need to make in order to have a roof over our heads) to yourself instead of to a landlord (Unfortunately, by the time you’ve paid off your $150,000 mortgage, you will have actually paid about $250,000 on your house–that is now probably worth $125,000).
- Congratulations! Your kids live in a crappy neighborhood and go to a crappy school! (Rinse, and repeat)
This sounds nothing like freedom to me. This sounds more like a system that is set up so that the things a person needs in order to succeed are out of his price range, so he is forced to make a choice: Either you play by their rules and become indebted to the rich for a huge portion of your life, or you for forfeit your chance to become one of the ones who is lending and making the money. This doesn’t sound like a just society. This sounds like a fraternity hazing. Or a Nigerian inheritance scam. Or a battered woman staying with the man who beats her because it’s all she knows.
Then, if you don’t pay back your loan on their terms, they tell you that your credit rating is bad. Guess what–Your credit rating is basically just a number by which they rate how well you play by the rules of the people with the money. Imagine what would happen if we all just said, “You can take your credit rating and shove it up your ass.” Who would they lend to if we all had 520 credit ratings? Or, there’s the other side of it. What if we all took Dave Ramsey’s advice and lived modestly until we were out of debt? If either one of these things happened, the American economy would collapse. Think of how many people (whose jobs are dependent on the interest being paid by the poor to the rich) would be out of a job! And where would all of those companies be without Black Friday?
The Bible has some interesting (no pun intended) things to say about usury. When God spoke to Israel about lending at interest (especially through the prophets), it’s referred to as an abomination, and put in the same category as adultery, bribery, and extortion. In contrast to the person who takes usury and exploits the poor, Ezekiel 18:17 describes a righteous man who “helps the poor, does not lend money at interest, and obeys all my regulations and decrees. Such a person will not die because of his father’s sins; he will surely live.” Every time, God seems to be saying, “How dare you? How dare you exploit the poor in this way?” Then we’ve got to deal with the fact that Jesus tells us to pray saying “Forgive us our debts, as we forgive our debtors.” The word that is translated as “debtors” actually means “a person who is indebted to you.”–not a trespasser, not simply a person who has sinned against you—a debtor. It’s easier to say “I forgive you” to someone who has insulted you than it is to say “I forgive you” to someone who owes you money, but this “financial-debt forgiveness” is the word that Jesus used.
And the thing is, money is not real—that should make it easier for people to forgive debts. Money is fiction–love is real.
A great read. Classic. I love a good rant! God bless
While life would be different without debt, it would not crash the economy. I think it would expand the economy. When you use debt you are simply forgoing future income for something you would like today. So if you did not have debt, then you would simply save up to buy what you want. Our desires would not change, but our means of getting them would.
As far as your comments on usury I think you head that right on the mark. If you look back in history, it was the “great” thinkers such as Voltaire who thought and I am paraphrasing, if I could only get these Christians to think about business they would not fight wars over who better understands the bible. Turns out he was right, but he may have unleashed even greater evils.
I think they key line you said was to live modestly. Very difficult to do in these days. I was thinking about how our generation is nickel and dimed by all these things we think we must have. cell phones, cable, internet, netflix, ect. In the 70’s we did not have many of these things and people were able to save more of the fruit of their labor.
I don’t think it would expand the economy, but it might make it less volatile… Someday. In the mean time, think of how many jobs there are out there that are dependent on the money made off interest. There are just under $11 trillion of residential mortgage loans out there right now. Lets say that the average rate for those loans is 6.6% (it actually is). If everyone started only getting a house when they could afford to pay for one, that would remove $726,000,000,000 from the economy (just under 3/4 of a trillion dollars)–I’m pretty sure that would damage the economy just by itself. There are no jobs to replace the ones that would be lost. That’s not counting all the bank jobs and credit card jobs. In the midst of the worst recession in 65 years, Visa’s profits jumped 35% (about $2.4 billion). Profit. Their operating revenue is about $5 billion a year–and that’s just Visa.
You’ve got to know that debt is VERY big business in the US, right?
Yes I realize that debt and the business around it is very important to the US. Our fractional banking system makes it possible, and it forces the prices of our homes to rise and I believe that it therefore forces the values of our wages down. I realize that if someone waved a dave ramsey wand and eliminated debt in one day it would harm the economy. But just about anything instantly removed would cause harm in the markets.
Eventually the system though would clear itself and then we would have a more honest economy. Although painful, it would allow the market to right itself and prices would fall back in line. If a person can live without debt, they should. If you can lend with out charging interest rates especially high ones, then you should as well.
Surely when you mentioned “the prophets” that was intentional (profits)?
Love reading your blog!!
Ha! I made that wordplay at the end of this blog: https://theboeskool.wordpress.com/2011/10/03/ive-been-known-to-critical-of-christians/
I get what you are saying, but I have a problem with the defeatist/victim language in this one. Although I wholeheartedly agree that it is far easier for the privileged to make it in this country, and that the general culture pushes people toward debt, I don’t believe we are ‘forced to ask’ for loans or are ‘lucky’ if we graduate from high school. I see too many people make stupid financial decisions because they seem to think it is the only way (ie. going to a private university for a degree they could have gotten at a community college), but I’m not going to be part of the culture that perpetuates that lie.
The point is not that there aren’t success stories despite the uneven playing field. The point is that all of this bondage exists despite money not really being real–As well as the inherently exploitative nature of usury that God spoke against over and over.
Also, there are a whole lot of degrees (and jobs) that you can’t get from a community college…. But I get what you’re saying. People need to be smart about these expensive decisions, but I went to a private college (and a private elementary and high school), and I’m pretty certain I would not be able to write (or think) with anywhere near the clarity or insight that I currently do without those experiences. People may disagree….
It is funny to see both “money is not real” and “hurt the economy” in the same post. The belief in an “economy”, an over-arching and abstract entity that must be “healthy” by some standard, is a bit silly if money is not real. We accept the concept of an “economy” in the same way that we accept fiat currency and fractional lending. What we actually have is a mechanistic financial machine that runs on the wealth of the masses, and lays golden eggs in off-shore tax havens. It is intended to exploit, not serve, those who feed it (parasite rather than symbiote). The etymology of the term economy is an interesting one (http://www.etymonline.com/index.php?term=economy), and a little bit of research will show that the way that it is commonly used now is a total perversion. The benchmarks and metrics used now only tell us if the machine is efficiently converting consumer wealth into corporate profits, not whether or not wealth is being managed well, or if we collectively are being good stewards of what we are given.
Yes, usury is a sin, and yet what American Christian is ready and willing to loan money without taking interest, let alone loaning without expecting in return.
Hi Chris! Some interesting points–I sometimes lecture on the history, utility, and nature of money–which, next to agriculture, is one of humankind’s greatest inventions (without which we’d be much poorer). Debt has been a problem since coinage was invented by the Lydians; I think it’s morally neutral–not something governments should regulate, tax, forbid, or subsidize (and subsidize they do–look at the housing bubble). Frankly, I don’t think any interest rate is usurious–and if we limit what people can charge, we end up denying credit to poor people.
It is true that some bachelors degrees aren’t worth much–but that’s because governments subsidize higher education. So too many people get degrees in English or Sociology and then complain about the lack of jobs or low wages. If a degree adds to your productivity, you should be able to get someone to loan you the money to invest in your human capital. When governments subsidize education (or take over the college loan industry) we’re politicizing the whole process.
Your minarchist uncle Bruce
Wait, wait, wait…. My English degree has made me all kinds of money from this blog alone. I haven’t gotten an actual check yet, but I assume it’s coming soon.
You don’t think there should be any regulation on interest rates? Payday/title loans? Loan sharking? Nothing?
And then, is there (or should there be) a difference between the state’s response to usury and the church’s response to it? The Bible doesn’t seem to make the case for its moral neutrality.
I haven’t gotten rich off my history degree either (I still remember my first annual paycheck: $8600–I lived like a monk and saved $2000), but I knew that going into it–when teachers complain of being underpaid, I wonder why they went into education, and if they are underpaid, why so many applicants are desperate to get into the profession. Guess it’s all about the summers off.
No–no regulations. Competition does a marvelous job doing that. But that also means no barriers to entry, no licenses, no favors, no crony capitalism, no FDIC, no Community Reinvestment Acts, zippo. Which means creative entrepreneurs can open banks in poorer areas.
There is almost always a difference between the church’s and state’s responsibility toward issues, yes. But I’m not sure what usury is: my Roman Catholic friends say historically it has nothing to do with interest rates per se, but rather what the money is loaned for.
There are lots of particulars in the OT that I’d view from a distance, keeping in mind the ultimate purpose of particulars like these: caring for the poor; which, in most cases, means creating a society that allows individuals to express their productivity. Steve Jobs created more wealth for millions of people (especially poor Chinese), and that’s something Christians should celebrate.
Might it be hard to enforce the “no favors, no crony capitalism” part of that without any sort of government agencies?
Also, what happens when companies get so big and powerful that they stomp out competition?
The reason we need regulation is the same reason that bullying is such a huge schools all over the country.
Government agencies are to crony capitalism as oxygen is to fire; in fact, regulation helps bring about crony capitalism. Most large companies don’t mind regulation at all–it keeps out the competition, which can’t afford those pesky regulations.
I’m not at all afraid of big companies (none of them can legally use guns, after all). I cringe before snotty DMV officials and my heart palpitates when I see red and blue lights in my rear view mirror, but somehow Apple computer–the US’s biggest market cap company–doesn’t make me at all nervous. They have no legal monopoly to be coercive, and I always have alternatives or, if they really suck, I can start my own. Start your own first class mail service–you end up in jail. Which might explain those long lines at the USPS.
Hey, this blogging is fun. You’re much more intelligent than my uber chillin’ California students–none of whom bully, at least. We’d kick em out if they did.
The best thing about non-poor people is they speak about poor people as if they are the authority on economics, poverty and frugal living. I hear things like “culture of poverty” and “culture of victimization.” Trust me, when you are poor, by necessity you are often times living frugally. Of course there are exceptions to the rule and many people, both poor and well to do have a hard time managing money properly. But of course, the poor are the ones demonized for not having this skill locked down.
Education, a phone, microwaves, a car are spoken about as if they are “luxury” items that the poor are squandering their pennies on. Really? Let’s say I do give up my prepaid phone that I spend $20 a month on so my kids can reach me because I work two jobs. That saves me what- $240 a year? Let’s say I give up my car. How will I get to work? How will I buy food and other necessities? Unless you live in a large city with adequate public transportation, you are stuck. That means, I’ll walk to whatever grocery store is closest to me, likely a 7-11 or something and be forced to pay 3 times as much for milk and bread than you do. I’ll use a pay phone and spend 10 times the amount per minute than you do.
I volunteer at a non-profit called LOVE inc. and literally every single story I hear from the poor families in my community are struggling because the system is stacked against them from the beginning. Again, there are exceptions to the rule. Those are the stories you hear about on the news or read about in books etc. But let’s get this straight, there are millions of poor families in the US and millions of children with food insecurity in the US. Are they all just not budgeting properly? Should they be living more modestly? They already have nothing!
The old adage that rent is “just throwing away money” is a great rule of thumb, but there are a lot of people who are finding rentals that are inexpensive enough to more than compensate for the equity in a house, even if you don’t adjust for the illiquidity of a home investment.