We like to believe that everything is going to be OK, that we’ll get through our little setbacks and problems just fine, like we always have. To the extent that the sun will keep rising, yes, that’s true. But it may keep rising even though all the assets you thought you owned in the bank are now part of someone else’s account. When government itself permits or causes theft, real chaos and economic ruin can follow. You might have missed some of the alarming details about the failure of MF Global recently, but you should dig into this story. Regulators appear to have allowed a crooked CEO to steal the cash that people had deposited to pay for his horrific losses in highly leveraged futures trading. Something that is not supposed to happen, that should never happen, simply happened, with tacit government approval. Mysteriously, $630 million has just disappeared right under regulator’s noses. For some, like Ann Barnhardt of Barnhardt Capital Management, the theft is a signal that the rule of law has ended in the United States and that we have become a kleptocracy (warning: she makes an nasty statement toward one party when the problem has become much more bipartisan). Feeling that her clients can no longer be secure in such a system, she’s pulling the plug on her business. Worry about the implications of the MF Global crime? Yawn–I know, it wasn’t your money. This time.
What happened may be a rare exception, limited to the commodities area and not necessarily applicable to whatever investments you may have. But that it could happen at all is quite unsettling.
Even if the electronic digits that represent your economic assets are secure, even if your cash balances remain untouched and not locked up by regulators or simply swiped, we also face the burden of devastating national debt, now $15 trillion worth plus obligations far beyond that. We’ll be footing some of the bill for Europe and facing unpredictable consequences of their horrific debt. The US and Euro governments are stuck in a paradigm of printing money to solve our problems (and subsidizing big banks with artificially low interest rates that further transfers wealth away from citizens who pay them interest on the treasuries they buy with the money they borrow from us for almost free). This cannot go on without consequences, including the ongoing erosion of the dollar. It has lost over 95% of its value since the Federal Reserve began taking charge of our money supply to “protect” us. Adding trillions more to the effective money supply will inevitably erode the value of the dollar in the future–a form of theft, of redistributing your wealth into the hands of the Government, Inc. and their pals.
So is this a time to panic and fall into boundless despair? No, not at all. That doesn’t come for a few weeks yet. But this is a time to avoid unnecessary debt, to become more frugal, to build up your food storage, to diversify, to maintain some cash reserves (some precious metals might help one day–a few handfuls of silver coins, for example), to have some fuel, water, and clothing on hand, and to make sure you have 72-hour kits in case of emergency. Be prepared–that’s all I’m saying, really. Recognize that we live in perilous times where what we take for granted, like the rule of law and property rights, might not apply when you need it. I hope everything will be OK and that we’ll get our debt under control without serious trouble, just like Greece has–wait, I mean Italy, no, Spain, uh, Zambia? Help me out, it’s on the tip of my tongue–what was the name of that country that had been cranking out new money like we are and then managed to reduce their debt and fix everything smoothly without serious social and economic trouble? Utopia? Atlantis? Disneyland? Mental block, sorry.
Government corruption waxes and wanes but is as old as government itself. It is an ever-present danger and we should always be vigilant to detect it and punish it. What struck me in this post was Jeff's concern with "all the assets you thought you owned," which reminded me that Mormons are indeed not Christians. Of course, I define Christians quite narrowly as people who believe as Jesus did, even to sharing His belief in the imminence of cosmic judgement and thus sharing also His utter lack of concern with things like assets stashed away for the future.
To be fair, I should add that this doesn't apply only to Mormons. Also "not Christian" are all those Baptists, Catholics, and others who call themselves Christians but are in fact just bourgeois moderns, who like to wrap themselves in the snuggly mantle of ancient authority but who would no sooner live a genuinely Christlike life than they would cash out their 401-Ks and give the money to the poor.
— Eveningsun
It's interesting how some people can take any post and turn it into an attack on people for their religious beliefs.
That's sad.
"Of course, I define Christians quite narrowly as people who believe as Jesus did"
There is no way to address such a statement, in the context given, without some really harsh words, so I'll pass this time.
Excellent points, Jeff. Lots to ponder.
One comment that I keep seeing about what is happening in Europe is that the heavily indebted countries are losing their "sovereignty". In some cases this is painfully obvious, the prime minister of Greece was forced to resign because of pressure from the rest of the Eurozone. They have not been able to make any of their own decisions for more than a year. The people in Spain are saying that the coming election will be irrelevant because it does not matter who wins all legislation will come from Brussels (or Berlin) and not Madrid.
We can see what happens when countries (and individuals) have too much debt, they no longer have the ability to act for themselves. All their decisions are made for them by others. If we were to put this in religious terms then we would say that they have been put into captivity. This reminds me of the captivity of the people of Zeniff and of Alma. We have been warned about the consequences of sin (covetousness, greed, dishonesty etc.) by both modern and ancient prophets. Perhaps we should listen.
Quantumleap42, I'd say there are two forms of "captivity" here: first, the captivity of excessive debt, and second the captivity of EU membership. When you're simply in debt (but not a member of the EU), your creditors make a lot of your decisions for you. But when you're also in the EU, the EU leadership is also making decisions for you. You're in a double bind. If the EU survives the present crisis, one would hope member nations learn to be more careful in the future.
I want to say also that there are so many common-sense pragmatic reasons to avoid excessive debt that I don't see the need for citing the Book of Mormon about it. It's a bit like telling someone, "Don't jump off that cliff, because, as it says in Second Nephi…." I just don't see the need for that second bit.
Maybe the reason people are always tempted to cite scripture in this sort of situation has something to do (as I noted above in what PapaD quite unfairly characterized as an "attack") with the pleasure of wrapping oneself up in the snuggly mantle of ancient authority. Maybe it's because, for a lot of people, common sense is not reason enough but must be backed up by scripture. But why wouldn't common sense be enough?
— Eveningsun
"in what PapaD quite unfairly characterized as an 'attack'"
*sigh*
Back to discussing the actual post, itself . . .
I have said for a long time that there are two main problems with debt outside that which is necessary to live in out modern world – and the necessary is FAR less than most assume:
1) Every penny someone spends on debt payments is a penny that can't be spent on other things – and I mean that especially with regard to charitable help for those who are in need.
2) Interest paid enriches those who already are rich, ultimately, with exorbitant rates keeping those who are poor in perpetual poverty. At the extremes, it constitutes "grinding the faces of the poor" – and the best example of this today are paycheck advance businesses and credit cards that jump interest rates significantly for even one late payment (or based on a formula that increases rates for things like "likelihood to default" even with no late payments at all). It's been a tool of the rich for centuries, but it's just not as obvious to everyone as it used to be – largely because it's become so ingrained in our culture that many people actually see it as unavoidable and even good.
Quite right, PapaD. Personally, I rather like the biblical idea of a periodic jubilee year in which all debts are forgiven. Of course, that would wreak havoc with the modern economy, and creditors would scream their heads off about the injustice of a jubilee, which just goes to show how far we moderns have come from the morality of biblical times.