Homeschool News & Views

Issue 87, September 21, 2008

From Homeschool Helpers

In association with Pass It On Ministries

By Dan L. White

Listen to this article.

Alan Greenspan, former head of the Fed, said that the United States is in a once in a century financial crisis. This is the worst economy he’s ever seen.

Multiple giant financial institutions have fallen, in spite of the Federal Reserve’s extreme efforts. Now the Fed is trying to save not just an institution here and there, but the whole US financial system.

How did this happen?

Greed and debt.

Because of greed, people and institutions took on more and more debt. Finally the pyramid collapsed.

In the stock market crash of 1929, the greed and debt mostly involved the stock market.

About.com says, “During the Crash of 1929 preceeding the Great Depression, maintenance requirements were only 10% of the amount of the margin loan; brokerage firms, in other words, would loan $9 for every $1 an investor had deposited. If an investor wanted to purchase $10,000 worth of stock, he would only be required to deposit $1,000 upfront. This wasn't a problem until the market crashed, causing stock prices to fall. When brokers made their margin calls, they found that no one could repay them since most of their customers' wealth was in the stock market. Thus, the brokers sold the stock to pay back the margin loans. This created a cycle until eventually prices were battered down and the entire market demolished. It also resulted in the suspension of margin trading for many years.”

That was paying for prosperity on credit, or debt. When someone bought stock in a company for 10% down, that meant he had a debt of 90%. That also meant that nine times more money was trying to buy the stock than was actually available, which drove the prices higher.

Most fell into the trap of thinking that prices could not fall. When they did reach unsustainable levels and began to fall, the brokers called for the stock owners to put up more money besides the original 10%. In other words, they foreclosed on the stock owners. But the stock buyers were so in debt, betting on a sure thing, that they didn’t have any more money to put into the stocks. So the brokers had to sell, which drove down the prices, which caused still more margin calls, which caused the brokers to have to sell more, which drove down the price still more. Etc.

The same thing has now happened in real estate, except worse.

First of all, there was the absurd idea that real estate prices always go up. They’re not making any more land, you know.

People were buying real estate with nothing down. In the 1920’s people bought stocks with 10% down and 90% debt. People bought real estate with nothing down and 100% debt. Sometimes people even had loans where they did not even have to make the normal monthly interest payments, so that the buyer was actually going farther in debt with every passing month. It was figured that the difference would be made up in a few years when the buyer sold the real estate. At a higher price, of course.

Furthermore, people who bought real estate with 100% leverage often lied about their ability to pay for it.

This extreme use of debt drove up the price of real estate far beyond its normal economic value. We live in the Ozarks where the land is pretty but not very productive. The recent rise in land prices means that the land here will not pay for itself in cows or hay, which it ultimately has to do.

Finally this pyramid scheme had to falter. Some people could not keep up with their payments. Just like the brokers making a margin call, the banks foreclosed on some properties. Those properties then went on the market, forcing prices down and hurting new construction and earnings, which gave people still less money to make payments with. That caused more foreclosures, which put more properties on the market, which drove down prices still more. Etc.

This mountain of debt was caused by greed. Americans were not just looking for a place to live – they were looking to live it up. The average size of a new house went up by about 600 square feet in the last few years, while the average number of people living in a home decreased. My wife has some retired relatives who are building a new house. The two of them, former government workers with government pensions, will be crowded into 4,000 square feet. In their old age, they will be lucky to dodder around two or three of those multiple rooms.

A number of Americans bought second homes or vacation homes or condos. Not only could they use them part time, but they were a good investment, you know.

Greed and debt.

We were reading Leviticus 23 through 25 in a Bible study discussion, about God’s lifestyle for His people Israel, designed to avoid greed and debt. An Israelite was not to waste his life on accumulating physical wealth.

In chapter 23, the festivals are given, starting with the weekly Sabbath. They took off the seventh day from work to spend with God. The festivals involved 19 days a year, plus travel and preparation time. That is about a month out of every year, taken out to worship God.

Besides that, they were to not grow crops on the sabbath year. That involved almost everyone in the nation, since almost everyone got their living from the land. So during the land sabbath, basically everyone took a year off from work. Have you ever known anyone who took a sabbatical? A sabbatical means to take a year off from work, the word derived apparently from the land sabbath. Sometimes a college professor or such will take a year off from work, usually to do research or write a book, but I have never personally known anyone who took a sabbatical.

Think of that. The whole nation got a year’s paid vacation. It was paid, because God promised them that He would give them enough crops in the sixth year to last for two years, just as He had given enough manna on the sixth day to last through the seventh day.

Also on the sabbath year, loans to the poor were forgiven. Even though a loan to the poor would be forgiven if it couldn’t be paid back, an Israelite was commanded to make that loan.

Deu 15:7-10 World English Bible

(7) If a poor man, one of your brothers, is with you within any of your gates in your land which Yahweh your God gives you, you shall not harden your heart, nor shut your hand from your poor brother;

(8) but you shall surely open your hand to him, and shall surely lend him sufficient for his need in that which he wants.

(9) Beware that there not be a base thought in your heart, saying, The seventh year, the year of release, is at hand; and your eye be evil against your poor brother, and you give him nothing; and he cry to Yahweh against you, and it be sin to you.

(10) You shall surely give him, and your heart shall not be grieved when you give to him; because that for this thing Yahweh your God will bless you in all your work, and in all that you put your hand to.

On top of all that, when you made the loan to a poor brother, you could not charge him interest to make up for that risk of loss.

The exclamation point on this whole lifestyle was that in the fiftieth year, the Yubile or Jubile year, any land that had been sold went back to the original family. There were to be no real estate tycoons in Israel.

The whole point of that system is that God will take care of you. You do not have to waste your life trying to accumulate wealth to sustain you. You have Yahweh Yireh.

Gen 22:7-8

(7) Isaac spoke to Abraham his father, and said, "My father?" He said, "Here I am, my son." He said, "Here is the fire and the wood, but where is the lamb for a burnt offering?"

(8) Abraham said, "God will provide himself the lamb for a burnt offering, my son." So they both went together.

Gen 22:14

(14) Abraham called the name of that place Yahweh (Yireh) Will Provide. As it is said to this day, "On Yahweh's mountain, it will be provided."

It is stunning to consider the difference in the lifestyle that God outlined for the Israelite compared to the way people commonly live today. If you took off every seventh day, festivals three times a year, every seventh year, and a Jubile once in your working life, you would not be able to spend your life’s time on accumulating wealth. But you would accumulate untold spiritual wealth.

When Israel went into the land, Yahweh gave each family their land free and clear. There was no mortgage payment. Further, there were no taxes to pay to the king. Yahweh was their king. They were promised abundance, if they obeyed.

Lev 26:3-5

(3) " 'If you walk in my statutes, and keep my commandments, and do them;

(4) then I will give you your rains in their season, and the land shall yield its increase, and the trees of the field shall yield their fruit.

(5) Your threshing shall reach to the vintage, and the vintage shall reach to the sowing time; and you shall eat your bread to the full, and dwell in your land safely.

Since they were promised that they would have enough themselves, they could always share with someone who had less. They had enough.

They could make a loan to the poor, and then cancel that loan. They had enough.

They could leave the corners of their fields unharvested for the poor like Ruth. They didn’t have to greedily pick up every grain. Boaz had enough.

They could take off every sabbath year, and spend that year thinking about something besides feeding their faces. They had enough.

Laura Ingalls’ mother had a saying: “Enough is plenty, and a feast is no better.”

If you have enough -- and God -- what point is there in spending your whole life just trying to get more?

The current crisis in the United States was caused by greed and debt, not just by the financial institutions, but by almost everyone in the country. At this time of sea change, which will affect all our lives, it is well for Christian families to consider the lifestyle that God laid out. It is enough.