Friday, February 27, 2009

I'm No Economist But...

One afternoon several months ago, Nicol and I were sitting on the couch doing some casual reading. I didn't know the title of her book but, as she often does, she was sharing blurbs from it as she whizzed thru it, paragraph after paragraph, page after page. She's one of those annoying people who can sit down with a book, thumb thru it in about an hour or two and know with a great deal of accuracy the author's basic premise, as well as most of the significant details therein. And if you ask her about it, like, 3 years later, she STILL remembers many of the details. Honestly... it bugs me... a lot. No one should be that smart. [ :-) ] 

Anyway, that's not my point. As she was spouting off fact after fact and statement after statement, I asked her what she was reading. "It's called 'The Coming Economic Earthquake,'" she replied. So, naturally, I asked her who wrote it and she told me, "Larry Burkett, in 1991." "1991?! What?!" I asked/blurted out. "Yes." 

The reason 1991 was so surprising is that what she was reading to me was so eerily similar to, if not exactly like, what was happening at that time with our economy. Remember last fall, when The Fed was lowering interest rates, Wall Street was sinking like a lead balloon, banks for falling apart at their financial seams, and the once-booming housing market was plummeting? I could not believe that this writer, Larry Burkett, had so accurately described the economic conditions that we were witnessing at that time, and have continued to experience to this day... and I'm not sure we realize just how significant this "recession" or "downturn" in our economy really is.    

Below are links to a two-part interview conducted in 1992 by James Dobson (founder and chairman of Focus on the Family) with Larry Burkett (deceased; was co-founder and chairman of Crown Financial Ministries). It was re-aired by Focus in October 2008. 

These interviews are well worth the 55 minutes or so that it will take to listen to them in their entirety. I would highly recommend that you check 'em out. Much to my regret, I am finding just how undereducated I am on this issue, and I am convinced that we can't ignore it, nor can we avoid educating ourselves on it because the problem is so significant that it simply will not allow itself to be ignored for much longer. It has crept up on us and it has the potential to destroy our country as we have known it. This is serious and this country's sovereignty may hang in the balance. As extreme as all that may sound, I do not believe that it is extreme at all... I believe that it's an accurate description of what we are facing. To be sure, only history will be able to inform us as to the severity of all this, and I'm definitely not making any predictions here, but we had better wake up, educate ourselves, and get as prepared as possible for what lies ahead.


Why is this such a big deal? I'm no economist, and I'm certainly not a finance guru, but I can do basic math, and it seems to me that we are in a heap of trouble when it comes to our future... both economically and generally speaking. I don't consider myself an alarmist by any stretch of the imagination, and I don't think those who know me do either, but I believe that we are in for some drastically difficult times... and given the fact that I've never wanted for ANYTHING in my life, I don't have the first idea what "drastically difficult times" means... and that concerns me.

Here are a few statistics that Burkett shared during his interviews with Dobson...
  • in 1980, the federal government owed $700-800 billion
  • in 1990, the federal government owed $3 trillion
  • in 1992, the federal government owed $4 trillion
  • today, the federal government owes in excess of $10 trillion, possibly as much as $12 trillion 
The point? The federal deficit has grown exponentially over the past 3 decades. And this year alone it is projected that we will have a federal budget shortfall of $1.75 trillion. 

Let me put that in perspective for you... and I think the figure below is correct... you can play with the numbers at bankrate.com... it's very possible that I've got this messed up somehow, so please let me know and I will stand corrected... these kinds of numbers are surely not what I'm accustomed to dealing with... whatever the case, this stuff is mind-boggling.
  • If you amortize $1.75 trillion (the projected federal budget deficit for this year) over 1,000 years (that's right, a thousand years!) at 1% interest (good luck finding that rate; having said that, I have no idea what our government gets for interest rates on its loans) you'll be paying $1,458,399,820.88 per month. Basically, that's $1.5 billion every single month. Told you this is scary stuff. And keep in mind that $1.75 trillion only represents the coming year. We've got another $10-12 trillion on the books. Think about that for a minute.  
But here's where it goes from bad to worse: we can't afford our current payments and yet we continue to borrow more. Check out these stats from Burkett, which reflect the percentage of taxes paid by every taxpayer that went toward paying the interest on the national debt (interest only, not principal). 
  • 1991 = 40%
  • 1995 = 75%
  • 2000 = 100% (as projected by Burkett; he passed in 2003)
The bottom line? As Burkett said in 1992, "we are creeping our way to the point where our government can't borrow enough money to pay our bills." 

Here's where we are today folks... borrowing money to pay the interest on our debt... and eventually we won't even be able to borrow enough to pay the people we owe... interest or otherwise. Not a good situation.

All this is precisely why all this talk of "stimulus" and "bailouts" should concern us all. Borrowing more on top of what we already owe is a recipe for disaster. Again, I'm no economist, but if someone owed $8,000 in credit card debt (which, incidentally, is the national average) who in their right mind would encourage that individual to borrow another $1,000 with the hope that it would somehow, in the long run, help them to pay off that debt? No one would do that because it wouldn't work! And yet, fundamentally, that is exactly what our government is doing.

Burkett was onto something 17 years ago. His book was a NY Times Best Seller. Many took note of his warnings, but many others dismissed his work out of hand, calling him an alarmist. It's understandable how people could dismiss and ignore what he had to say back then - 1991 - but now, in 2009, with everything that has taken place in the past 6 months and with the projected indefinite continued downturn in the economy, we had better at least give this serious consideration. Hopefully it's not too late.

The concept driving my concern is both biblical and practical... the borrower is servant to the lender. (Proverbs 22:7) Whereas the U.S. was once the lender, we have become the borrower, and that is dangerous territory. In many ways, we are at the mercy of those to whom we owe this money.  

Let me try to end this on a positive note with a much-needed dose of biblical perspective...

Give your entire attention to what God is doing right now, and don't get worked up about what may or may not happen tomorrow. God will help you deal with whatever hard things come up when the time comes. (Matthew 6:34, The Message)







11 comments:

Scuba Girl said...

Greg:
I do have a degree in Economics and it is much worse than you have been led to believe. What is reported as "the deficit" is only what Congress has been spending beyond what they have been taking in taxes. This part of deficit spending is easily understood; Congressmen run for re-election every two years and their constituents all want them to "bring home the bacon" but no one wants their taxes to go up. So, Congress spends what they want but is not willing to pay for it now. The REAL problem will be hitting in the next few years. The government is reporting to the public a $13 Trillion deficit but, what they never mention is that there is no Social Security Trust Fund; they spent it. When you add in the obligations of the U.S. Treasury to retiring baby boomers, the real deficit is closer to $60 Trillion. And you are correct, we cannot afford a $13 Trillion deficit.
Richard Pool, Shreveport, LA

Blameless said...

God is in Heaven, and all is right with the world.

Matthew 6:25-32 Brings me great comfort in times like this.

RZ said...

I don't pay too much attention to the economy. Yes, I know I should but I just can't. But, I completely agree with the fact that we (all) just keep getting in deeper and deeper. When I had a creditor call me--at work--because my credit card payment may have been a little behind...I asked the person on the phone where and how I should get the money he was asking me for, because I simply didn't have it. He said 'can't you borrow some? get a loan? etc' I told him obviously that was what got me into trouble in the 1st place so no, I would not borrow more money to give him his. I also agree that it's scary to think how much we owe and to whom we owe it.

Becca Sports said...

Greg-
Good post. I look forward to listening to the links. I'm not an economist, but Wayne and I are accountants and the article below explains the problem I have with Pres. Obama's "tax solution". Taxing the "rich" to pay for all of the new programs (including nationalized health care that we really can't afford) and supposedly decreasing the deficit. You might find it an interesting read.

http://online.wsj.com/article/SB123561551065378405.html

A-and-Z's Mom said...

I agree.
While some deficit is good, I shudder when I read what our politicians are up to!!! Yikes.

A-and-Z's Mom said...

Actually, I wrote about this recently. Of course, this is a joke, but... http://mraidanandmszoe.blogspot.com/2009/02/new-friend.html

Monica said...

Greg,I try not to get worried about the things I don't understand..I do understand alittle of what you are saying..My question,if you or anyone has the answer,Who are we borrowing from?That concerns me..I more I read my daily bible,the better I see How God intended us to live according to his decrees and laws...

Just an ordinary woman said...

Greg,

This has nothing to do with Economics..Its about Luke.

I started following "Bring the rain" last year, and I was reading it daily when Luke went to heaven. I remember reading the post and how it broke my heart that one family could suffer so much pain in such a short space of time.

I came across your blog from a completely different source this evening, and all the while that I was reading about your Luke passing, it kept ringing bells in my head, but I couldn't place it.

So I went back to the beginning and read your whole blog.. and then I saw your post about Audrey Caroline.. and then the pieces fell into place.

I know I didn't write anything about it last year and I should have - but I want you to know how very sorry I am for your loss..there is no greater loss than that of a child.

I cannot even imagine how difficult it must continue to be for you.

I really studied Luke's pictures tonight and his sweet little face has really touched something in me.. it made me get up from my pc and go to both my boys rooms and give them an extra kiss and a love and just to check that they are okay..

Finding your blog tonight has reminded me that nothing is certain and that it can change in an instant.. I believe I was meant to find your blog tonight.. to ensure that I focus on what is really important, and not the fact that my kitchen is messy or the toys are still lying all over the house..thank you for reminding me.

May your heart find some peace with this terrible thing.

Kerren
South Africa

~ shi ~ said...

I remember Larry talking about this, my husband and I loved to listen to him! Thanks for this post. Shi~

Julie said...

Logos Bible Software is offering a 4-book Larry Burkett Collection on pre-order. Thought you’d like to know!

Larry Burkett Collection (4 Vols.)

Bethany said...

followed a link from Angie's blog, and wanted to comment.

If you or Nicol are readers, please try Atlas Shrugged, by Ayn Rand. It was written over 50 years ago and is scarily accurate!