Point of View Outlook May 2019

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May 2019

3 Inflation and Chuck E. Cheese

In his book, Godonomics, Chad Hovind finds engaging ways to illustrate economic facts. In his book and on Point of View he answered questions like: What would God say to Karl Marx about America?...

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Government Debt

The Federal government has been going further and further into debt each year. The current national debt figures exceed $22 trillion. Put another way, that amount exceeds the GDP for the...

8 Personal Debt

Not only is America in debt, but Americans are also in debt because of choices they have made about consumer goods, lifestyle choices, and educational opportunities.

Debt isn’t necessarily wrong, but...

12 Saving America

The amount of debt being carried by the American people and our government is very concerning. But the other side of the coin, the amount Americans hold in their savings accounts, may actually...

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© chuckecheese.com

INFLATION AND CHUCK E. CHEESE — KERBY ANDERSON

In his book, Godonomics, Chad Hovind finds engaging ways to illustrate economic facts. In his book and on Point of View, he answered questions like: What would God say to Karl Marx about America? What would God say to John Maynard Keynes about spending?

In a chapter on the money supply he compared inflation to the experience parents and kids have at Chuck E. Cheese. You and your kids arrive at the arcade restaurant and purchase twenty dollar’s worth of tokens. The kids spend their tokens to play certain games to win tickets. At the end of the adventure, the kids count their tickets and take them to the toy counter to purchase a prize.

Along the way they are thrilled that they have 1,700 points in children’s currency. Their eyes gleam with hopes of trading for some real treasures. The toy counter is stocked with iPods, stuffed animals, and all sorts of prizes they are ready to take home.

But their excitement fades quickly when they realize that it takes 500 points just to purchase a Blow Pop. It takes 1,000 points to earn a Chinese handcuff. The prizes they want require hundreds of thousands of points.

Chad Hovind believes that the way the government prints money is similar to this experience at Chuck E. Cheese. The issuers have tinkered with the value of the tickets (at the arcade) or the value of the dollar (at the government). The dollar has lost as much as 98 percent of its value over the past hundred years. In most cases, the goods and services aren’t really more expensive. It is the dollars in our pockets that have lost so much value.

You can go to a federal government website to see how much your money has been devalued. Use a search engine to find “government inflation calculator.” A car that cost $10,000 in 1980 today would cost nearly $31,000.

This is what happens when we let government tinker with the value of our money. It’s like standing at the toy counter of Chuck E. Cheese.

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G O V E R N M E N T

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GOVERNMENT DEBT — KERBY ANDERSON

The Federal government has been going further and further into debt each year. The current national debt figures exceed $22 trillion. Put another way, that amount exceeds the GDP for the United States.

These concerning facts are the reason that some financial analysts are saying that “a sword of Damocles is hanging over the head of every American” ready to drop when certain economic facts align.

Less than a decade ago, I wrote about the concern that the national debt may reach $20 trillion by the year 2020. You can see that we passed that mark some time ago. I also expressed concern in that column about what would happen when, by year 2020, it would be 90 percent of GDP. Again, we passed that mark before President Trump came into office.

FOREIGN INVESTMENT IN AMERICA

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When our debt load exceeds our annual income, a number of things begin to happen. We can see this in our own lives. Imagine if you have credit card debt larger than your annual income. Think of college students who have a student debt load that vastly exceeds what they will

to know who owns this debt. In the past, we were assured that the national debt wasn’t a big deal since “we owe it to ourselves.” I never thought that comment was very reassuring then. It simply isn’t true now.

The US borrows heavily from foreign countries, especially the Chinese. And this creates the first problem: foreign influence. One former member of Congress put it this way, “Whoever pays the piper gets to call the tune.

Foreign leaders aren’t inclined to whistle ‘Yankee Doodle!’”

This leads to a second problem. These countries are not an infinite source of credit. They have their own economies to deal with and will probably want to put their investments closer to home especially as they look at the current congressional spending spree.

Are we approaching a time when America’s excessive borrowing makes us a bad credit risk? Sometimes the US looks like some of its citizens who have maxed out their credit cards and have nowhere else to turn.

The amount some of these countries hold in American debt is staggering. The US government owes China about $1.1 trillion. Saudi Arabia probably has about $700 billion in assets. A number of years ago they threatened to sell that much off when Barack Obama was president.

be able to make in their current job. Government isn’t as constrained as the typical US citizen, but the government will face problems.

First, America’s large debt load is certain to scare away foreign investors and individuals who would want to finance our debt. Consider this fact: the European Union probably would not even be willing to admit the US into its economic structure with its current debt load.

Now that the US debt exceeds $22 trillion, some of the listeners to the Point of View Radio Talk Show wanted

These countries that have been lending America money may not wish to invest any more in America and might even decide to withdraw their current investments.

In the past, I have warned about the possibility that these foreign investors may simply decide to cash in their Treasury bills and invest them closer to home. If our creditors cut us off, our Treasury securities could reach junk bond status.

E CO N O M I C D E B T B O M B All of these sobering statistics lead to what many economists have called the “economic debt bomb.” Until now the Federal Reserve has kept interest rates low.

When you are paying very low interest rates on a massive amount of national debt, you still can make it work in the federal budget. But as interest rates rise, the cost of servicing the debt also rises.

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G O V E R N M E N T

D E B T

Let’s look at the eight years of the Obama administration to illustrate the point. When President Obama took office in 2009, the national debt was $12.3 trillion (and $7.27 trillion was held by the public). When he left office, the national debt was $20 trillion (with $14 trillion held by the public). Through that whole period, interest rates were very low. Fortunately, the low interest rates kept the skyrocketing debt from being too much of a financial burden on the federal budget.

Now look ahead to 2020. The national debt will be at least $23 trillion with approximately $18 trillion held by the public (according to the Congressional Budget Office). When the interest rate was less than one percent, the cost of servicing the debt (especially for the public) was low. Now that the interest rate is three times higher and headed higher, the cost is obviously much greater.

One Congressional Budget Office scenario for 2020 predicted that over half of all personal income taxes

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would be required just to service the national debt. In fact, the annual debt service would exceed our Social Security obligations.

Economist Paul Samuelson reminds us that the problem facing America can also be found in the world economy, which is estimated to be at a staggering $247 trillion. He also predicts this will grow worse due to an expanding trade war that threatens to squeeze incomes.

The push for more tariffs and trade restrictions will make it harder for borrowers to pay their debts.

GOOD DEBT OR BAD DEBT? In the midst of some of these ominous trends have been some who want to argue that all of this debt isn’t so bad. Back when George W. Bush was president, there was a concern voiced by some in the cabinet that the tax cuts would lead to larger federal deficits and increase the national debt. Allegedly, then Vice-President Dick Cheney replied by saying that “deficits don’t matter.”

Treasury Secretary Steven Mnuchin testifies on ‘The Annual Report of the Financial Stability Oversight Council’ before the House Financial Services Committee in the Rayburn House Office Building on Capitol Hill February 6, 2018 in Washington, DC. - Getty Images

When President Obama was in office, economist Paul Krugman argued in a New York Times column that, “Debt is Good.” Since he has a Noble Prize to his credit, it was easy to believe that settled the discussion. But his tune changed the moment that President Trump took office. Now, he and many Democrat members of Congress, express their concern about deficits and the national debt.

Here’s something that very few political commentators will tell you. When economists like the president in office, the national debt isn’t a big deal. When they dislike the president in office, the national debt is a catastrophe. Sadly the national debt goes up every year whether we have a Republican president or a Democratic president, and whether we have Congress controlled by Republicans or Democrats.

In his column, Krugman argued that, “issuing debt is a way to pay for useful things, and we should do more of that when the price is right. The United States suffers obvious deficiencies in roads, rails, water systems and

more; meanwhile, the federal government can borrow at historically low interest rates.”

That might have been true when we had low interest rates, but that is no longer the case. But here is the bigger problem. The money wasn’t being used to build infrastructure. In most cases the government was borrowing money in order to fund social services. The debt was going to current consumption.

Think of debt in your personal life. Borrowing money to fix up your house is probably a good investment, especially if you can someday sell your house for more money. Borrowing to fix up your house is very different from borrowing money by using your credit card so that you can go to fancy restaurants and buy expensive meals.

Running the country further into debt and borrowing more and more money is not a good prescription for the future. Unfortunately, politicians in both parties seem to be ignoring the obvious economic problems ahead.

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PERSONAL DEBT — KERBY ANDERSON —

“THE RICH RULE OVER THE POOR, AND THE BORROWER IS A SERVANT TO THE LENDER.” — P sal m 22:7

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Not only is America in debt, but Americans are also in debt because of choices they have made about consumer goods, lifestyle choices, and educational opportunities. Debt isn’t necessarily wrong, but the level of personal indebtedness today is of concern.

You cannot overemphasize the impact of debt on our society. It is the leading cause for divorce and also the reason for many more troubled marriages. It is also one of the causes for depression as well as suicide.

The level of personal indebtedness in this country is a relatively recent phenomenon. Less than a century ago, credit cards were unknown and car loans were a rarity.

Home mortgages were unusual too and only really began to proliferate when GIs returning from the war wanted to get starter homes.

If you were to bring a person from the middle of the 20th century to our world and tell them about all the debts the typical American has, they would shake their heads. They would not even believe the number of people with credit card debt or the number of people who finance a car loan. And they would be even more amazed that banks and the government would lend tens of thousands of dollars to college students before they were even able to prove that they could earn enough to pay back the loans promptly.

THE BIBLE AND DEBT The Bible has quite a bit to say about money, and a significant part of what it has to say are financial warnings concerning debt. Proverbs 22:7 says, “The rich rule over the poor, and the borrower is a servant to the lender.” When you borrow money and put yourself in debt, you put yourself in a situation where the lender has significant influence over you.

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Many other verses in the Proverbs also warn about the potential danger of taking on debt, especially another person’s debt (Proverbs 17:18; 22:26-27; 27:13). While this does not mean that we can never be in debt, it does warn us about its dangers.

Some have taught that Christians should never go into debt. The basis for that teaching is usually the passage in Romans 13:8 that says, “Owe nothing to anyone.” Although some have argued that this verse prohibits debt, the passage needs to be seen in context. This passage is not a specific teaching about debt but rather a summary of our duty as Christians to governmental authority.

We should also make a distinction between debt and credit. Often in our society, the two words are used interchangeably. To put it simply, debt is something that is owed. The Bible does not prohibit borrowing, but it certainly does not recommend it. Credit is the establishment of mutual trust between a lender and borrower.

Let us also acknowledge that some people end up in debt due to no fault of their own. They may have been swindled in a business. They may have made a good faith attempt to start a business but were unsuccessful because their competitors or suppliers cheated them. They

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may have been unfairly sued in court. The reasons are many.

CREDIT CARD DEBT Americans who criticize the federal government for going in debt may want to look at their own credit card statements. Economists recently announced that credit card debt for Americans has now reached a height of $1 trillion.

Matt Schultz is a senior industry analyst at CreditCards.com. He says, “This record should serve as a wake-up call to Americans to focus on their credit card debt.” He adds, “Even if you feel your debt is manageable right now, know that you could be one unexpected emergency away from real trouble.”

Using credit cards to purchase items isn’t a problem if you pay off the credit card each month. Many Americans are not doing that. More than half (55%) don’t regularly pay off their credit card in full. Of even greater concern is that 37 million credit card accounts had a 90+ day delinquency mark added to their credit report last quarter. That’s an increase of about two million from two years ago.

Notice that credit card debt is increasing while the incomes for most Americans is also increasing. Economists point out that while incomes are growing, some costs are growing faster. Some of these fast growing costs are items like medical costs and food purchased away from home.

As you might imagine, credit card debt increases by age. The average credit card debt for Americans under age 35 is $5,808, while it peaks at ages 45 to 54 to $9,096. And another item of interest is the fact that older Americans (over the age of 60) are holding a significant portion of credit card debt. They account for about 30 percent of the total.

The average college student will graduate with $37,172 in student loan debt.

The average American consumer owns three credit cards. And the average interest Americans pay on their credit cards is 16.46% OT H E R D E B T S Auto loan debt is another concern for Americans. Auto loans are especially burdensome because they are at higher interest loan rates. The total active loan amount across all lenders nationwide was more than $1 trillion.

Nearly half (44%) of US adults rely on a loan to finance a vehicle. Back in 2003, about 74 million Americans had auto loans. Now more than 108 million have auto loans.

Sadly, millions of auto loans are in delinquency. Also of concern is the fact that many Americans are taking out loans with repayment periods longer than the time they plan to own the vehicle.

Student loan debt is the second highest consumer debt category, only behind mortgage debt. There are more than 44 million borrowers who collectively owe $1.5 trillion in student loan debt in the US alone. The average college student will graduate with $37,172 in student loan debt.

The student loan delinquency rate (or default rate) is more than ten percent. New delinquent balances (more than 30 days) is $32.6 million.

T H E CO N S E Q U E N C E S O F D E B T As we mentioned, the Bible describes debt as a form of slavery.

Proverbs 22:7 says, “The rich rule over the poor, and the borrower is a servant to the lender.” The borrower becomes a servant (or slave) to the person who is the lender.

Today we may not be in actual slavery from debt, but it may feel like it sometimes. We have all heard the phrase: “I owe, I owe, so it’s off to work I go.” If you are deep in debt you know that there may be very few days off and perhaps no vacation.

One of the consequences of debt is we often deny reality. In order to realistically deal with the debt in our lives we need to get rid of some of the silly ideas running around in our heads. For example, you are NOT going to win the lottery. Your debt problem is NOT going to go away if you just ignore it.

Sometimes debt even leads to dishonesty. Psalm 37:21 says, “The wicked borrows and does not pay back.” We should repay our debts.

A final consequence of debt is stress. When we owe more than we can pay, we worry and feel a heavy load of stress that wouldn’t exist if we lived debt free.

Reduce stress and bring freedom back into your life. Implement a plan to get out of debt.

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S A V I N G

A M E R I C A — WARREN KELLEY —

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RESTORING CHRIST IN THE CULTURE

Volume 15 • May 2019 President / Publisher

Warren Kelley Contributing Writers

Kerby Anderson Warren Kelley OUTLOOK is published by Point of View Ministries (the parent company of Point of View Radio Talk Show), a non-profit ministry recognized for tax-deductible giving by the IRS. Copyright © 2019 Point of View Ministries.

All rights reserved.

The amount of debt being carried by the American people and our government is very concerning. But on the other side of the coin, the amount Americans hold in their savings accounts, may actually look worse. According to a May 2018 study by the Federal Reserve Board, 40 percent of American adults say they could not cover an unexpected expense of $400 without selling something or borrowing money. Because of the improving economy, that number is actually better than it was. Just a few years ago, in 2013, half of all adults were part of that group.

Even when you add in retirement savings, the picture doesn’t look much better. Half of all American households have less than $11,700 in total savings, including retirement savings. Young adult households who have not started to save for retirement may lower the average, but a high percentage of older households have little or nothing put away for retirement. A recent study by the Government Accounting Office found that 29 percent of households 55 and over have no retirement savings nor a pension.

Those individuals will be forced to rely totally on Social Security and/or government and charitable programs for their support during retirement. That may prove to be more of a challenge than they expect. The average Social Security benefit in 2019 is $1,461 per month or $17,532 per year.

Most Americans know they don’t have their financial house in order, but they carry it as a secret shame. No one wants to admit they have maxed out their credit cards and are struggling to keep their head above water. If you will pardon the mixed metaphor, you can’t keep your head above water by burying it in the sand. There are many great resources available from Christian authors and financial ministries. Many churches now offer free or very low-cost courses in personal finance. Start looking for the one that fits your needs and get started as soon as possible. When you procrastinate in dealing with your financial problems, time is not your friend.

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