From shutdown to default

I remember the government shutdown of 1995 and the huge uproar it caused among the general public.  I don’t notice much of  that happening today.  The shutdown is not much of a shutdown, with over 80% of the government continuing as usual and the non-esssential offices, while closed, are, well, not essential.

The much bigger issue comes in 10 days when the government reaches the debt ceiling and will have to default on what it owes if Congress doesn’t approve the borrowing of more money.  How do you think that will turn out?  How should it turn out?  After the jump, China and Japan are threatening not to bankroll us anymore if we default. [Read more...]

Debt as a new form of currency

I knew it would only be a matter of time before the newly-ascendant left applied some postmodern linguistic constructivism to make our problems go away.  From Zachary Karabell in the Washington Post:

Debt is simply a new form of currency that is issued, bought, priced and sold like any other currency, [Read more...]

Forgive us our debts

University of Chicago theologian Susan Brooks Thistlethwaite says that when Jesus told us to pray (in some translations) “forgive us our debts as we forgive our debtors,” he was calling for the forgiveness of economic debts.  She also says how Occupy Wall Street is “operationalizing” Jesus’s economic teachings:

The folks who brought you Occupy Wall Street have launched what they call “Rolling Jubilee.” By donating to Rolling Jubilee, individuals can give money to buy up distressed consumer debt that is normally sold to debt collectors for pennies on the dollar. But instead of acting like debt collectors, hounding folks for the full payment, you are giving to cancel the debt, that is, forgive it.

What Jesus taught as a prayer about forgiving debt (Matthew 6:12) has just been operationalized by Occupy.

Through prayer and deed, Jesus pursued an economic plan called the “Jubilee,” as I write in ‘#OccupytheBible: What Jesus Really Said (and Did) About Money and Power,’ my new book on how what Jesus really said about money, and what he did about economic issues in his own time that is just now launching as an e-book, and then in print.

It is critical that American Christians learn that Jesus really meant it when he asked us to pray, “Forgive us our debts as we forgive our debtors.” Conservative Christians would like you to forget that Jesus really meant debt forgiveness. The Religious Right would like you to focus only on specific, individual “sins” like homosexuality (something that Jesus actually never mentions), and ignore that Jesus was really concerned about structured economic inequality in his own time. To Jesus, systemic economic inequality was the “Kingdom of Caesar,” not the “Kingdom of God.”

Jesus starts his ministry (Luke 4:16-19) by standing up in the synagogue and reading from one of the key texts of his Hebrew scriptures on the biblical “Jubilee.” The biblical “Jubilee” is a time of debt forgiveness.

Rolling Jubilee is exactly what Jesus was talking about and doing something about throughout his whole ministry.

According to the Jewish tradition in which Jesus stands, and from which he preached, the Jubilee is a special year of “liberty” where every 50 years there was a kind of “reboot” of Jewish economics and social relations. As described in Leviticus, “And you shall hallow the fiftieth year and you shall proclaim liberty throughout the land to all its inhabitants. It shall be a jubilee for you; you shall return every one of you to your property and every one of you to your family” (25:10). This 50th-year (or 49th-year) Jubilee followed seven “sabbatical cycles” where every seven years male slaves were released without debt, and land was allowed to lie fallow.

But that was millennia ago, some will say. How could the biblical Jubilee possibly be an economic plan in today’s economy, one that is far more complicated than in the first century CE?

It has never been more important to raise the issue of debt forgiveness and do something about it in concrete ways than it is in 21st century America.

via Rev. Dr. Susan Brooks Thistlethwaite: ‘Forgive Us Our Debts’: Occupy Operationalizes the Lord’s Prayer on Debt.

This reminds me of a preacher I heard, back in my pre-Lutheran days when I belonged to a liberal denomination, who taught that because Jesus proclaimed “release to the captives,” we need to empty our prisons by letting all of the inmates go free, a gesture of grace that would surely reform them all.

What do you think of Dr. Thistlewhite’s exegesis?  If you disagree, how would you answer her?   OR, does she have a valid point somewhere in her teaching?  What is the principle behind the Jubilee year?

Fighting debt problems by encouraging debt

The usually liberal Fareed Zakaria on the incoherence of the government’s attempts to fix the economy:

Washington is asking consumers to stop saving and start spending, while the government issues more debt and the Fed lowers rates – all measures designed to increase debt. In other words, we are fighting a crisis caused by excessive debt by encouraging excessive debt. Is that really the best way to get growth?

The investment manager and guru Jeremy Grantham says no. In his latest quarterly letter, he points out that over the last generation, American government has created conditions that encouraged everyone to keep accumulating debt. But far from getting a bang, the country’s growth rate actually slowed down over that period. In fact, the effect of all this government-subsidized debt has been deeply destructive. It created asset bubbles in stocks, bonds, commodities and more. One stunning chart in his letter underscores the extent to which the Fed created what he calls “the first housing bubble in history,” meaning the first time that U.S. house prices rose dramatically across the board – and are now falling just as dramatically.

Debt-fueled growth “is, in an important sense, not the real world,” Grantham writes. “In the real world, growth depends on real factors: the quality and quantity of education, work ethic, population profile, the quality and quantity of existing plant and equipment, business organization, the quality of public leadership (especially from the Fed in the U.S.), and the quality (not quantity) of existing regulations and the degree of enforcement.”

This strikes me as the common-sense view of economics. We can push and pull fiscal and monetary policy all we want, but long-term growth depends on these broader and deeper factors.

via Fareed Zakaria – Economic policy needs common sense, not Fed magic, for long-term growth.

Consumers are acting too responsibly

Why is the economy faltering?  Robert Samuelson blames consumers, who are saving more and paying down their debt instead of spending:

“Consumers are deleveraging (reducing debt) . . . and rebuilding saving faster than expected,” writes economist Richard Berner of Morgan Stanley. In 2007, the personal savings rate (the share of after-tax income devoted to saving) was 2 percent. Now it’s about 6 percent. Temporarily, this hurts buying. Declines in consumer spending in 2008 and 2009 were the first back-to-back annual drops since the 1930s. Since World War II, annual consumption spending had fallen only twice (1974 and 1980). . . .

Household debt has already dropped $800 billion from its peak of $11.7 trillion, estimates economist Mark Zandi of Moody’s Analytics. The Federal Reserve reports that debt service — the share of income going to interest and principal payment — has decreased from almost 14 percent in early 2008 to about 12.5 percent, the lowest since 2000.

via Robert J. Samuelson – The saving mentality is hurting the economy’s recovery.

And what has economists in a panic is the prospect of people continuing these good habits!


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