Finance: The end is nigh

By now you are probably fed up with the constant stream of negative financial news that is dominating our news media. Every day some new statistic is paraded as further evidence that the ‘end is nigh’.  The western world has enjoyed a rather large debt-fuelled party over the past few years and the ‘morning after’ has finally arrived. The bad news is that the hang-over is likely to persist for some time.

While global sharemarkets have experienced significant falls over the past year, many New Zealanders are yet to feel the impact of the global financial crisis. However, it won’t be long. Retail sales were down over the pre-Christmas period, prices of imported goods will rise as retailers sell the goods that they purchased from overseas when exchange rates were higher, and unemployment will rise as firms struggle to remain profitable. While some may be celebrating the fall in interest rates and racing out to buy a house – it is important to remember that interest rates are at record lows for a reason – the Reserve Bank expects the economy to get much worse.
 
It seems somewhat ironic that the solution of governments the world over is to lower interest rates to encourage more spending and more borrowing, the very behaviour that got Western nations into so much trouble in the first place. The risk is that the world ends up in the ‘Japan’ scenario: a decade where almost zero interest rates have produced very little in the way of economic growth.
How might Christians respond to such world-shaking events? There are many inter-related issues to be examined, but I’ve chosen to concentrate on debt in this post.
 
Twenty-four percent of employed New Zealanders now work more than 50 hours per week in order to fund their increasingly debt-laden lifestyles. Credit card debt is now over $5 billion – that's $1,200 for every woman, man and child in New Zealand. Total personal debt, including mortgages, credit cards and hire purchase, is approximately $175 billion (that’s over $41,000 per person)!
 
The New Zealand dream of home ownership has turned into a nightmare for many. Desperate to “get on the property ladder” they believed the real estate agents and the mortgage brokers who told them that property only went up in price in New Zealand. Now a significant number of New Zealanders face losing their homes in mortgagee sales. 
 
Financial theory would say that debt is okay, provided you are using it to buy an asset that will increase in value over time. Furthermore, the less risky the asset or business you are buying, the more debt you should use to purchase it.
 
Do we as Christians wrestle with scriptures’ strong teaching against indebtedness?  Charging interest is seen by scripture as taking advantage of someone in need. The people of God were forbidden from charging one another interest (Deut 23:19-20) although charging interest to foreigners was permitted. However, violation of these laws was common and frequently derided by the prophets (Ezek 18:8, Neh 5:6-13). Romans 13:8 exhorts Christians to owe nothing except the debt of love.
 
Over the course of history, Christian views on debt have tended to moderate. As the global economy has developed, so has Christian doctrine.[1] During the first four hundred years of recorded church history, lending to the poor was seen as a good thing, but charging any interest was rejected as unacceptable. As the Council of Nicea (325 AD) banned clergy from lending money with interest, it is clear that at least some were.[2] During the Crusades nobles sought large loans to underwrite military expeditions. Christians were prohibited from charging interest and were therefore unwilling to lend the large sums required, so these nobles turned to Jewish lenders who took advantage of their ability to lend to foreigners and charged interest (despite Thomas Aquinas arguing that the permission granted in Deuteronomy had lapsed). Towards the end of the Middle Ages, the demand for capital from rapidly expanding industry resulted in the church changing its position. John Calvin argued that scripture prohibited only “biting usury, usury taken from the defenceless poor” and the “usury is not now unlawful, except in so far as it contravenes equity and brotherly union”.[3]
 
So what might a Christian perspective be today? Should Christians borrow money at all? Scripture seems to have a fairly negative view of borrowing, yet over the course of church history attitudes to debt seem to have been moderating. First some suggestions from a “reasonable worldly financial perspective” and then some questions you might respond to below.
 
From a financial perspective it makes sense to borrow money only for those things that are likely to increase in value over time. A house is a good example, a car is not. It may be okay to have limited borrowing in some businesses, but makes no financial sense to borrow for items that are consumed. Credit cards, if used at all, should be paid off in full every month.  Clearly borrowing should be limited to what can be repaid. While interest rates are low in NZ terms now (around 6.5% for a five year mortgage) they may not always be this way. It makes no sense to buy the most expensive house one can afford at current interest rates only to find that the payments are not sustainable when interest rates have returned to more ‘normal’ levels.
 
Do you agree that the Bible has a negative view of debt? If so are the above “reasonable” suggestions consistent with scripture?
 
As Proverbs puts it “the borrower is the slave of the lender” (Prov 22:7). Are Christians who borrow money slaves to banks and finance companies?
 
Are there opportunities for Christians with financial resources to lend them to those in need in a way that honours Christ and breaks the bonds of financial slavery?
 
How might we do business in a Christian manner, such that we are slaves to Christ rather than slaves to debt?
 
Do Christians bring dishonour to the name of Christ if they are unable to meet their financial obligations?
 
Is borrowing or lending money consistent with biblical teaching? Should Christians be borrowing to buy houses? Should Christians be borrowing money to fund their businesses?

[1] Surely this is the task of the theologian, applying Biblical truth to the contemporary context?

[2] Justo Gonzalez, “Faith and Wealth: A History of Early Christian Ideas on the Origin, Significance and Use of Money”, Wipf and Stock Publishers, 1990, pp. 225-226.

[3] John E. Staepleford, “Bulls, Bears & Golden Calves, Applying Christian Ethics in Economics”, IVP, 2002, pp. 105-114. In Calvin’s day “Usury” had the same meaning as “interest” does today and didn’t have the contemporary connotation of excessive interest rates.