Tuesday, September 23, 2008

Has An Economic Earthquake Arrived?

Back in 1991, the late Larry Burkett wrote The Coming Economic Earthquake. One of his concerns was with America's very large national debt and our eventual inability to pay the interest on the debt. Right now, the official national debt stands at 9.7 trillion dollars, which includes treasury bills and bonds, but if you include promises to pay Social Security/Medicare/government pensions, the debt stands at 55 trillion. I have recently looked back at his book and found some interesting information:

Before the Great Depression:

Banks were pressured to make loans. (23)
People thought they could become wealthy by borrowing money, and loans were easy to get. (26)
Seventy percent of Americans lived in rural communities and supported the farming industry; only 20% were needed on the farms due to greater efficiency. (41).
Saving rate declined from 12% of income to less than 4%. (43)

During the Great Depression:

There was panic in the stock market, and many people wanted to sell their stocks. (24)
Many people lost their life savings, and the number of unemployed people grew. (25)
By 1932, more than 5,000 banks had closed their doors, leaving nothing for depositors. (26)
It became impossible to get a loan. (26)
People bought land, businesses, etc. for a fraction of what they were worth. (26)
Hoover did not intervene to repair the economy. There was no government bailout under Hoover. (26-27)
Forty percent of available workers were unemployed. (41)
The middle class virtually disappeared. (41)
FDR raised the status of the federal government to that of the “great provider,” and this set the stage for the next economic disaster in America. (28)

Results of Great Depression Policies:

Banks became more vulnerable to defaults by borrowers. (37)

Burkett also indicated that there are usually 60 years (plus or minus 6 years) between Great Depressions. If you add approximately 60 years to the end of World War II, you have our present time. It's a bit frightening, isn't it?

I believe that the basic cause of our present problems is greed. Remember the parable of the rich fool in Luke 12:

18 "Then he said, `This is what I will do: I will tear down my barns and build larger ones, and there I will store all my grain and my goods. 19 `And I will say to my soul, "Soul, you have many goods laid up for many years to come; take your ease, eat, drink and be merry."' 20 "But God said to him, `You fool! This very night your soul is required of you; and now who will own what you have prepared?' 21 "So is the man who stores up treasure for himself, and is not rich toward God." (NASB)

Have we been building bigger barns that we do not need? Notice these figures from the National Association of Home Builders that show the average square footage for a new single-family home per year:

1950 – 983 square feet
1970 – 1500 square feet
1990 – 2080 square feet
2004 – 2,349 square feet

People have been buying large homes that they cannot afford, and they have defaulted on their mortgages in many cases. Why did they do such a foolish thing? Greed. I am not a fan of Karl Marx, but Burkett used a quote from Marx to make a point about how greed could destroy our country:

“A democracy is not a form of government to survive. For it will only succeed until its citizens discover they can vote themselves money from the treasury, then they will bankrupt it.” (34)

Let's pray for our country. Life as we have known it may be about to change dramatically.