Monday, September 29, 2008

Financial Ruminations

So what is one to think of the current state of the financial markets and the failed 'bailout' by the government today? What does it all mean? And how should we respond to the whole situation, especially as Christians? These are some of the thoughts that have been meandering around the recesses of my mind the past week or so.

Now, there are many 'experts' and media mavens and political opportunists who will gladly answer these questions for us, in an effort to promote some agenda or grind their axe. Which only adds to the lack of clarity and the abundance of confusion. But while I don't claim to be any kind of an economist or financial whiz, I do know that there are a few clear root causes to the current meltdown in the credit markets. The first is the poorly thought through policies of the federal government over the past twenty years, forcing lenders to make loans to unqualified home buyers and in the process taking on more and more risky credit. Which also drove home sales, driving up demand, thereby driving up prices. In short, an unsustainable market condition that was a ticking time bomb. Once again, the problem is not too little government intervention, but too much.

The second root cause is the lack of lack of restraint on the part of those home buyers. They took on much more debt than was advisable, bought bigger and more expensive houses than they needed, financed the whole thing at artificially low adjustable interest rates, and generally got in way over their heads. You can blame the lenders for not advising them better, but it boils down to personal responsibility. They knew what they were signing up for. Again, a ticking time bomb.

So now the whole thing has come crashing down. The housing bubble burst, the artificially inflated values of homes has come down, the balloon payments on those adjustable mortgages have come due and can't be paid, the mortgage default rate has gone through the roof, and the big mortgage banking institutions are holding a huge portfolio of bad loans. And the ripple effects have spilled over into the broader credit market, which is a key part of the world financial markets. The modern global economy runs day to day on credit. When it's limited, there are untold effects across the board. Not the least of which is reflected in the equity markets, as has been seen recently in the behavior of the stock markets. Like today, when the market indexes dropped 7-10% due to the failure of the House to pass the 'rescue' package.

Regarding that package, I have to say that I received the news with mixed emotions. The fiscal conservative, limited government part of my brain did not like the idea of the American taxpayers taking on $700 billion in bad debt. Let the markets correct themselves, and recover from the effects of too much government intrusion, not adding more. But on the other hand, from a personal standpoint I know that my retirement fund (largely invested in stocks) and other investments have taken a large hit over the past 6 months, and will continue to as the market goes down further if the 'bailout' isn't enacted. It's rather unnerving to watch literally hundreds of thousands of dollars of value disappear from your accounts. I might even have to delay retirement. And there are many, many people in this same situation.

And here is where I come to the question of how we should respond as believers in Christ. First and foremost, this situation should be a checkup for each of us on where our sense of security lies. Are we trusting in our stocks, bonds, 401k's and the like for our security, or are we trusting in our sovereign Lord and Savior who has total control over even the Dow and the Nasdaq? It's times like these that call that question. Second, have we fallen prey to the pervading sense of greed and entitlement that has been part of the reason for this current crisis? Have we been among those who made unwise financial decisions in an effort to 'get our piece of the pie', and are now paying for it? If so, we have violated Biblical principles of contentment and stewardship, and may be seeing the Lord's discipline for it. And finally, are we viewing people caught deeply in this crisis with compassion, and praying for their well-being, asking God to show Himself clearly to them as their worldly security fails them?

Let's consider these application points in this time of financial uncertainty. For our good and our growth. And for His glory.

No comments: