How did the United States, the world’s richest and wealthiest nation, closed down its government and come to the brink of a catastrophic default on its debt that could send shockwaves through the fragile world economy? Relax. The worst is yet to come.
US DEBT shot up to reach more than 100 per cent of gross domestic, Treasury figures showed. The new borrowing took total public debt to US$17 trillion, and putting it in a league with highly indebted countries like Greece and Spain.
Public debt subject to the official debt limit – a slightly tighter definition – was US$17 trillion, rising from the previous official cap of US$14.29 trillion a year earlier. Treasury had used extraordinary measures to hold under the cap, while politicians battled over it and over addressing the country’s bloating deficit. The official limit was hiked US$400 billion and will be increased in stages over the next 18 months.
Looking at these statistics, it is not hard to see why debt generates so much news and discussions. The average American family devotes at least 25 percent, some as much as 50 percent, of its spendable income to paying outstanding debts. And that’s during sound economic growth. In financially difficult times, indebtedness can imperil our survival. Unfortunately, indebtedness has become a pillar of America’s financial framework. Both nationally and domestically. Greed will bring about global financial disaster – on a Biblical scale.
Dire economic downturns — including the worst since the Great Depression of the 1930s — giant tax cuts, costly wars in Iraq and Afghanistan, and a pricey new health program all helped sour Washington’s fiscal picture. Or, as President Barack Obama put it literally in a speech “For the last decade, we’ve spent more money than we took in.” Nervous Americans are bombarding their financial advisers with questions about what to do if the U.S. government defaults on its debt. Although we do not expect the stalemate to result in a temporary default, we now see a more than 50% chance that US sovereign debt will be downgraded by the rating agencies in the coming months. How will America pay its debt? Eventually, the US government will shut down. It’s a matter of when, not if.
When this happens, it will send shock waves across the U.S. economy and the world that will hit consumers and businesses, both struggling through a weak global economic recovery. The debt ceiling debate already is weighing on the economy. The bankers says credit is an important part of your financial identity. the more credit you have, the better your lifestyle can be. “Anything is within your grasp if you can simply get the payments low enough.” Nothing can be further than the truth.
The Bible discourages debt, individually and nationally, because debt presumes upon the future – and on God. If you are concerned about economic uncertainty, the last thing you want to do is to take anything about the future for granted. In fact, debt is a curse. If you go into debt, you are obligated to repay – yet you take on that obligation without knowing for certain whether you will be able to repay or not. Second, debt may deny Him an opportunity to work.
If the financial forecast calls for difficult times ahead, you should work to get rid of all debt. To do otherwise is to presume on the future.
Can USA continue to meet its financial obligations. No way. Ratings agencies have warned the country to reduce its debt-to-GDP ratio quickly or facing losing its coveted AAA debt rating. That is just the tip of the iceberg. The runaway debt is beyond hope. The entire nation will eventually go over the fiscal cliff. What matters now is: Can you continue to meet your financial obligations – car payments, credit card bills, housing instalment loans, and the like – if you lost your job? If there is hyperinflation? If the dollar collapses? We now have to view debt through the window of possibly one of the greatest financial crisis since the Great Depression. We have to find answers that will enable you to approach debt with a proper perspective.
Debt is not something that seems to really bother buyers in good times. Yet borrowing money has its price – and it is a cost far greater than you realize. Anytime you use credit to borrow money, you pre-commit your future income. The effects of such obligations can range from simple inconvenience to financial devastation. Many are now paying that price today.
There are two simple principles to keep in mind if you want to work to strengthen your financial position. First, you must increase your financial flexibility, and second, you must reduce your financial constraints. If borrowing money limits financial flexibility, the absence of debt makes for a lifestyle of financial freedom and opportunity. With no, or even low, financial pre-commitments, you will be at liberty to pursue your goals and desires.
The freedom from the financial obligations of debt can spell all the difference in how effectively personal resources can be used by God. Getting rid of any debt, whether it is large home mortgage or a relatively small credit card balance, is a guaranteed profitable investment.
How to get out of debt? Whether your debt is due to unwise overspending or an unexpected calamity, one thing is certain: Getting out of debt is always harder than getting in. The most effective way to get out of debt is to cut your spending. Establish a realistic repayment plan and discipline yourself to follow it. Beware of over-ambition. Once your strategy is in place, all you need is the self-discipline to make it work.
Ultimately, it all boils down to 3 simple rules in financial planning: First, spend less than you earn. Second, avoid the use of debt. And lastly, save up for financial uncertainties.
The Bible does show many ways to overcome any financial crisis. Many of these principles are laid out in our successful course, the Scriptural Financial Freedom series. To learn more, you can download the Small Groups kit from our Store.