The idea that rent money is “dead” money has been around a long time.
What is not said so often is that interest money is dead money too. This is not realized because people are under the mistaken notion that you can recover interest that you’ve paid, but you cannot recover rent that you’ve paid. It’s a mistaken notion because this is true only in an appreciating market. In other words, you can “recover” interest only if prices rise. And when prices don’t rise, or don’t rise enough, you won’t recover all or some of the interest you’ve paid.
Imagine this: you rent a house for 25 years and pay the rent on time. The landlord pays off his home with your rental money. At the end of 25 years you do not own the house; you merely walk away when you go and leave the asset to its owner.
Once you borrow, you join all borrowers and now you have a vested interest (pun intended) in price increases in the housing market.
When you buy a home, however, you might pay double the price over 25 years because of interest. Let’s say a $200,000 home, and after 25 years you’ve paid $400,000. Now if property values were to double over those 25 years, you could sell your home for $400,000 and recover all the interest you’ve paid as well.
But what would happen if you could only sell your home for its original $200,000 purchase price? Why, the interest you paid would be “dead money” — just as dead as if you rented through those 25 years. Why is it dead money? Because you could not “recover” it in the sale price of your home.
Think about words. Without them you’d find it difficult to communicate with others (even though some people are quite articulate with their hands). What do words mean? Who decides what they mean? What is the origin of language? If language comes from God, as our doctrine of creation implies, then it follows that the meaning of words must also come from God. Our basic definitions thus should come from God and not from man himself.
“If not another penny was borrowed starting now, and we started to pay back all that debt at a rate of one dollar per second, it would take over 100,000 years to pay it all off.” —Scott Craig Mooney
Debt and usury are tied together. This is the thesis of Scott Craig Mooney in his original book on the topic, Usury: Destroyer of Nations. Now he’s returned to the fray with a small—but powerful—reminder that we’re in economic trouble. The Fall of the House of Usury
Mr. Mooney is concerned that no one is talking about what is really wrong, and what is really wrong is usury. The reason for the lack of discussion on usury is simple: no one really believes it is a principle to be found in Scripture and practiced today. One of the reasons for this is the apparent “refutation” of usury by John Calvin.
Calvin effectively undercuts biblical law theory.
The contents of a letter by John Calvin to Oekolampadius provides us with insight into the great reformer’s view on the topic of usury. It also provides an opportunity to view any biblical arguments that might be found to support the pro-usury position.
Calvin’s position, however, appears somewhat ambiguous. For example, he argues on the one hand that “there is no scriptural passage that totally bans usury.” This is true, but the issue at stake today is not whether there is a general ban on usury, but whether there is any ban at all on the charging of usury. The Old Testament did not place a total ban on usury: it allowed usury to be charged to foreigners.
While he is not prepared to argue against usury on biblical grounds, Calvin nevertheless attempts to put moderation on the charging of interest. He prefers that “usurers were chased from every country.” Hardly an endorsement for usury.
- See Scott Mooney’s book, Usury, for an explanation of the meaning of ‘foreigner.’↵back
The Responsibilities of Lenders
Thus far our discussion has centered on those who borrow, and those who can benefit from debt, the sellers of goods. But there is yet another person who benefits from debt, and that is, naturally, the lender. Interestingly, the Bible also has some comments to make to the lender. The passage in Deuteronomy 15:1-11 places limitations on the actions of lenders. First, they are to cancel all debts to a brother in the seventh year. At the end of every seven years, the creditor is to cancel any outstanding debt. Second, this limitation did not apply to foreigners. Third, the requirement to cancel debts was no excuse not to lend to a brother in need. Fourth, the fact that the sabbath year was drawing close was likewise no reason to withhold assistance to a brother.
The sabbath year laws, interestingly, put a restraint upon the lender, not the borrower. This passage gives no encouragement for debt, even the limited use of debt. What it does do is put a strict limitation on lenders. The debt was not to be collected in full. At the end of the seventh year whatever remained unpaid was to be canceled. It is expressly stated that the Sabbath year’s imminence should not be used as an excuse to withhold funds from those in need.
If nothing else, this provides an indication that long-term lending is to be avoided. By long-term is meant longer than seven years. And if long-term lending is to be avoided, this naturally abolishes any notion of long-term debt.
The importance of this Old Testament requirement has been captured by Rushdoony:
[F]orgiveness is a basic aspect of the sabbath. The grace of God unto the remission of sins is the covenant of man’s sabbath. It means rest, release from the burden of sin and guilt. The Lord’s Prayer, which looks forward to the great sabbath (“Thy kingdom come”), has as a central petition the jubilee release: “And forgive us our debts, as we forgive our debtors” (Matt. 6:12). Lenski translated this, “And dismiss for us our debts as we, too, did dismiss our debtors.” The translation “trespasses” is good, in that it points more clearly to our sins; but the word “debts” has a broader connotation often, as it definitely does here. As Lenski observed, “So great are our debts to God that we can never hope to pay them, and our only help is that God will remit them gratis, by way of gift, for Christ’s sake.”
The forgiveness of debt in the seventh year is thus an indication of the release that God provides from the condemnation of our sin. This requirement, therefore, is of very special significance and should be kept.
- R.J. Rushdoony, The institutes of Biblical Law, Volume One (Nutley, NJ: Craig Press, 1973) p. 144.↵back
Managing Money With A Crystal Ball
No one knows the future with any certainty. The future is known to God alone, and we must live each day in ongoing dependence for His daily provision during the circumstances in which we find ourselves. Ecclesiastes 11:6 says, “In the morning sow your seed, and in the evening do not withhold your hand; for you do not know which will prosper, either this or that, or whether both alike will be good.” Although God is our heavenly Father and promises never to leave us nor forsake us (Heb. 13:5-6), this does not mean we have a trouble-free life. Christians get sick; they are killed in battle; and their businesses can flounder.
When we take on debt, however, we are saying that we know the future with enough certainty that we can guarantee payment of the loan. The Sabbath year debt cancellation, however, places a limit on how far we can safely make these kinds of assumptions about the future. The person who takes on a 25-year mortgage is, in effect, saying to the lender that he is sufficiently knowledgeable about the next 25 years that he can guarantee to make the repayments. Our choice is whether we accept God’s limitation on debt or whether we substitute our own standards for those which He has given us in the Bible.
Is There a Valid Connection Between Debt and Greed?
There is another argument against debt — or if not against debt as such, it at least requires a very careful self-analysis to make sure we are not guilty of simple greed. Debt can do at least two things for people. First, it permits them to buy goods for which they do not have sufficient cash right now. They don’t have the funds right now and don’t want to wait until they can save it. Or they think they’ll never be able to save the required amount, and don’t want to miss out on the goods. This has nothing to do with sound management at all. Rather, it is the manifestation of greed in the heart of man. This impatience, a refusal to wait until the funds are saved, is founded on an attitude of laziness and lack of self-discipline, often an inability to save for the future. Neither attitude provides a proper excuse to borrow money.
The desire for goods we cannot afford right at this moment is, I suspect, a reflection of the attitude towards the wealth that other people have. It is the “keeping up with the Joneses” syndrome (better spelled sindrome). However, time and time again we are told not to covet or desire the wealth of our neighbor. We should be content with that which God has given to us in His providence (Heb. 13:5). We break this command by desiring, for wrong reasons, to have a similar amount of wealth to our neighbor.
In the first three chapters on this topic of debt, I described the wealth creation process. Mankind was created with the mandate to be fruitful, to be innovative, to be productive, to look after God’s garden, preserve it, husband it, and in so doing create wealth for all to enjoy.
More importantly, however, it was seen that the process of putting aside for future use (savings) was the necessary step for economic advancement. Without savings there can be no process of ongoing economic development.
Debt is the opposite to the idea of saving. Continue reading
Living Debt Free is the Biblical Model
The first argument against the use of debt is that the Bible tells us very plainly to avoid it. In a passage in Romans 13:8, the apostle Paul, writing under the inspiration of the Holy Spirit, tells us that we should “owe no one anything except to love one another” (Rom. 13:8a).
There are some, however, who argue that this passage is not referring to financial debt. Commentators are divided on the matter, and when the scholars disagree it is often difficult for the layman to form an opinion. Their position, however, is usually presented as a statement without supporting evidence. Mostly, it comes down to the fact that the commentator thinks it is not referring to financial debt, but rarely offers evidence to show why this is so. Commentators, however helpful, are not our ultimate guide to life. Only God and the Bible can hold that position in our lives. Therefore, we need to turn to the biblical text, and not the commentators, for guidance.
In order for us to understand the text, there are several things we should note about this verse to make sure the words are not taken out of their context and misused.
In economics, things are not always as they appear.
The sky is falling. Doom is near. Buy this or that stock. Buy gold. Buy anything that is a hard asset. Get rid of paper.
The economy is falling.
Because house prices have fallen.
Falling prices are only a problem to some people.”
Bankruptcies are up.
Doom is nigh.
That’s funny, I thought you just told me that house prices are falling? This means the purchasing power of my money in relation to homes has gone up. How is that a disaster?
In chapter six of my book, Making Sense of Your Dollars: A Biblical Approach to Wealth, I discuss inflation and its causes. I argue that monetary inflation, an expansion of the money supply, causes price inflation. Monetary inflation, I also argued, was immoral, since it devalues the purchasing power of money as prices in the community rise. I pointed out that the two primary means of monetary inflation were using the presses to manufacture notes and coin and the creation of money through credit. It is this latter method of monetary inflation that we need to understand in relation to debt as well as in relation to biblical morality.