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02 January 2014

The debt default

The debt default

As the Christmas spendfest is followed by the annual sales-mania, many of us will soon be confronted with the sobering task of paying down our store cards, credit cards and overdrafts. And we will convince ourselves that we are dealing with debt. But are we?

by David Landrum

Today in the UK, over 11 million households have mortgage debt worth around £1.2 trillion. Unsecured lending or consumer credit stands at around £160 billion. Taken together, we owe around £29,0 00 for every adult in the country: more than an entire year's income for the average person. Until the global financial markets collapsed in 2008, this was seen as acceptable. Then it became apparent that our indulgent wealthwas in fact a mirage. Indeed, the 'credit crunch' was actually a debt wake-up call.

We are both fascinated and paralysed by debt. Even the government spends far more than it can raise in taxes. Indeed, our national debt is an eye-watering £1.2 trillion – and rising.

Debt has become such a common, accepted, and even expected part of life today that we need to ask whether we have forgotten what God's view on being 'in debt' is? 

In Romans 13:7-8, Paul perfectly summarises the Lord's guidance on debt: "Give to everyone what you owe them …Let no debt remain outstanding, except the continuing debt to love one another."

This echoes the many Old Testament calls to avoid debt, and also reminds us of the jubilee principle which proposes set times for the cancelling of what is owed. Designed by God, this system protects against the development of a culture of debt in which the rich get richer and the poor get poorer – until they are permanently enslaved. But what do we do when we have no jubilee principle?

While previous generations avoided debt wherever possible, it seems that we are the only generation in history to see debt as a convenience. The Bible clearly teaches that we have obligations to: respect the dead (those who have gone before us) ; dignify the living; and bless the unborn (future generations). But as society has secularised, people have become obsessively and exclusively focused on themselves, and the now – leaving a huge legacy of burdens for those yet to be born.

Debt is not new, but our modern understanding of it has changed due to people being less willing to defer gratification and being compelled to 'have' by a sense that 'it's my right'. After re-branding it as 'credit', it seems we willfully forget that by definition debt inevitably requires repayment which involves accepting certain limits on what we can do with our hard earned money. Misleading ourselves that our room for manoeuvre in life is not actually being restricted by debt, we also wilfully forget (until we default) that our obligations are enforced by the law. This self-delusion about debt is no doubt compounded by the fact that marketing now far exceeds people's ability to resist it. So, being in denial that debt is dependency, we keep spending – on things we don't really need – for a lifestyle we increasingly can't afford.

Unsurprisingly, it's the less wealthy and less educated who are hit the hardest by this 'affluenza'. Today, the poorest 20 percent have more credit card, store card, overdraft and personal debt than they have in savings, and the poorest 10 per cent owe four times as much as they hold in financial assets. All of which helps toexplain the explosion in payday loans,instant credit, buy-now-pay-later schemesand pawnbrokers. After living through the longest economic boom in history, our poorest are now forced to take out loans to pay the rent and put food on the table. This is a consequence of being conditioned to accept debt as normal, when the Bible tells us that it's something to be avoided. 

We should thank God for the wonderful work of Christians Against Poverty, Christian credit unions and the vast range of poverty relief that the Church gives in the UK. However, if we really want to address the causes of this suffering, we all need to take responsibility for modelling good stewardship of money. Rejecting the 'much-wants-more' debt junky culture, this means getting a plan to pay things back and sticking to it. After all, as people who have had our debts paid for us, our example of freedom and prudence can be a powerful witness to a world in bondage. And we know that there is life beyond debt.

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