Wednesday, November 30, 2011

The Positive Aspects of Debt - And Religion

Jesus wants you to have that new car!

I write a lot here about how bad debt is - and how it can cripple people.  But I have also written about how debt can be useful - to businesses and corporations, as a means of spreading out risk and raising capital.  In countries where it is hard to borrow money, it is hard to expand a business, as you have to pay cash for all your improvements and expansions, which means theses come very slowly, if at all.

And mortgages, while capable of wiping out people if they are not careful, can be useful in helping people buy housing.  In Mexico, until recently, mortgages were not available.  When we drove down there in the early 2000's (mental note:  Do Not Do) we saw many folks living in half-finished houses.  Unable to get a loan to build a home, they would bring home one cinder block, every day, and mix up a bucket of cement, and put it into place.  This way, over a period of years, if not decades, they could build a house.

Today, Mexicans can get mortgages, and many of the folks working here illegally (or legally) are paying off a mortgage for their family "back home" so that when they retire, they can move back and have a place to live.

But debt, like money, is very powerful, and like a loaded handgun, can kill or wound you or someone you love, if you use it improperly. And today, we are seeing the fallout from excessive debt - and also the problems when loans are harder to obtain.  We have been see-sawed in both directions - swimming in a see of funny money one minute, and then left high and dry at low tide the next.

But debt has another "useful" social function - and one that cuts against your own personal interests.  Debt keeps people in line, better than any laws, police force, or societal norms.  Kids today protesting this and that can afford to camp out and sit-in, because they don't have mortgages (but do have staggering student loan debts - but no way to repay them).  And 50 years go, kids did the same thing - for a while, until they started getting jobs and taking on debts.  Yippies become Yuppies, like clockwork, over time.

Once you "buy into the system" of debt - by getting a mortgage, a car loan, some credit cards, etc., you are now a stake-holder in the whole concept of debt.  And rather than think about what a raw deal you are getting, you run faster in faster to stay in place, to keep playing the debt game, hoping that you come out ahead in the end.  Usually, you never do.

When I worked for GM and UTC, and the Government, and even law firms, my bosses were always happy when I took on more debt.  If I bought a car, or a house, they were happy, as they knew I was that much less likely to quit, and moreover, had a compelling reason not to call in sick or use my vacation time I had accrued.

In fact, they knew that once I needed that paycheck to service my staggering debts, they had me by the balls.  They could give me a hard time and treat me like dirt and all I could do is gulp and think, "Gee, only 59 more payments and I can quit my job!"

And to some extent, this is a social good.  It creates a social glue that holds people together.  Let's face it, if not for their jet-ski and monster truck payments, most rednecks would never show up for work at all.  And if you are hiring someone, you never, ever, want to hire a young man with no debts and a hunting and/or fishing license.  Once deer season starts, you will not see him - for days, perhaps weeks.

No, what you want is the young man with the shiny pickup truck and a 72-month loan, a trailer home with a string of mortgage payments, and hopefully a pregnant wife.  That guy will show up for work, and you can piss all over him.

And yea, that sounds evil, but debt is a little evil - sometimes a lot.  But on a larger scale, debt acts as social glue for all of us.  A merchant is in debt to a supplier.  His customers are in debt to him.  Everyone owes someone else, and it creates a round-robin of mutual dependency, to some extent.  Except, of course, for the guy at the top of the heap, who actually owns money and is making interest income on all these debts.  But even for him, it is a matter of mutual dependency.  You can't make money as a loan shark, unless you have customers willing to borrow.  Those that have the wealth have nothing, if we don't have the need for money.  It is a two-way street.

Religion works in similar way.  And religion can be very evil - and is, most of the time.  And in the past, I have written about this - The Religion Trap.  But religion also has a positive social aspect.  Religion is what gets Billy-Bob to stop drinking and gets him on the "straight and narrow".  Maybe we find fundamentalist Christianity to be a bit stupid and naive (and missing the message of Jesus Christ by about 1000 miles), but it does keep the plebes in line.

And it also keeps people civilized, to some extent.   Religion is often the one thing that keeps a man from stealing, even when he knows he can get away with it.  It is often the one thing that keeps him married - even when he feels he wants something else.  It is often the only thing that keeps people doing things that are a benefit to greater society, even if it is a detriment to themselves.

And perhaps that is a definition of Religion right there - people sacrificing for the greater good.  It is sort of a common theme of most major religions.

So from a societal aspect, we want to see other people in debt and we want other people to be religious.  And that may sound a bit Machiavellian, but so be it.  If you can see through the smokescreens of both institutions (debt and religion) you can easily come out ahead in life.

And note that it may be very useful to you, on a personal level to appear to be in debt, and appear to be religious, lest people think you are a financial or religious heretic.  As recent events illustrate, being wealthy only generates resentment, so if you can appear to be middle-class, like everyone else, you lower your profile somewhat.  It is never worthwhile to die for a religion or an idea, as Galileo was smart enough to figure out.
"Whenever the locals rub blue mud in their navels, I rub blue mud in mine just as solemnly." --Lazarus Long, Time Enough For Love, pg 46.

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