Sunday, August 1, 2010

Economic Immorality

Several months ago, I commented on the possibility that may exist for an economic collapse and a correlated Evangelical collapse. I still don't know what to make of the relationship between the two, but I am just as convinced as ever that both of them are likely to occur. The economic reasons are no less threatening, that's for sure, but I was motivated to address the issue again after I ran across a few seemingly unrelated articles over the last few months.

In case you haven't heard, this country is in a debt crisis that is not going away anytime soon. It's gotten worse since these statistics were published last October, but at that time Kevin Hasset reported that the United States debt level is "higher relative to our national income than it was for the typical middle-income country that defaulted on its debt between 1970 and 2001 ... in worse shape than the typical Latin American country that defaulted" (National Review, October 19, 2009, p. 8).

The trigger for the current debt crisis was a housing/mortgage market that imploded. Since the implosion, politicians (of both parties) have tried to cover up the problem with silly "stimulus" measures and one-time tax credits ostensibly meant to mend the housing market. But this has a similar effect to painting over a rusty wrought-iron fence. It may look pretty from the road but the fence is still rusting.

Today, the Wall Street Journal estimates that 5.3 million Americans are living in homes that are worth 20% less than the mortgage they still owe on them. Of those who took "sub-prime" mortgages between 2000-2007, nearly 60% owe more than their homes are worth. In some places, nearly every mortgage is "under water" in this way -- 94% in Las Vegas, 89% in Phoenix, 86% in Miami. (National Review, March 8, 2010, p. 20)

At the same time the mortgage default rate has been surprisingly low, considering the number who could just walk away. In fact, Hassett reports that 80% of individuals believe it would be "morally wrong" to strategically default on their mortgages.

Remember that number. It tells us that a vast majority of people simply do not want to give up on their mortgages and have attempted to renegotiate them with the help of banks that have been primed by the federal government (more of that "stimulus" money). But printing money for the purpose of pretending that doing so will make everything get better cannot go on forever. And when it stops, all hell will break loose.

More next time ...

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