Sabbatical 2017

Sabbatical 2017
Mt 11:28

Wednesday, November 19, 2008

A Christian Perspective on Our Economic Crisis

It is my honor to share with you today a short article written by our own Jeff Haymond, former Elder at our church with a Doctorate in Economics. Jeff and his family are currently stationed in Albuquerque, NM with the Air Force. He is uniquely qualified and equipped to address the current economic climate and provide for us solid Scriptural guidelines on how we can approach it:

Wow! That’s at least one thing we can say about the financial turmoil we’ve seen over the last couple of months. To say its unprecedented does little to cover the magnitude of what’s been occurring. Historic currency volatility, market deleveraging, financial institution failures, mortgage market meltdown, government nationalization of housing, commodities going crazy up, now they’re down. Wow! All of us are affected by this turmoil, and its not just a sporting event on TV; our college and retirement plans are dependent upon our savings in various markets—and it seems almost every market is getting killed. And as the markets head south, employment is going down as well. We may have hit the market bottom, but then again we may not have. Historically we have already seen financial losses equivalent to the brutal bear market of 1973-1974, when the Dow lost 45%. But we haven’t approached the 90% losses of the Great Depression. So what can we do?

I’ve received many calls and emails on this turmoil, asking my opinion on the matter, and I’d like to share some of that thinking with you. In advance, I must beg forgiveness for being a bit arrogant, in order to hopefully show some humility at the end. I’ve studied markets closely for at least 15 years, and after teaching Economics at the Air Force Academy, received a Ph.D. in Economics at George Mason University in 2001. My specific specialty and interest is in monetary policy and Austrian economics (where I explored the interaction of monetary policy and business cycles). In a previously published essay, written in 2000, I suggested expansion of mortgages might lead to the very business cycle we are now seeing play out (available on the web at http://mises.org/journals/qjae/pdf/qjae3_4_2.pdf, see pp. 65-68 if you’re curious). So what? A famous question to economists is: “If you’re so smart, how come you’re not rich?” Fair question. I want to arrogantly say that I have much of the world’s wisdom in understanding the underlying financial forces at work. Further, I have crafted my own investment portfolio to withstand just such a shock as we are now facing, to include a sizable portion that shorted the market, to profit when the market goes down. Yet, even with this knowledge, I have not really made any money. Over the last 8 years, as the market has basically gone sideways, my portfolio has also went up and down. And the recent turmoil, while part of the portfolio has done well, other parts have been hammered, probably worse than you, as I’m fairly aggressive on certain positions. So what’s my point in being arrogant and telling you how my own portfolio has held up? Here it is: Man’s wisdom, even when it understands much, is an insufficient source of knowledge to withstand the financial storms of life. So as folks come to me for advice in turbulent times like this, I don’t advise them to short the market, go long this or that, because I know that whatever knowledge I might think I have, there is a sovereign God that has better investment advice.

So what should we do today? I think Biblical wisdom offers a number of suggestions. First, we need to be debt free as quickly as possible. Not that we shouldn’t take on debt; just we should only take it for as short a period as possible, and consumer debt should be avoided like the plague. Much of country’s problems have occurred due to the vast amount of indebtedness, both public and private. I became seriously debt averse after reading one of Larry Burkett’s books about 15 years ago. He related a couple that had a home loan with a local bank for about $3,000 during the great depression. They also had savings with the same bank of about $5,000. The bank went under during the banking crisis of the depression and the assets were sold. The purchasers of the home loan came looking to them to pay off the loan, and they pointed out the bank that had the loan had more than that in their savings. It didn’t matter; the bank that purchased the loan was not responsible for the failed bank’s liabilities. This couple lost their home. Don’t let the warning of Deut 29:44 come to your house. Don’t worry about other investments until you’re debt free.

Second, man’s wisdom about diversification is consistent with God’s warnings about greed and the uncertainty of life. Failure to diversify often occurs when we get greedy, and are looking for the home run. We also get comfortable with our own understanding of events, thinking an investment is a “sure thing.” Diversification is an admission of our own limitations, and reflects a spirit of humility toward the uncertainty of life. While pretty much all assets have been hit hard in this current fallout, the more diversified you are, the less you’ve likely lost.

Third, you should invest in yourself. Your safest asset is your own human capital. Are you continuously upgrading your professional skills to stay current? Do you have any backup skills that you can hone if your primary line of employment dries up? This prepares you to be useful for God even with the uncertainty of life (Proverbs 27:12, Ephesians 4:28). While ultimately we are relying on God, we should be doing everything we can to be useful for his service.
Finally, now is the time to demonstrate our faith in a radical way. Do we really trust God with the responsibility to provide for our future? Yes, we have to do our part, but when he gives guidance that goes against the grain, are we ready to follow it? The worldly reaction to this financial crisis is to hunker down, and cut unnecessary expenditures. We’re already seeing a significant drop in financial giving to charities. On my Air Force base (and keep in mind these are all government workers with some certainty over their paycheck), we’re only meeting about 60% of last year’s giving for the annual Combined Federal Campaign. As Christians, we need to continue our giving, even and especially with this uncertainty. As we see people in need, this is an opportunity to demonstrate both Christian love and compassion, as well as our trust in God. Remember, we cannot out give God! Malachi 3:10-12! While I don’t know how God will choose to pour out his blessings—it may not be in a material way—we do know with certainty He will bless us!

Studying markets and understanding financial economics is a useful endeavor. But studying God’s word, and applying His principles are even more important. Man’s wisdom, however good, will ultimately be insufficient. God’s wisdom, however, will never fail. Nor will He ever leave us or forsake us. This financial crisis gives Christians the opportunity to glorify God by how we handle it. Don’t miss the opportunity!

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