THE DANGERS OF DEBT
by Joshua Spatha
Our modern world and the entire global economy may be based on it, but scripture has a much more cautious view of debt with God even legally regulating it in Old Testament Israel. Due to modern society's broad acceptance of this monetary instrument, it has become a cultural norm with most people simply defaulting to the use of credit, loans, and debt with little question or concern. The "buy now, pay later" mentality began in earnest in the middle of the 20th Century and nearly three generations later, interest in this economic philosophy has only increased. The prevailing wisdom of most economic experts is that such a foundation is both manageable and sustainable, but history is replete with sobering examples which should temper such cavalier attitudes. But while history should be heeded, it is God's word which we should turn to as our foundation, the corner stone of civilization, and the textbook for how to structure a society. So what does scripture have to say about the subject of debt? A decent summary of the biblical principles would be, lend freely, borrow sparingly, and repay diligently. For with loans, 'tis truly better to give than to receive.
Lend Freely
If there is a poor person among you, one of your brothers, in any of your towns in your land which the Lord your God is giving you, you shall not harden your heart, nor close your hand from your poor brother; but you shall fully open your hand to him, and generously lend him enough for his need in whatever he lacks. -Deu 15:7-8
All day long he [the righteous] is gracious and lends, And his descendants are a blessing. -Psa 37:26It goes well for a person who is gracious and lends; He will maintain his cause in judgment. -Psa 112:5
Give to him who asks of you, and do not turn away from him who wants to borrow from you. -Mat 5:42
If you're wondering why lending seems to be a virtue in the Bible, it's because the biblical practice of lending involves no benefit to the lender. It is not a business deal or an investment opportunity, but rather an act of charity for a brother in need. Indeed, in the Bible lending was primarily done through private individuals (not large banks and institutions) and charging interest on those loans was forbidden between Jews and only allowed to be exacted upon foreigners.
If you lend money to My people, to the poor among you, you are not to act as a creditor to him; you shall not charge him interest. -Ex 22:5
You may charge interest to a foreigner, but to your countrymen you shall not charge interest, so that the Lord your God may bless you in all that you undertake in the land which you are about to enter to possess. -Deu 23:20
This law was not just viewed as ethical, but moral. When the Jews were brought back to Jerusalem from exile under the leadership of Nehemiah, they had forgotten the law of God and had adopted the lending practices of their pagan neighbors. In Nehemiah chapter 5, Nehemiah condemned the Jewish lenders for charging a mere 1% simple interest saying, “The thing which you are doing is not good; should you not walk in the fear of our God because of the taunting of the nations, our enemies?" (Neh 5:9). After the public admonishment, the lenders swore to repay the borrowers and to henceforth lend without interest or mortgage (Neh 5:10-12). We see this injunction against interest in other passages as well, with Ezekiel going as far as calling the practice an abomination worthy of death.
He [who fears the Lord] does not lend his money at interest, nor does he take a bribe against the innocent. One who does these things will never be shaken. -Psa 15:5
“However, he may father a violent son who sheds blood, and does any one of these things to a brother (though he himself did not do any of these things), that is, he even eats at the mountain shrines, and defiles his neighbor’s wife, oppresses the poor and needy, commits robbery, does not restore a pledge, but raises his eyes to the idols and commits abomination, lends money at interest and takes interest; will he live? He will not live! He has committed all these abominations, he shall certainly be put to death; his blood will be on himself. -Eze 18:10-13
Thomas Aquinas acknowledged this biblical injunction against lending with interest in his work, Summa Theologica stating, “To accept usury for the loan of money is in itself unjust; because this is selling what does not exist, and must obviously give rise to inequality, which is contrary to justice. Just as a man is bound to restore other things unjustly acquired, so he is bound to restore money received through usury.” So while it is true that scripture does not forbid loans or debt as a whole, we must realize that the types of debt which the modern world operates on are explicitly condemned in scripture.
But Jesus raises the bar even further in the New Testament by telling His disciples that not only should they lend without interest, but to lend without even expecting repayment of the principal.
"And if you lend to those from whom you expect to receive, what credit is that to you? Even sinners lend to sinners in order to receive back the same amount. But love your enemies and do good, and lend, expecting nothing in return; and your reward will be great, and you will be sons of the Most High; for He Himself is kind to ungrateful and evil people." -Luk 6:34-35
Borrow Sparingly
For the Lord your God will have blessed you just as He has promised you, and you will lend to many nations, but you will not borrow; and you will rule over many nations, but they will not rule over you. -Deu 15:6
As part of God's promise of a blessing over the Israelites as they entered the promise land, He declared in Deuteronomy 15:6 and again in 28:12 that His people would lend to everyone, but borrow from no one. This is not an explicit injunction against borrowing, but clearly a statement which implies that lending comes with a blessing (and in part as a result of blessing) and puts that in stark contrast to borrowing. The biblical norm and economic principle is to save, have a surplus, be generous, and provide your children with an inheritance, which builds generational wealth. This principle and ethic is so strong with Jews that just a few generations after having all their considerable wealth stolen from them during WWII (with estimates that their confiscated wealth alone paid for 30% of Hitler's war efforts), Jews are now once again the wealthiest people group in Germany.
Now, it should be emphasized that debt or borrowing is not identified as sin in scripture, nor is it forbidden—it is simply cautioned against and portrayed as something other than God's best for His people. However, there are zero passages which paint debt in a positive light and several which caution against it with others even limiting what could be used as collateral to secure a loan in order to help protect debtors from the most severe consequences of debt.
One who is a guarantor for a stranger will certainly suffer for it, but one who hates being a guarantor is secure. -Pro 11:15
Do not be among those who shake hands, Among those who become guarantors for debts. If you have nothing with which to repay, why should he take your bed from under you? -Pro 22:26-27No one shall seize a handmill or an upper millstone as a pledge for a loan, since he would be seizing the debtor’s means of life as a pledge. -Deu 24:6
With such a strong biblical emphasis on personal responsibility, duty, being a productive member of society, and saving, naturally loans and debts would be somewhat viewed as unwise and undisciplined. Indeed, some passages even seem to go a step further and treat the debtor with contempt and ridicule the concept that our modern world seems smitten with: that you can borrow your way into prosperity.
Will all of these not take up a song of ridicule against him, even a saying and insinuations against him and say, ‘Woe to him who increases what is not his—for how long—and makes himself rich with debts!’ Will your creditors not rise up suddenly, and those who collect from you awaken? Indeed, you will become plunder for them. -Hab 2:6-7
This Old Testament caution against indebtedness also carries into the New Testament with Paul advising believers to owe no one.
Owe nothing to anyone except to love one another; for the one who loves his neighbor has fulfilled the Law. -Rom 13:8
Repay Diligently
The reason debt is cast in a rather negative light in scripture is because debt can often lead to bondage. Indeed, Proverbs 22:7 states this plainly by saying, The rich rules over the poor, and the borrower becomes the lender’s slave. This was literally true throughout most of history as defaulting on a debt could result in the borrower becoming a slave of the lender in order to repay the value of the loan in service, or else be thrown into debtor's prison (see Jesus' parable of the two debtors in Mat 18:23-34). As odd as it may sound, God commanded Israel to practice indentured servitude rather than imprisonment in order to protect the lives and livelihoods of both the debtor and their family. He also limited the maximum number of years one could be indentured and required fair treatment of the indentured to further protect both the debtor and their family. But as defaulting on debt makes you an oath breaker and the consequences can be disastrous and far reaching, prompt repayment is not only prudent, but also moral in scripture.
The wicked borrows and does not pay back, but the righteous is gracious and gives. -Psa 37:21
When you make a vow to God, do not be late in paying it; for He takes no delight in fools. Pay what you vow! It is better that you not vow, than vow and not pay. -Ecc 5:4-5
The danger of debt leading to bondage, bankruptcy, and generational poverty was taken so seriously by God that He tightly regulated debt in Israel, commanding a complete release from all debt every seven years, but also the return of all property lost to debt and poverty every 49 years.
At the end of every seven years you shall grant a remission of debts. This is the manner of remission: every creditor shall release what he has loaned to his neighbor; he shall not exact it of his neighbor and his brother, because the LORD'S remission has been proclaimed. From a foreigner you may exact it, but your hand shall release whatever of yours is with your brother. -Deu 15:1-3
You are also to count off seven Sabbaths of years for yourself, seven times seven years, so that you have the time of the seven Sabbaths of years, that is, forty-nine years... So you shall consecrate the fiftieth year and proclaim a release throughout the land to all its inhabitants. It shall be a jubilee for you, and each of you shall return to his own property, and each of you shall return to his family. -Lev 25:8, 10
If a fellow countryman of yours becomes so poor that he sells part of his property, then his closest redeemer is to come and buy back what his relative has sold. Or in case someone has no redeemer, but recovers to find sufficient means for its redemption, then he shall calculate the years since its sale and refund the balance to the man to whom he sold it, and so return to his property. But if he has not found sufficient means to get it back for himself, then what he has sold shall remain in the hands of its purchaser until the year of jubilee; but at the jubilee it shall revert, so that he may return to his property. -Lev 25:25-28
Of course all these regulations on debt would greatly affect the societal practices of lending as no lender would want to enter into loan agreements which would extend beyond each Sabbath year or grant a loan amount which could not feasibly be repaid before the next Sabbath year. These Sabbath cycles effectively limited debt and helped guard lives and livelihoods against it while the Jubilee cycle helped guard a family's generational wealth against an undisciplined patriarch's debt. Then the restriction on charging interest on debt helped ensure that loans were given in good faith, discouraged predatory lending, and all but prevented institutional lending as a business practice.
Credit, Inflation, & Collapse
If scripture cautions against debt for individuals due to danger it poses, you can imagine the compounding and exponential threat it poses to entire nations. As societies shift from the biblical economic principle of savings being used in capitalism for investment and development to the unbiblical economic philosophy of creditism where debt is used for those purposes, the risk increases dramatically. If a single person defaults on a debt, one individual or family could become impoverished. If a large corporation defaults on their debt, the ripple effect is much larger and detrimental for society. But if a national government defaults on its debt, everyone for multiple generations can become impoverished.
Despite this enormous risk, governments throughout history have flirted with debt, often with disastrous consequences. This proclivity to live beyond their means has tempted many governments throughout history to experiment with fiat currencies in order to print or mint more money at will and multiply debt creation and expansion without the normal restrictions which come with a currency tied to limited commodities or precious metals. Of course every government which has adopted fiat currency for the purpose of expanding its "wealth" through ever increasing debt has been met with rapid inflation which eventually devalues the currency to the point of worthlessness, leading to a financial collapse. This historical reality led the famous French historian and philosopher Voltaire to remark, "Fiat currency always returns to its intrinsic value—zero."
The Founding Fathers of the United States were also students of history and were therefore quite wary of the perils of central banks. Thomas Jefferson even wrote that banks were more dangerous to a free nation than standing armies and that if he could wish for a single amendment to the constitution, it would be that the federal government would be barred from borrowing. But even more surprising is the condemnation of the practice by bankers themselves. Lord Josiah Stamp, then director of the Bank of England in 1937 said, "The modern banking process manufactures currency out of nothing. The process is perhaps the most astounding piece of slight of hand that was ever invented... If you want to be slaves of the bankers, and pay the cost of your own slavery, then let the banks create currency."
But currency creation is but one of the unwise practices of modern economics. Another that runs afoul of biblical principles is fractional reserve banking. With capitalism at least lending, even if done against biblical instruction and lent with interest, was done with savings—actual stored wealth. With creditism, lenders can lend money they don't even have through fractional reserve banking. So now we're not just creating money out of thin air by printing or minting it, we're also creating money out of thin air by lending exponentially more than we actually have—and then in yet another twist of wickedness, we're charging compound interest on that air. The famous economist John Maynard Keynes wrote in 1920 that, "By this means [of fractional reserve banking] governments may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft."
So the Bible and history agree that savings and accumulated tangible goods equate to wealth and produces blessing, but most modern economists and bankers believe that notion is far too conservative and restrictive, so they contend that debt and ever more intangible, speculative, complex, and esoteric financial instruments equate to wealth. With this complete lack of fiscal restraint or grounding, our modern economic system has "created" trillions of dollars and both public and private debt has skyrocketed. Private debt in the US stands at around $15 trillion, or about $93,000 per adult, but it's the public debt which should really concern us. The US federal government is in debt roughly $31 trillion, or roughly $92,000 per citizen or $243,000 per taxpayer. But government unfunded liabilities—future debt obligations which have no money set aside to cover them—is estimated to teeter around the $170 trillion mark. That debt obligation equates to roughly $510,000 per citizen in the US. For a family of five, that's a public debt of roughly $2.5 million on top of that family's private debt obligations. To get a better idea of just how enormous the US federal debt is, consider a few incredible facts:
Every second, about $40,000 of debt is added by the federal government. That's roughly $2.4 million per minute, $144 million per hour, and $3.5 billion per day.
The market value of all global Fortune 500 companies combined is only $22.6 trillion, so even if the federal government were to liquidate and confiscate (steal) all their wealth, it would only cover 2/3rds of their debt.
If the US government confiscated all gold ever mined—roughly 190,040 metric tons—it would only cover the federal debt incurred under President Obama from 2009-2016.
The debt incurred during President Trump's single peace time term—$4 trillion—could pay for an entire inflation-adjusted WWII.
The interest payments on $31 trillion in debt in 2021 was $562 billion—over $200 billion more than the entire Canadian federal budget in 2020.
Around the year 2023, the US will pay more in interest payments than the entire national defense budget. Note that we only pay the interest on our debt, we don't pay down the principal. We essentially don't repay our debts, we simply take out new and larger loans to cover older, smaller loans.
By 2050, interest payments alone will consume 100% of all federal tax revenue
And if you thought taxing the rich would allow us to expand federal budgets to include even more luxuries and entitlements, consider the fact that the combined wealth of all 614 billionaires in the US is only $4.2 trillion. So even if we could somehow confiscate every single penny of their unrealized value, that would only cover the current federal debt accumulation for less than a single presidential term or run the entire current federal budget for less than a single year. In fact, if we sent Elon Musk to the gulag tomorrow and confiscated his entire estimated value (by liquidating his stocks and probably crashing the market), the world's richest man could only pay about one month's worth of current federal debt accumulation.
But debt has a tendency to compound and spiral out of control due to the nature of interest and inflation. Back in the year 2000 after over 220 years of existence, US federal debt was about 57% of our national GDP... Just 20 years later in 2021 it was already 130% as each president, regardless of political party or policy, has increased the debt more rapidly than the last. Thomas Jefferson's warning seems quite accurate.
“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up will deprive the people of all property until their children wake up homeless on the continent their fathers conquered." -Thomas Jefferson
Maybe we should return to fiscal sense and sanity by returning to biblical currency and caution regarding debt, because history has taught us that our current course ends in economic collapse. But rather than address this existential threat, our politicians aren't just kicking the can down the road, but actively expanding government debt in new and creative ways, attempting to buy current citizens' votes with future citizens' money. Rather than saving and blessing our children with an inheritance, we're borrowing from our children, their children, and their children's children without their consent so that we can live comfortable and entitled lives far beyond our means. This borrowed bread and circus strategy isn't just unwise fiscal policy, it's immoral and unjust and as with all sin, will eventually cost us dearly. As Habakkuk warned, "Woe to him who increases what is not his—for how long—and makes himself rich with debts!"
This article first appeared on mPerspective