I would hate to be guilty of always looking at the clouds instead of the silver lining, so when I saw the report “U.S. Deleveraging, Unlike Some” on the Powerline blog that had some good news about American debt, I thought I would pass it along. Well, “good” is a relative term, of course!
To “leverage” yourself, in this case, is to use your borrowing power, and to “deleverage” is to reduce your debt. And the good news is that the United States, unlike, say, the UK and Europe, has, on the whole, been getting rid of debt as a percentage of Gross Domestic Product (GDP). By the standards in the report, the United States has reduced its total debt as a percentage of GDP by 16% since the second quarter of 2008, when much of this mess accelerated.
Actually, to be more specific, the American government has not, but the citizens and private companies of America have. The report claims that the American government has continued overextending itself and increased debt, but that the private households, banks, firms, etc. of the United States have personally cut back to the point that the net result for the country is a reduction of overall debt.
Of course, some of you out there reading this might be a part of that change, and good for you if you have been! The Bible tells us that the borrower is servant or slave to the lender (Proverbs 22:7), and if you’ve ever been in severe debt, you’ve tasted the sentiment expressed in that proverb. It is encouraging that at least our citizenry may have some financial sense when little-to-none seems to be visible in our leadership.
Same for our private businesses, and the report points out that our financial institutions are not nearly as debt-leveraged as their counterparts elsewhere in the world [note: "pc" means "percent (of GDP)"]:
One is tempted to ask what all the fuss was about in the US. The debt of financial institutions is just 40pc, compared to the UK (219pc), Japan (120pc), France (97pc), Germany (87pc) and Italy (76pc). Bank debt has dropped from $8 trillion to $6.1 trillion — accelerated by the Lehman collapse — as lenders rely more on old-fashioned deposits.
So, good news for America on this front. (Read the report, though: Abysmal news for the UK.)
But to say we are out of the woods would be delusional. For one thing, we’ve created the sort of economic environment that is, sadly, dependent on stupidity: Where Bubba’s willingness to let Visa loan him money to by an 80″ flat screen TV may be dumb for Bubba but is good for Uncle Sam — short term, of course, not long term. (My apologies to those actually named Bubba who are too smart to do such a thing.) When a nation’s economic standing is hampered when its people begin to behave rationally, it’s in trouble.
And, ultimately, our problems are not policy problems but spiritual problems. While Habakkuk 2 is not a direct prophecy about the United States (which the Bible makes clear and which I feel responsible for clearing up), there are many prophecies in Scripture which point out that crushing debt is our destiny if we do not get our spiritual house in order — which involves so much more and runs so much deeper than monetary policy.
Still, it’s nice to hear some good news for a change, with whatever caveats it may bring with it. With clouds as dark as these, any silver lining is a welcome sight.