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The borrower is the slave of the lender
Wednesday, November 25, 2009
More evidence that there's not too much difference between drugs, alcohol, and shopping at the local mall when the credit card balances only go in one direction - up - comes in this story by Megan McArdle in the Atlantic.
Lead Us Not Into DebtHey, if submitting to a higher power works for alcoholics, why not "shopaholics"?
Finance guru Dave Ramsey wins followers with a simple message: find God and lose your credit cards.Dave Ramsey looks nothing like a televangelist. He’s a little on the short side, neither fat nor thin, and he wears jeans and a sports jacket, not a shiny suit and an oily smile. With his goatee and what’s left of his graying hair trimmed close to his head, he looks mostly like what he is—a well-groomed, middle- to upper-middle-class American professional. But when he runs out onstage and starts dispensing financial advice, you realize that he could have been a great preacher.
On a fine summer day at the end of August, I paid $220 for front-row seats on the floor of a minor-league hockey rink in Detroit, just to hear Ramsey talk for five hours. The ostensible topic: getting your financial life in order. Afterward, my fiancé, who grew up in the Bible Belt, called me to ask what I’d thought.
“I think I just attended my first prayer meeting,” I told him.
There was, of course, a great deal of talk about money, and what to do with it. But the format was more tent revival than accounting seminar, with the first 90 minutes or so mostly devoted to Ramsey’s personal story of ruin and redemption. We heard how, during the second half of the 1980s, a young Ramsey built up a multimillion-dollar real-estate empire—then lost it all as the bank got nervous and called his loans, ultimately forcing him and his wife into bankruptcy. How, searching for help in his hour of need, he turned to the Bible and discovered Proverbs 22:7: “The rich rule over the poor, and the borrower is slave of the lender.” At that moment, he told an audience so hushed that we could hear the ice squeak, Ramsey decided to never borrow another dollar again.
5 comments:
The central bank has made the US a nation of slaves by printing too much. The US is now a slave to overseas lenders.
The flip-side of the argument, of course, is that by not borrowing you're limited to un-leveraged investing, you cannot take advantage of government incentives which encourage borrowing (eg: tax deductions), and you're a slave to the monetary authorities who control the currency, and by extension its implied value. But wait, I forgot possibly the most important other argument: you're last in line for government bailouts, and governments will confiscate your wealth anyway, and give it to people who lived the high-life on borrowed money.
In a perfect, fair country/world, being fiscally responsible would have its rewards. In the US, however, you're often fighting an up-hill battle just to break even. I'm not saying you shouldn't try to save, I'm just saying it's not the road to prosperity with tax-happy wealth-redistributing governments.
@Nick,
The only way to keep ahead and keep your soul is to realize that wealth redistribution creates malinvestments and therefore underinvestments elsewhere. If you are early and find the right vehicles, either one will work.
I think the basic points of Mr. Ramsay's advice are quite sound. Whether he should envelop them in religion is a matter that every reader/listener should decide for himself.
Ramsay has some good advice. He also has some ridiculously extreme points of view (borrow ZERO for a car even if that means your wife goes to work in an unreliable, unsafe, gas hogging $500 clunker). I am debt free, do not borrow for cars myself, but a rich guy telling relatively poor ones not to take on a modest loan on a used cars is typical of this guy's arrogant side.
He uses religion simply to put butts in the seats at his expensive shows. The religion tie-in is his marketing machine. Church folks will gladly go with just one mention from their preacher. My parents got the speel for it at their Sunday services and were all ready to attend with no other previous vetting of him.
Listen to his show for a few days. You'll quickly see his attitude is a thinly concealed arrogance and contempt for his callers and sometimes it bubbles out and he has to catch himself and try to act humble and helpful.
Overall, good message but flawed messenger. It's about his own financial empire. Not yours.
PS. He was telling folks to load up on stocks and RE during 2007/2008 and called Schiff and other bears "kooks" and in a very unchristianlike way made sure to mention Schiff's dad was in jail. That's your guy in a nutshell.
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