God Is In Control During the Financial Crisis

October 2, 2008



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Speaking Out
God Is In Control During the Financial Crisis
God often uses adversity for his greatest blessings and the markets are his.
Charles Colson | posted 10/02/2008 02:33PM


Most of us have been badly shaken by the tumultuous events on Wall Street in recent weeks. If you have an IRA or some kind of retirement plan, no doubt you are licking your wounds. You may even be fearful. I understand. I have experienced those apprehensions myself.

But we need to remember that fear is always the enemy of faith. The financial markets are his. The world is his.

Here is something else to remember: God often uses adversity for his greatest blessings — in several ways in this case. Christians are called to do the best things in the worst of times.

Above all, remember this: God is on his throne. Maybe the "eat, drink, and be merry" attitude of Americans needed a little adjustment — as does the spiritually casual attitude of the church.

Accounting for disaster

The near collapse and buyout of Fannie Mae and Freddie Mac are prime examples of Washington corruption. For at least a decade, a few brave politicians have sought to reform these quasi-governmental behemoths, only to be beaten back by political powerbrokers. Why? Because, as they say, money talks.

So while the politicians were busy padding their cozy little nests, the chickens have come home to roost.

The first step in the cleanup is the massive $700 billion plan proposed by Treasury Secretary Henry Paulson and passed by the Senate Wednesday night. Of course the people who are steering this plan through Congress are the very characters who brought us this crisis. And they are already looking for political and financial goodies they can hang on to the plan.

I have got a better idea. Those who steered Fannie and Freddie into the ground should return to the taxpayers their ridiculous compensation. And if there was criminality involved—either with corrupt executives or elected leaders—then let's have some indictments.

Cost and opportunity

Meanwhile, across America folks are outraged by the government's rescue plan for the nation's financial system. I understand — $700 billion is a lot of money.

Call it sticker shock. But let's get some perspective. Some estimate that the United States will spend more than $400 billion this year alone on foreign oil. So $700 billion is less than what we will be spending on foreign oil this year and next, putting money in the pockets of the likes of Saudi Arabia (which is an exporter of extremist Wahhabi Islam) and Venezuela (whose volatile leader, Hugo Chavez, makes no bones about hating the U.S.).

As this financial crisis spreads uncertainty throughout the markets and across Main Street, there's another opportunity on the table: the opportunity we Christians have to witness to our neighbors.

How you react to this crisis — in conversations with friends, in helping a family in trouble, in how you live within your means — will speak volumes about the confidence you have in Christ and in the sovereignty of God.

What's in it for me?

On Monday, the House of Representatives surprised its leaders, the administration, and, most of all, the financial community by rejecting the agreed-upon financial rescue plan.

Two-thirds of all Republicans and two-fifths of all Democrats voted against the plan, with predictable results. The markets tanked around the world.

Now to be sure, some opposed the rescue measure on principle. But many who voted against the bill merely reflected the will of their constituencies, who wondered why their money should be used to take other people off the hook.

I can't help but think this illustrates how far we have gone down the path of viewing all politics and all of life as "what's in it for me."

No great civilization has ever been built, or maintained, on that basis. That idea cannot demand, much less inspire, the necessary sacrifices to keep a civilization great, or even healthy. There's nothing to aspire to apart from fleeting self-satisfaction.

I respect the principled opposition to the rescue plan by some members. But the fate of the economy is hanging in the balance. If the American people can't look beyond the "me" and see the "we" with this much at stake, then much more than our retirement funds and our bank accounts are at risk.

Consumption and crisis

The financial crisis was precipitated by the meltdown of the sub-prime mortgage market. Millions of Americans took out mortgages they could not afford to buy houses that in some cases they really didn't need.

But it's not just the sub-prime mess. The personal debt of Americans is at record levels, and everything from the war in Iraq to Katrina recovery is funded by borrowing. Both political parties are quick to promise specific "goodies," such as new entitlements or tax cuts or new roads, but they never say how they are going to pay for them.

The answer, of course, is that they haven't a clue, other than to borrow from foreigners and then stick our children and grandchildren with the bill for some future day.

So first, we put our own houses in order. Next, we demand that our political leaders stop behaving like Santa Claus, or shopaholics in an outlet mall. In fact, I am tempted to say that we ought to be voting for the candidates who promise us the least goodies and tell us the hard truth: that we have to start acting responsibly.

Playing it SAFE

Once we get past this crisis, as we will, we are still a long way from getting our economic house in order. The problem is that we — politicians and those of us who demand they deliver the goods — have lost the political will to make the choices necessary to live within our means.

Congressman Frank Wolf of Virginia has proposed the creation of a bipartisan blue-ribbon commission called SAFE: Securing America's Future Economy. The SAFE Commission would identify the things we can afford and the things we can't afford. It would examine entitlements in a way that politicians seeking re-election dare not.

As it is, the nation's economy is in for a rough ride. But we may also be in the midst of what is called a "teachable moment." We ought to take advantage of it and show the world that we have the civic courage to do what is right.

Charles Colson is a Christianity Today columnist and founder of Prison Fellowship Ministries. This article is adapted from a series of radio commentaries for PFM'sBreakPoint. Excerpted with permission of PFM.

Copyright © 2008 Christianity Today. Click for reprint information.



Related Elsewhere:

Al Mohler also wrote "A Christian View of the Economic Crisis."

Christianity Today has special sections on the economic crisis and money & business.

The layman's finance crisis glossary

The current financial crisis has thrown terminology from the business pages onto the front page of newspapers, with jargon now abounding everywhere from the watercooler to the back of a taxi.


Here is a guide to many of the business terms currently cropping up regularly, as well as some of the more exotic words coined to describe some of the social effects of the credit crunch.

Readers can send any terms they need explaining using the form at the bottom.


A-C


Administration

A rescue mechanism for UK companies in severe trouble. It allows them to continue as a going concern, under supervision, effectively to try to trade out of difficulty.

A firm in administration cannot be wound up without permission from a court.


Bear market

In a bear market, prices are falling and investors, anticipating losses, tend to sell. This can create a self-sustaining downward spiral.
Bond

A debt security - or more simply an IOU. The bond states when a loan must be repaid and what interest the borrower (issuer) must pay to the holder. Banks and investors buy and trade bonds.


Bull market

A bull market is one in which prices are generally rising and investor confidence is high.


Chapter 11

The term for bankruptcy protection in the US. It postpones a company's obligations to its creditors, giving it time to reorganise its debts or sell parts of the business, for example.


Commodities

Commodities are products that, in their basic form, are all the same so it makes little difference from whom you buy them.

That means that they have a market price. You would be unlikely to pay more for iron ore from a particular mine, for example.

Credit crunch

The situation created when banks hugely reduced their lending to each other because they were uncertain about how much money they had.

This in turn resulted in more expensive loans and mortgages for ordinary people.

Credit default swap

A swap designed to transfer credit risk. The buyer of the swap makes periodic payments to the seller in return for protection in the event of a default.

A bank which owns a lot of mortgage debt could swap it, but would have to make a pay-out if those mortgages were not repaid.

D-F

Derivatives

Derivatives are a way of investing in a particular product or security without having to own it. The value can depend on anything from the price of coffee to interest rates or what the weather is like.

Derivatives can be used as insurance to limit the risk of a particular investment.

Credit derivatives are based on the risk of borrowers defaulting on their loans, such as mortgages.

Equity

In a business, equity is how much all of the shares put together are worth.

In a house, your equity is the amount your house is worth minus the amount of mortgage debt that is outstanding on it.

Fakeaway

A home-made, belt-tightening version of a takeaway - think, a curry made with a jar of sauce, bag of rice and a packet of poppadoms from the supermarket.


Futures

A futures contract is an agreement to buy or sell a commodity at a predetermined date and price. It could be used to hedge or to speculate on the price of the commodity.


H-K
Hedge fund

A private investment fund with a large, unregulated pool of capital and very experienced investors.

Hedge funds use a range of sophisticated strategies to maximise returns - including hedging, leveraging and derivatives trading.

Hedging

Making an investment to reduce the risk of price fluctuations to the value of an asset.

For example, if you owned a stock and then sold a futures contract agreeing to sell your stock on a particular date at a set price. A fall in price would not harm you - but nor would you benefit from any rise.

Hypermiling

Techniques used by drivers to get more miles to the gallon, such as coasting in neutral and keeping tyre pressure high.

Investment bank

Investment banks provide financial services for governments, companies or extremely rich individuals. They differ from commercial banks where you have your savings or your mortgage.


L-P

Leveraging

Leveraging, or gearing, means using debt to supplement investment.

The more you borrow on top of the funds (or equity) you already have, the more highly leveraged you are. Leveraging can maximise both gains and losses.

Deleveraging means reducing the amount you are borrowing.

Libor

London Inter Bank Offered Rate. The rate at which banks lend money to each other.

Liquidity

The liquidity of something is how easy it is to convert it into cash. Your current account, for example, is more liquid than your house.

If you needed to sell your house quickly to pay bills you would have drop the price substantially to get a sale.

Loans to deposit ratio

For financial institutions, the sum of their loans divided by the sum of their deposits.

Currently important because using other sources to fund lending is getting more expensive.

Mark-to-market

Recording the value of an asset on a daily basis according to current market prices.

So for a futures contract, what it would be worth if realised today rather than at the specified future date. Also marked-to-market.

Negative equity

Refers to a situation in which the value of your house is below the amount of the mortgage that still has to be paid off.

Profit warning

When a company issues a statement indicating that its profits will not be as high as it had expected. Also profits warning .



R-T

Rating

Bonds are rated according to their safety from an investment standpoint - based on the ability of the company or government that has issued it to repay.

Ratings range from AAA, the safest, down to D, a company that has already defaulted.

Recessionista

A person who manages to look fashionable on a tight budget.

Securitisation

Turning something into a security . For example, taking the debt from a number of mortgages and combining them to make a financial product which can then be traded.

Banks who buy these securities receive income when the original home-buyers make their mortgage payments.

Security

Essentially, a contract that can be assigned a value and traded. It could be a stock, bond or mortgage debt, for example.

Short selling

A technique used by investors who think the price of an asset, such as shares, currencies or oil contracts, will fall. They borrow the asset from another investor and then sell it in the relevant market.

The aim is to buy back the asset at a lower price and return it to its owner, pocketing the difference. Also shorting .

Spiv

A term popularised in World War II for flashily-dressed chancers involved in black market dealings. A fictional spiv is ladies' man Private Joe Walker in Dad's Army.

Newspaper headline writers use "spiv" as shorthand for traders who play for high stakes.

Stagflation

The dreaded combination of inflation and stagnation - an economy that is not growing while prices continue to rise.

Staycation

Staying at home for your holiday in a bid to save money.

Sub-prime mortgages

These carry a higher risk to the lender (and therefore tend to be at higher interest rates) because they are offered to people who have had financial problems or who have low or unpredictable incomes.

Swap

An exchange of securities between two parties. For example, if a firm in one country has a lower fixed interest rate and one in another country has a lower floating interest rate, an interest rate swap could be mutually beneficial.


U-Z

Unwind

To unwind a deal is to reverse it - to sell something that you have previously bought, or vice versa.

When administrators are called in to a bank, they must do the unwinding before creditors can get any money back.

Write-down

Reducing the book value of an asset to reflect a fall in its market value. For example, the write-down of a company's value after a big fall in share prices.



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