The "Great Recession," Idols, and the Gospel of Jesus Christ

March 4, 2009

In recent years there was a move to focus Reformed and evangelical piety on "The Idols of the Heart." Of course as one of those who agrees entirely with Calvin’s dictum that after the fall the "perpetual disposition" of human beings is to be a "factory of idols"¹ it seems difficult to dissent from the new inquisition of the heart.

Yet, we should observe that the fellow who gave us the dictum about our inclination to be an "idol factory" did not turn every sermon into an inquisition of the heart. This is perhaps because it was not a shock to him that we are idolators by nature. He did comment on it quite frequently, however. With that I wish to consider a popular idol that has caused quite a lot of trouble: the pocketbook and spending habits of the last 25 years or more.

One of the patterns that some economists have noted, in connection with the "Great Recession" we are experiencing, is that consumer spending continued to grow with very few pauses since 1980. [Disclosure: I’m not an economist. I was a poli sci major way back when but I read more Plato than von Mises.] At the same time, the savings rate dropped. Baby boomers (those born between 1946-1960) had come of age in the era of the credit card. Gone were Mom and Dad's staid Diners Card. In came a plethora of cards and soon there were "Platinum" cards by which to measure one's credit and affluence. Buy now, pay later. Cash wasn’t king. Credit was king. Gradually from the 1950s it seems that we moved from being a savings-based economy to a credit-based economy. That move probably reached it’s apex in the Clinton-Bush years when credit card companies were throwing cards at consumers and, of course, lenders began throwing mortgages at people and then packaging them into "derivatives" to be sold in bulk to investors (backed by a AAA Moody's rating).

Like everything in this world, credit has a natural market. Sometime after 2004, the credit market began to hit its limit. The mortgage-backed securities turned out to have been backed by overpriced mortgages (fueled by record-low interest rates) and, finally, the housing market began to tumble as interest rates rose on the adjustable mortgages. Home values plummeted (because of falling demand) and suddenly millions of home owners were "upside down" in their houses--and banks owned loans against these severely devalued assets.

We'll leave it to the economists to sort out exactly what happened and how to deal with it on the macro level (though I'm not sure that borrowing unimaginable sums against future earnings will solve the problem). Our interest here should be the degree to which Christians participated in the culture of credit. Could it be that our problem was not just an idol of the heart but an idol of the credit card?

Isn't it true that during a couple of ostensibly "conservative" administrations that, in fact, we Americans were anything but conservative fiscally? I'm not speaking of tax cuts but of personal spending. We came to believe in easy money and high rates of return. I remember hearing someone once say, "You’re only getting 15 percent on your IRA?" That sounds pretty funny in a time when Treasuries are offering almost zero percent interest.