Letter from Langdon: Much to Our Dis-Credit

Credit and debt aren't the problem -- or at least they weren't. The problem is how we've spent all that money we've been borrowing.

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Things have been tough lately. Here at Langdon, Missouri, we’ve been hit by a recession along with inflating land, fertilizer, and farm equipment prices. Now we’re having a river flood while heat and drought inundate parts of the south.

All I’m getting out of this is another day older and deeper in debt.

With all that in mind, I called my banker to let him know enough is enough. I will be dealing with my crippling farm indebtedness by refusing to borrow another red cent. He applauded my will power. Then he asked when I’d be coming in to repay notes with interest due.

“Perhaps you didn’t understand,”  I said patiently. “Such action would be against recently adopted policy. I must be more austere. Each additional payment on my loans must be met with an equal offsetting cut. I have nothing left to cut. Therefore I will be unable to respond to your request because that would only add to my debt.”

After all, I have to draw the line somewhere.

I knew right away I had made an impression. Unfortunately for me, as soon as he had gathered his wits, my banker made it clear that this new-found conservatism would have to happen at my own expense, not his. He pointed out that the decision to spend money in question had been mine alone. I could easily have prevented this debt crisis if I had simply said “no” at the start.

Fair is fair. I suppose when it comes to debt, the same rules should apply to everyone.

I understand why as a nation we must finally say “Enough!” the same way average people must live within their means. It’s just too bad that Congress as a body is so far removed from average that the obvious is only apparent prior to election day.

One of the first things Dad taught me was that being a farmer and having good credit go hand in hand. Succeeding means doing things like planting and fertilizing on time. Farmers do a lot of that on borrowed money. So if I don’t pay my bills a whole lot of bad things happen to me. For one thing, no one will sell me anything because they know I won’t pay.

Without money I can’t grow a new crop. So if I don’t honor my commitments, I won’t succeed. But if I do things the way I should (and have a bit more luck than this year), I get to generate new income, and everyone…my lenders, my suppliers, my customers, and I…get something we need.

The U.S. space program, built with U.S. bonds, brought prestige, scientific advances, and powdered drinks.

Credit is only bad if you use it to for dumb things. Our nation plants and fertilizes its prosperity the same way I do. Bonds paid for the WPA and World War II. The fleet that blockaded Kruschev’s missiles in Cuba wasn’t bought with cash. Our astronauts went to the moon on borrowed money. That’s how we got Tang and a whole bunch of other stuff because we cultivated tough questions and harvested a big crop of answers.
 
Maybe Tang isn’t the best example.

But we all know the war on terror was financed with ten-year notes and refinanced on thirty. I rest my case.

On the farm we use cash or short term credit for things we use up right away, like repairs, fertilizer, and seed. That money has to be replaced in a few months. We use intermediate term credit for things that wear out less quickly, like machines that may last just a few years, and long term credit is for hard assets that don’t depreciate at all or may even gain in value over time, like land.

When you have to use long term credit just to pay the bills, you’re in trouble. Either way, the bills still have to be paid.

Louis Charles McClure/American Memory
For farmers, credit buys seed, fertilizer, and machinery, with loans repaid after the harvest. Here two men stand in thigh-high millet in Eastern Colorado, 1921.

Congress could have drawn the line on Mideast wars, multi-billion dollar defense contract overruns, “free” trade, and credit swap bail-outs, but they chose to finance those things even though they’re the equivalents of QVC Lava Lamps purchased on Master Card.

Now we have to pay.

All the people who made money through expenditures of government debt say they shouldn’t have to make payments on the debt by paying taxes. Big oil wants open channels to ply their trade through the Persian Gulf, offshore drilling, and the Arctic National Wildlife Refuge. Big business wants access to the treasury through tax credits, not tax bills. Big bankers want it all deposited off the books to an off shore account where it probably finances, among other things, our competition. 

Hard to believe that 12 years ago we had a budget surplus and could pay cash.

It’s a vicious cycle. Now we’re flirting with government shutdowns that make America less safe and stable but that still allow Congress access to taxpayer-financed air conditioning, printing presses, per diems, health care, and retirement at any age worth five times the best Social Security has to offer.

Like my folks always said, poor people have poor ways.

 

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