Scanning the headlines, one easily becomes lost in trivia that passes for news. The meaningless vanity of Hollywood’s Oscar dog-and-pony-show tops the recent list. However, one important news item that caught my eye was actually “bad news” that left me cheering.
George Osborne, Great Britain’s Chancellor of the Exchequer, made the politically incorrect but courageous announcement that his beloved country is broke.
“The British Government has run out of money because all the money was spent in the good years,” the Chancellor said in The Telegraph as he sent early warning signals ahead of the upcoming budget presentation to Parliament.
As I read those simple words that a four-year-old could understand, I was, well…. gob smacked! To you, Chancellor Osborne, I say, “Three cheers!”
Hip, Hip, Hooray! (#1)
Why am I so giddy over this seemingly horrible news? And why is this simple statement so important to you, dear reader? Let me count the ways.
First, the Chancellor of the Exchequer is a high-ranking position in the British Cabinet, on par with the Secretary of the Treasury in the U.S. This person reports directly to the Prime Minister. Mr. Osborne’s words were not the opinion of a media pundit or an Ivory Tower economist; this was an assessment from the person in charge of what has historically been called the “budget box.” The Chancellor of the Exchequer knows exactly what’s in the box; in this case—nothing.
Second, these plainspoken words are entirely appropriate for such a time as this. The first step in solving any problem is to admit that you have one. This level of honesty brings about hope that solutions can now be honestly addressed as well.
Finally, if you were making financial decisions at home, aware that you have no money, you could weigh your options and move with urgency to change your financial condition. The Chancellor’s admission that his government doesn’t have two pence to rub together similarly calls for immediate action.
But Mr. Osborne wasn’t finished. He not only identified the problem; he offered the solution. Responding to severe financial pressure to do something to boost economic growth amid fears that the U.K. is slipping back into recession, the Chancellor called for bold action:
“The money and the investment and the jobs need to come from the private sector. In other words, what we are not going to do in this Budget is borrow more money to either increase spending or cut taxes.”
Hip! Hip! Hooray! (#2)
Sanity may be returning to ranks of the British government.
Mr. Osborne’s assessment was echoed by Liberal Democrat Jeremy Browne, Britain’s foreign minister. He recently wrote in the Daily Telegraph that Britain’s once-dominant world market share is now in free fall compared to the soaring economies of Asia and South America. “This situation has been becoming more acute for years. It is now staring us in the face. So we need to take action.”
Mr. Browne called for immediate reform of government pensions, welfare and defense spending to prevent Britain’s bureaucracies from “collapsing under the weight of their own debt. Just because the spending was sometimes on worthy causes does not in itself mean it was affordable.”
While it seems that both sides of the political aisle in Britain believe that private sector activity is needed to grow the economy and create jobs, they disagree on how that is accomplished. Mr. Osborne’s critics seized the opportunity to accuse him of being insensitive and washing his hands of the responsibility to use the government’s resources to spur private sector growth.
The Chancellor’s stark appraisal of his country’s condition was also a shot across the bow of other European Union members. Mr. Osborne made it clear that he understands the limitations of Britain’s options. When you’re broke, you can’t bail out others who are broke. He stated that Britain would not be giving any extra funds to the International Monetary Fund to bailout other bankrupt EU countries.
Hip! Hip! Hooray! (#3)
So why is this important to you?
You and I live in a country where our government is in denial.
In 1992, Crown’s late cofounder, Larry Burkett, authored a best-selling book,The Coming Economic Earthquake. Along with his warning that excessive spending and debt would carry the U.S. past a point of no return, Larry identified a dangerous weakness in America’s leaders:
“The one thing you can be certain of is that no one in the power structure of Washington will admit to any problems until the evidence is so overwhelming that it is obvious to all. It’s like we’re headed down the Niagara River in a powerless boat, and they still insist, ‘There is no problem. The sound you hear in the distance is not a waterfall. We promise!’”
The U.S. has been out of money for a very long time. Since World War II we’ve borrowed every year except eight to operate the federal government. We’ve been unable to admit we have a deadly addiction to spending more than we have.
But unlike the courageous Mr. Osborne, our leaders say we must continue spending money we don’t have to “stimulate the economy.” This can only be done by borrowing or turning on the printing presses. Many incorrectly view government—not the private sector—as the ultimate solution. This foolish thinking will one day cripple our economy.
The U.S. will soon face the same acute pain described by Jeremy Browne. Our day of reckoning will come when our creditors refuse to buy more government bonds. Then we’ll be left with only the printing presses, which will bring on hyperinflation. It’s bitter medicine, but the sooner the better. The more delay, the greater the pain.
Let us pray for more global leaders like George Osborne, both in Europe and the U.S., who will be willing to speak up and say that we can’t bail out others when we ourselves have nothing. Whether in the Queen’s English or good old American slang, “we’re broke” speaks volumes to those who need to hear it.
But why wait? Let’s get our personal houses in order starting right now. Even as our elected officials remain in denial and continue to sell us the “extend and pretend” approach, you can prepare for the troubled times ahead.
You won’t be able to say nobody warned you.
P.S. Are you getting your house in order? Share your story in the comments below to encourage others by your example.
If you’d like information on how to get started, everything you need to know from a biblical and practical standpoint to prepare for the worst, get The S.A.L.T. Plan: How to Prepare for an Economic Crisis of Biblical Proportions.