Hypothetical:[fn1] Alex and Pat both want a Kindle Fire.[fn2] Alex goes to the local brick-and-mortar[fn3] Amazon store, pays $200 cash, and takes a Kindle Fire home. Pat goes to the bank, gets a loan for $200, goes to the local brick-and-mortar Amazon store, pays the $200, and takes a Kindle Fire home. Who made the better decision?[fn4]
In the Church, we’re suspicious of debt. Sure, we get a pass on student loans, a modest house, a first car, but, as a general rule, our leaders discourage incurring consumer debt, and celebrate those who have escaped debt’s clutches. Having grown up a member of the Church, and having heard the various talks and lessons, I suspect most members would say that Alex made the better decision;Alex has the Fire and no debt. Pat, on the other hand, has both the Fire and the debt.
Assuming you agree with my intuition that, in general, Mormons would think that Alex made the better decision, I want to push that intuition a little:
(1) Let’s suppose, first, that Alex bought with cash because he has $200 just lying around. Pat, on the other hand, doesn’t, and the only way she can afford a Kindle is by borrowing. But assume Pat has a steady, if low-paying, job with amazing job security, while Alex, though making more money,has a 70% chance of losing his job in the next three months, with an uncertain outlook for getting another job in the foreseeable future. Does that change your (Mormon) intuition?
(2) Or what if Alex leaves all of his money in a checking account that doesn’t pay any interest, while Pat borrows at a low 3% rate, while she earns a 10% return on her money, which has all been wisely invested?[fn5]
(3) Or what if Pat isn’t just paying a low interest rate, but no (or a negative) interest rate?
What I’m trying to get at is the underlying why of our discomfort with debt. I understand for financial purposes why consumer debt is often a bad idea. Even in a (2) situation, most people don’t invest their unborrowed money; they just leave it in their checking accounts, so the fact that they could earn a higher return in theory doesn’t mean anything in practice.
And maybe our discomfort is purely a practical one, borne out of speculative investing in Kirtland and several generations of General Authorities who lived through the Depression.[fn6] But is there a religious explanation? Like we don’t like consumerism/worldliness? (But didn’t both Alex and Pat buy a Kindle Fire?) We’re theologically opposed to risk? Interest (at least its payment) is spiritually harmful?
Even if the avoidance of consumer debt is purely a practical consideration, we can see better today why it’s a good idea than we’ve seen in 80 years or so. But I’m interested in your take on whether it might be something more.
[fn1] Note that it’s exam season, so I’m kind of in exam mode. Oh, and good luck to all of the T&S-reading students on your finals!
[fn2] Actually, they both want an iPad, but it’s priced way out of their league, and they figure a Kindle Fire is good enough.
[fn4] Yes, I’m asking you to judge Alex and Pat, without knowing their hearts or their genders. If it makes you feel any better, they’re fictional, anyway: this is just a thought experiment.
[fn5] FWIW, Pres. Hinckley wouldn’t have changed his mind.
[fn6] It’s probably also worth noting that the Law prohibited charging interest. For those of you who know the Hebrew Bible better than I, was there any underlying reason that interest would be prohibited, or is it solely because God said?