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08/20/2005 Archived Entry: "Debt is a choice"

YOU’RE WELCOME, CLAIRE although I did very little. The point Claire raises is so important that I want to emphasize it.

Claire Wolfe is the wealthiest starving artist I know. I don’t know what’s in her bank account (or if she even has one) or how many gold coins she’s saved. So how do I know she is wealthy?

Claire Wolfe lives free. She walks the talk. Freedom means, among many things, not being in debt.

I have to disagree slightly about “negative net worth.” There are very limited conditions where it might make sense, or be unavoidable, to be in debt TEMPORARILY, such as taking out loans to get a college education, or suffering a serious illness.

But as Claire points out, only wastrels and worse make debt into a way of life. Starting a business, or making an investment, does not decrease your net worth. You trade savings for the storefront or the coin collection, but the wealth isn’t gone, its just changed from FRNs to something else. Your NET worth is unchanged at the moment you make the trade.

This isn’t just nitpicking. The business can fail, the investment can be a bad one, and THEN your net worth goes down. But that is a result of bad decisions, and all too often a lack of hard, effective work. A failing business or depreciating investment is the market at work, moving wealth from those who don’t put it to the best use to those who do.

The point is, the only way to have a negative net worth, to stay in debt, is to spend more than you earn. Year after year, decade after decade, you consume more than your income. Your lifestyle exceeds your means. Debt is a way of life. It has its attractions: fine food and wine, new cars and exotic vacations. But it is slavery.

Claire Wolfe’s life shows us all that being wealthy, and being free, is not a matter of income. It is first and always a matter of choice.


That said, the carefully engineered system of fiat money, chronic inflation, and spiraling debt that we live in today does play an important role in the choices people make. For an excellent summary see Jörg Guido Hülsmann's The Cultural and Spiritual Legacy of Fiat Inflation.

"Inflation erodes morals in creeping, insidious ways. It replaces social bonds with government controls, makes war possible and leads to loss of respect for life, reduces rewards for enterprise and thrift while subsidizing laziness and debt, encourages proflicacy in finance and recklessness in morals, and penalizing traditional marital relationships. In all, inflation is a powerhouse of social, economic, cultural, and spiritual destruction."

Powerful stuff, and worth reading. But in the end, the lies and distortions are merely temptations. Debt is a choice, as is freedom.

Posted by Silver @ 05:21 AM CST

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