Magic Water and Big Government

During the wee hours of this morning, my brother saw an infomercial for magic water that will erase all of a person's debt. (I am not making this up; we googled it today to make sure that he was not putting us on!). A person who wants a fresh start in life merely sends to some money to the organization hawking the water, and when the vial of elixir arrives, he or she pours it over the mailbox. Within days, all debt has been forgiven.

The infomercial apparently featured happy users of the magic water who had been deeply in debt before receiving their supply. They are now debt free and prosperous. The magic water apparently not only forgives existing debt but is income producing as well. One of them is now closing on her third home. (I wonder whether she will use the magic water to expunge the mortgage or whether this is a once in a lifetime debt forgiveness.)

As reasonably intelligent, worldwise people, we would tend to scoff at the very concept of magic water, but that is mainly because we don't believe it would work. But I wonder what would happen if we knew for sure that, instead of just a pile of soggy mail, we really would have complete debt forgiveness. If the water did work, if we could see its effects and know that it could meet every claim, would we still scoff? I submit that the purveyors of magic water would have an immediate shortage as it became the most in-demand product in the U.S--perhaps even worldwide as its fame spread. And unless one of its magic properties is to reimburse the creditor, it would be responsible for the greatest financial crash in history. How many of us would stop to say to ourselves, "I wonder how much money it will cost the companies I borrowed from it I don't pay them back." Would we even think about those losses at all?

This sounds ridiculous, because it is, but if you think about it, that is exactly what we as a nation are attempting to do right now with so much of our personal debt. When we demand that lenders reduce the principal balances of mortgages, we are not considering that the bank loaned that money on a specific piece of property, and that when we refuse to pay it back we are costing them money. How many borrowers exercising "strategic default" think about the fact that they are walking away from a house that the bank will have to sell at less than the amount owed. In most cases, that is no more the bank's fault than it is ours as the buyer of the home, yet we don't feel guilty about it. We just want a quick fix, even if it comes at somebody else's expense.

The only real long term solution to debt and financial problems is to work to solve the problem. For some that means bankruptcy with a payment plan, for others it means learning to live within our means. Real financial reform starts at a personal level with personal integrity and the knowledge that our actions and decisions affect others--sometimes many others. The core principal of a credit society is that we honor our obligations and we all do our part, without looking for magic water or a magic fix from Uncle Sam.