It seems like the economy is the thing on everyone's mind these days. The Iraq War has really faded in to the background, partly because it has been shoved out of the picture by fears of recession but primarily (at least, according to me) because the troop surge has cut casualty rates to almost nothing (although there has been some bad news the past couple days).
Most people seem to accept the idea that the economy is headed for a recession, now. Poof! There goes the only potential bright spot of the Bush legacy--at least his immediate legacy. Time will tell as to how people think he did on terrorism. I know people think he has failed miserably now, but the passage of time has resulted in some pretty substantial shifts of opinion before.
The real question for me is: how long is it going to take before we really start to feel the effects of recession in Utah? By all accounts, Utah's economy is booming right now. People are still moving in and companies are starting up and things are generally good--at least that's what we're told. I, for one, am already feeling a pinch. Food prices are up, and gas prices don't feel like they've really gone down this winter (although they have receded from their high of $3.25 during the summer). Also, new home construction has basically slowed to a stop in my area of Provo (and I'm not sure it's any better anywhere else in the valley). It won't take long for these effects to start rippling through the local economy.
In any event, we will soon find out just how much of Utah's rosy economy of the last few years was driven by real estate. I suspect it is a substantial amount--more substantial than many people think. It seems like one of every 3-4 people I meet are either in the construction or real-estate industry. Both of those industries have been driven mainly be two things: (1) investment and (2) credit. Now, with the extension of credit coming back to earth and the flood of investment from California, Florida, Arizona, and Nevada becoming a small trickle, these industries are going to take a hit. This hit, combined with bad economic news from around the country will put us in the classic downward spiral. I think we're going to see some substantial negative effects here in Utah. Our economy here, like those in most other places, was built on property investment and consumption. The combination of the decimation of the residential construction industry with inflation is bad news for Utah--in my humble opinion.
As a final note, I find it instructive (and sad) to think back on President Hinckley's comments in the October 1998 General Conference. Here's a quote:
Now, brethren, I should like to talk to the older men, hoping that there will be some lesson for the younger men as well.I wish to speak to you about temporal matters.
As a backdrop for what I wish to say, I read to you a few verses from the 41st chapter of Genesis.
Pharaoh, the ruler of Egypt, dreamed dreams which greatly troubled him. The wise men of his court could not give an interpretation. Joseph was then brought before him: "Pharaoh said unto Joseph, In my dream, behold, I stood upon the bank of the river:
"And, behold, there came up out of the river seven kine, fatfleshed and well favoured; and they fed in a meadow:
"And, behold, seven other kine came up after them, poor and very ill favoured and leanfleshed. . . .
"And the lean and the ill favoured kine did eat up the first seven fat kine: . . .
"And I saw in my dream . . . seven ears came up in one stalk, full and good:
"And, behold, seven ears, withered, thin, and blasted with the east wind, sprung up after them:
"And the thin ears devoured the seven good ears: . . .
"And Joseph said unto Pharaoh, . . . God hath shewed Pharaoh what he is about to do.
"The seven good kine are seven years; and the seven good ears are seven years: the dream is one. . . .
". . . What God is about to do he sheweth unto Pharaoh.
"Behold, there come seven years of great plenty throughout all the land of Egypt:
"And there shall arise after them seven years of famine.
". . . And God will shortly bring it to pass" (Gen. 41:1720, 2226, 2830, 32).
Now, brethren, I want to make it very clear that I am not prophesying, that I am not predicting years of famine in the future. But I am suggesting that the time has come to get our houses in order.
So many of our people are living on the very edge of their incomes. In fact, some are living on borrowings.
We have witnessed in recent weeks wide and fearsome swings in the markets of the world. The economy is a fragile thing. A stumble in the economy in Jakarta or Moscow can immediately affect the entire world. It can eventually reach down to each of us as individuals. There is a portent of stormy weather ahead to which we had better give heed.
I hope with all my heart that we shall never slip into a depression. I am a child of the Great Depression of the thirties. I finished the university in 1932, when unemployment in this area exceeded 33 percent.
My father was then president of the largest stake in the Church in this valley. It was before our present welfare program was established. He walked the floor worrying about his people. He and his associates established a great wood-chopping project designed to keep the home furnaces and stoves going and the people warm in the winter. They had no money with which to buy coal. Men who had been affluent were among those who chopped wood.
I repeat, I hope we will never again see such a depression. But I am troubled by the huge consumer installment debt which hangs over the people of the nation, including our own people. In March 1997 that debt totaled $1.2 trillion, which represented a 7 percent increase over the previous year.
In December of 1997, 55 to 60 million households in the United States carried credit card balances. These balances averaged more than $7,000 and cost $1,000 per year in interest and fees. Consumer debt as a percentage of disposable income rose from 16.3 percent in 1993 to 19.3 percent in 1996.
Everyone knows that every dollar borrowed carries with it the penalty of paying interest. When money cannot be repaid, then bankruptcy follows. There were 1,350,118 bankruptcies in the United States last year. This represented a 50 percent increase from 1992. In the second quarter of this year, nearly 362,000 persons filed for bankruptcy, a record number for a three-month period.
We are beguiled by seductive advertising. Television carries the enticing invitation to borrow up to 125 percent of the value of one's home. But no mention is made of interest.
President J. Reuben Clark Jr., in the priesthood meeting of the conference in 1938, said from this pulpit: "Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you" (in Conference Report, Apr. 1938, 103).
I recognize that it may be necessary to borrow to get a home, of course. But let us buy a home that we can afford and thus ease the payments which will constantly hang over our heads without mercy or respite for as long as 30 years.
No one knows when emergencies will strike. I am somewhat familiar with the case of a man who was highly successful in his profession. He lived in comfort. He built a large home. Then one day he was suddenly involved in a serious accident. Instantly, without warning, he almost lost his life. He was left a cripple. Destroyed was his earning power. He faced huge medical bills. He had other payments to make. He was helpless before his creditors. One moment he was rich, the next he was broke.
Since the beginnings of the Church, the Lord has spoken on this matter of debt. To Martin Harris through revelation, He said: "Pay the debt thou hast contracted with the printer. Release thyself from bondage" (D&C 19:35).
President Heber J. Grant spoke repeatedly on this matter from this pulpit. He said: "If there is any one thing that will bring peace and contentment into the human heart, and into the family, it is to live within our means. And if there is any one thing that is grinding and discouraging and disheartening, it is to have debts and obligations that one cannot meet" (Gospel Standards, comp. G. Homer Durham [1941], 111).
We are carrying a message of self-reliance throughout the Church. Self-reliance cannot obtain when there is serious debt hanging over a household. One has neither independence nor freedom from bondage when he is obligated to others.
In managing the affairs of the Church, we have tried to set an example. We have, as a matter of policy, stringently followed the practice of setting aside each year a percentage of the income of the Church against a possible day of need.
I am grateful to be able to say that the Church in all its operations, in all its undertakings, in all of its departments, is able to function without borrowed money. If we cannot get along, we will curtail our programs. We will shrink expenditures to fit the income. We will not borrow.
One of the happiest days in the life of President Joseph F. Smith was the day the Church paid off its long-standing indebtedness.
What a wonderful feeling it is to be free of debt, to have a little money against a day of emergency put away where it can be retrieved when necessary.
President Faust would not tell you this himself. Perhaps I can tell it, and he can take it out on me afterward. He had a mortgage on his home drawing 4 percent interest. Many people would have told him he was foolish to pay off that mortgage when it carried so low a rate of interest. But the first opportunity he had to acquire some means, he and his wife determined they would pay off their mortgage. He has been free of debt since that day. That's why he wears a smile on his face, and that's why he whistles while he works.
I urge you, brethren, to look to the condition of your finances. I urge you to be modest in your expenditures; discipline yourselves in your purchases to avoid debt to the extent possible. Pay off debt as quickly as you can, and free yourselves from bondage.
Remarkably prescient, huh? But what else would you expect from the Prophet. What I think is sad is that it is pretty clear that the members in Utah generally ignored his counsel. The house of the average member of the church in Utah today is more "out of order" than it was in 1998. We've had our 7 years of prosperity since 2001, and now the bill for our consumer debt is coming due.
