On Savings and Debt

By James Schaefer.

Some years back, at an annual company off-site retreat, a presenter was elaborating on money.  He gave many definitions, then asked us to think of money in a slightly different way.  Rather than thinking of it as a medium of exchange, he asked us to think of money as “stored work”.

He said that savings, especially robust retirement savings, represented substantial stored work.  We can think of savings, he said, as work that will not have to be done in retirement, because it was done earlier in life.

The work that is stored away — as money and savings — will originate, of course, from whatever we do for a living.  We can think of it as teeth filled, hours on the assembly line, fields plowed and planted and harvested, sermons given, investment analyses done — that will not have to be done in the future, because they have been done already.

If money is “stored work”, then savings, or cash reserves, are “work reserves” that we can draw from when we retire.  In one sense, we are continuing to work, and are simply using the credits from previous work.

It gives a different twist to the expression, “I’m calling in my marker”.  We get to call the marker, in a positive way, against the credits we have created.

The flip side of savings, of course, is debt; and — here is where it gets ugly — the logical extension, the corollary of savings being “work stored”, is that in truth, debt is “work owed”.  It is work to which we have obligated ourselves in the future.

Gotta have that new SUV, that bling?  How much are we willing to place a debt burden of future work on ourselves to have them?  How many hours on the assembly line, building widgets or meeting with clients or treating patients, are we willing to obligate ourselves to?

Debt creates a burden for future work that must be paid.  “I’m calling in my marker” is the demand from the lender when the debt becomes due.

For individual debt and business debt, we are regulated in part by how much we can borrow, and in part by how we individually distinguish between “I need” and “I want”.

For government debt, it is also regulated to some degree by how much it can borrow.  The problem with government debt is that it does not have to be paid back by the entities creating it, and in many case, by the entities receiving the benefits.

We need to understand the enormous burden, the “work owed” obligation, that is represented by our annual budget deficit ($1.17 trillion), our cumulative debt ($15.7 trillion), and our unfunded future liabilities ($114 trillion) — promises that we have made to ourselves that we, and our children and grandchildren, will have to pay.

One hundred and fourteen trillion dollars:  that’s a lot of “work owed.”






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