Gasoline at my neighborhood station has dropped 50 cents a gallon in the last week. I can't believe I am excited about $3.71 a gallon gas and am calling it "cheaper." But it is all relative. The stock market this week has been down and up—as I write, it is down again. Few investors will want to look at their financial advisor's July report, because it's too gloomy.

August marks one year since America began what has been called the subprime mortgage crisis. The exposure of a relatively small number of mortgages that can't be paid has led to an incredible chain reaction of events that has included the closure of banks, the failure of a major Wall Street brokerage firm and the loss of confidence in many parts of the American economic system.

It is daunting to monitor. I am reluctant to write much about it since it is sometimes complicated. Yet, at the core of economics there are basic principles that all of us can master. It simply takes knowledge combined with self-discipline to make things work. Let me cover one point today.

In Proverbs 22:7 God spells out a fundamental eternal law of economics: "The rich rules over the poor, and the borrower is servant to the lender." When you go into excessive and unnecessary debt, you become a slave to those who loan you the money. Borrow more than you have assets or income to repay, and it will always lead to problems. There will be a day of reckoning—sooner for an individual than for a larger entity such as a corporation or a nation.

If I go out and buy a home I cannot afford, financing it with a mortgage I cannot repay, I will be saddled with massive monthly payments. Add to that an expensive automobile or two, and the debt load mounts. Then suppose I max out my credit cards to finance an excessive lifestyle and get saddled with a 27 percent rate of interest that begins to compound out of control. Soon I will be over my head in debt crying, "Somebody, please help me!" I will be headed quickly for foreclosure and an appointment with a bankruptcy judge.

A major corporation can essentially do the same, albeit with more complicated means of overspending. Yet, in time (perhaps drawn out over years), fluctuating markets and economic conditions combined with bad management will send the company into oblivion. Remember Enron, MCI and Bear Stearns?

Now take a nation—like America. Import more goods than you export, and somebody has to pay for it. For years America's current account deficit has been growing. To pay for our consumer society, nations like China and Saudi Arabia have been taking dollars (which have been falling in value) and purchasing bonds, U.S. Treasury notes and other forms of collateral to allow the nation to go on its way, spending more than it takes in. The difference with the United States is it can print more money or make other assurances that cover the imbalance. It works on a global scale as long as other nations, those holding America's financial obligations, have confidence in the government's economic policies and other fundamental factors. 

Did you catch that word, confidence? It means more than we realize. Much of what I read and study about economics comes down to this one concept. As long as the world has confidence in America's government, economy and people, the United States can continue functioning with its massive debt. But when those other countries lose their confidence in the United States, they will call in the debts and the whole picture will change—dramatically.

When God says, "The borrower is servant to the lender," He speaks an eternal financial rule that no one can long escape. What does this mean for you?

Properly manage your debt. Keep an affordable mortgage. If you don't need or can't afford two cars, sell one and drive the other for more years than you might normally. Pay cash for consumer goods, using a credit card only if you pay it off each month in full so you won't have to pay interest.

Practice self-discipline. Resist the appeals to greed and lust that come from all the marketing pitches around us. Live within your means. If that means taking a hard look at your "lifestyle" and downsizing to fit your true income, then do it. Otherwise we all will be vulnerable to the principle stated above. We will be in a state of economic servitude that will take years to overcome.

Remember that "cheaper" gasoline at my neighborhood station? I don't take that as a sign to let down my guard on the economy, thinking we will return to the days of truly cheap gas and other commodities. I understand it as an adjustment based on many factors beyond my control. For now I will stay with what I can control.

Basic economics is not rocket science. Stay out of debt. Reduce the debt you have. Live within your means. Our booklet Managing Your Finances offers more financial insight.

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