Financial Bedlam: How the Mighty Fall
enormous financial bail-outs and sell-offs of some of
most elite banking and financial service firms is of enormous significance.
It is not just a great tragedy because of the many billions that have
been lost, although surely these will eventually be counted in the trillions.
It is tragic because as a result, the big Anglo-Saxon countries have lost
enormous stature in the world. They
are now the laughing stock of many countries that have long been wanting to pull
down Gulliver with many ropes and stakes.
As Walter Russell Mead points out in a recent book[i],
it is the Anglo Saxon countries of Britain and America that have been on top of the
world for several centuries (though
sometimes fighting each other).
While the British Empire has been pulled off
the pinnacle of power more than a half century ago, it’s younger cousin is now
also facing a humiliating come-uppance.
after a long-period of progressively intensifying consumerism, toxic prosperity
gospel, self-indulgent narcissism and sanctified greed at the highest levels,
the proverbial boil of bubble and trouble has been lanced.
It would be excusable to think it not circumstantial that recent
calamities are occurring exactly 7 years after 9/11.
(Lehman Brothers even
announced its bankruptcy filing that
day.) Back at the earlier 9/11,
the nation felt briefly chastened; many rushing back to church.
At the same time, the nation rose to the patriotic call to arms of “Buy
something.” Many did so on credit.
Eventually, a culture of greed again took sway, from Wall Street to
Now seven years later, we read that the Federal Reserve is adding
reserves, the most since the September 2001 terrorist attacks. It is a different
attack. But, the outcome is clear.
We see that the unsustainable delusion that God — whether divinely or
simply through natural economic law — would continue to bless such reckless
stewardship and materialism has finally been disabused.
Why should there be
surprise that finally the “chickens have
come home to roost”? The Bible
clearly says, “Do not be deceived: God cannot be mocked. A man reaps what he
sows” (Galatians 6:7). Of course, there has been a long-line of false prophets
and soothsayers that have popularized the ideas that there are no consequences
of revelry, “that you can eat your cake
and have it, too,” and that there is no such thing as sin and wrong-doing.
This message offered pleasing license to complacently rush down the broad
road to the difficulties that America and the
world are experiencing today.
word of caution. These outcomes
have long been sleeping.
(2 Peter 2:3)
In other words, they have long been overdue.
Now that the inevitable American financial collapses are finally upon us,
it seems that instant, post-game prophets are popping out all over the place.
Run from the US dollar … run from the stock market they advise.
It is a little bit late, though it surely will prove to be a successful
sensationalist approach to sell newsletters and books.
The US dollar has been falling for years, if you haven’t noticed.
Debts have been piling up on household balance sheets for decades …
spending far outrunning income. The
same has been true for America
people do react reflexively, even though the processes leading to the recent
calamitous outcomes have been long obvious … evident to any clear-headed analyst
with even a modicum of sense. One
didn’t need an economic degree to ascertain the ultimate outcome.
before you join the masses in apoplectic panic, it is worthwhile to consider the
larger perspective. America, while at the moment
harboring the “ground zero” zone of credit crisis attack, it does not reflect
the entire world in that regard.
While some tough adjustments lie ahead for America, and the risk of dangerous
government responses are high, the greater world is still on the road to
Armageddon. It is not yet here,
though it may feel as such in North America.
the specter America faces: What are seen as pagans
(so considered in the classical Christian
perspective) — Middle Eastern countries such as Saudi Arabia, Kuwait and Abu
Dhabi (among others), emerging Asian economic goliaths such as China — now look
gloatingly upon the fate of the most “Christian-professing” nation of the world,
wagging their fingers over America’s sins of greed and corrupt elites.
In reality, judging by the behavior of most North Americans, they are
just as pagan, if not more so than the citizens of the countries mentioned.
(Please view the article
Modern Economic Pagan Man on our website
for a convincing perspective on this assertion.)
many of these countries have become rich trading with
America, in the process having accumulated
enormous piles of surplus reserves.
The majority of these reserves are in the form of US dollars and
debt paper, such as government bonds or the Government Sponsored Agencies (GSEs)
of Freddie Mac or Fannie Mae. While
the reserve funds or Sovereign Wealth Funds (SWFs) of these foreign nations
(these now exceeding $6 trillion in
value), will also have suffered losses on their American and European
investments in financial paper
(particularly also due to a slumping US dollar over recent years) they
nevertheless are in a position to swoop in to buy distressed US companies.
In fact, many of the big US banks that
were in dire need of new capital indeed did go hat in hand to these foreign
entities. Lately, however, even
these buyers have chosen to not participate in any further rescues.
investment arms of some foreign sovereign states or multi-national firms might
now pick up choice assets in America, Britain or elsewhere is no worse than what
the multinational companies (MNCs) did in other countries during their times of
national or financial distress. The
Asian crisis of 1997 and 1998 is a case in point.
Like vultures, many Western MNCs pounced upon low-priced opportunities in
various Asian countries. If it was
OK then, the quid pro quo should be expected to unfold now.
But, it doesn’t feel so good.
It was one thing when US-based Newbridge Capital was snapping up Korea
First Bank in 1999. It is quite
another to think that a Korean financial entity was thought to be a potential
rescuer of Lehman Brothers this week.
specter that must be recognized is that the previously-influential,
once-Christian inspired, Anglo Saxon nations are on the financial ropes, with
their necks exposed to otherwise unfriendly, incompatible “value free” nations
that have become stronger.
biggest questions upon everyone’s lips will likely be these: Will America’s
financial troubles sink the world?
Is the current meltdown apocalyptic?
How much more difficult will it get for North American households?
We are not
prophets, but we will try some answers.
Firstly, as mentioned in other comments of late, if one takes a
Dispensational, pre-millennial perspective upon the world’s timeline, one would
have to conclude that the apocalypse is not yet upon the world.
Therefore, we can at least assume that the world’s financial systems will
yet survive and recover, to then meet their ultimate judgment later. But that
provides little ray of light on the near-term.
how significant are the recent economic troubles of America in relation to the whole
world? Of course, the answer will
depend upon whose perspective we adopt.
Americans may today exaggerate this linkage due to the real-life impact
and immediacy of current financial troubles.
To illustrate this
point, consider the country of Indonesia
which has the 4th largest population in the world (227 million) as
compared to the US
population of 302 million. Indonesia,
according to 2008 estimates of the International Monetary Fund (IMF) has a gross
domestic product (GDP) of $488 billion in equivalent US dollar terms.
The US economy measured at $24,195
billion, by comparison is gigantic … namely 29 times larger.
Back during the Asian crisis of 1997-1998, an Indonesia
citizen would have been tempted to draw the same apocalyptic inference for the
rest of the world as might an American in present troubled times today.
Their country seemed to be in a literal melt-down at that time. Many of
its citizens suffered … even starved.
Yet, even while Indonesia’s economy contracted by
more than 20% between 1997 and 1998 (the stock market collapsing over 70% in
15 months), to conclude that the sky was falling upon the whole world, would
have been incorrect. The same perspective now applies in reverse, though the
comparative metrics of the illustration are exaggerated.
Just how would God
compare these two crises? Was Indonesia’s crisis lesser because this country
only represented 0.8% of the world economy (versus 23.5% for the US share); much
less as a proportion of total world wealth; and was considered a geopolitical
pipsqueak? Or, does God look upon
the number of individuals? As
already observed, the populations of these two countries are roughly in the same
The Bible clearly tells
us that the Lord cares for each and every soul individually, and that everyone
is important — whether rich or poor.
“Are not two sparrows sold for a
penny? Yet not one of them will fall to the ground apart from the will of your
Father. And even the very hairs of your head are all numbered. So don't be
afraid; you are worth more than many sparrows” (Matthew 10:28-29).
If that is so, surely God places more importance on people and their
numbers rather than the contrived power measurements of mankind.
Therefore, from this vantage point, troubles unfolding in the
United States would be a small crisis in
comparative global terms as God would see it. After all, the US accounts for
only 4% of the world’s population.
When the Bible says
that the world will be generally unaware of the coming days of the Son of Man, “eating
and drinking, marrying and giving in marriage” (Matthew 24:38) this does not
necessarily mean that every tribe, nation and state will be experiencing the
same levels of complacency.
But back to the
realities of world money and financial systems.
Isn’t the current US
credit crisis so large that it is sure to trigger the final world financial
It is likely too
pessimistic to conclude that the current US-induced credit crisis would sink the
entire financial world. These may be famous last words. However, for a
perspective on this question, consider
these financial measurements. Tabulating information from various sources, the
total world-wide value of financial securities
(denominated in US dollars)
amounted to $140.6 trillion at year-end 2007. In relative terms, this value
would be equivalent to 2.5 times the size of the annual world economy. (These
values do no include bank deposits and other forms of money and therefore ignore
some important aspects of the question being considered).
Assuming that the forecast losses of the current “credit crises” prove
the most apocalyptic analysts correct, these would amount to no more than 2% of
the total world value of financial securities or 4.5% of annual economic output.
These are not inconsequential figures as they surely are large.
Yet, some of the biggest banking busts in the past have cost on the order of 10%
to 20% of economic output (according to the studies of the International
Monetary Fund). No doubt, such
crises were terrible and financially fatal for individuals and companies and the
same will hold true now. However, we can reasonably hazard the guess that the
current crisis is ultimately survivable for the world’s financial systems … at
least, for now.
But one day, to be sure, mankind’s financial and trading systems will collapse.
home, our global perspective provides no insight as to how deep and long
America’s troubles may yet be.
An economic slowdown could yet get much worse.
faces a long plodding road to recovery.
Its financial systems must be repaired and its high household debt levels
reduced. But even here there are
choices. Authorities may choose to
manipulate these problems away through high inflation … if possible, as did the
in the 1970s following their catastrophic real estate bust of that time.
tactic worked for the UK in the world then.
But in today’s interconnected world of
The Age of Global Capital, and given
the size of debts to the rest of the world, this is not so easily possible for
Were its policymakers to attempt this tactic, interest rates would rise
and the US dollar again decline, in this way short-circuiting this process.
All in all, recovery stands to be a slow, grinding process.
In the meantime, the rest of the world — here we mean those outside the
Anglo-Saxon or Occidental world — will likely recover and resume strong economic
growth more quickly.
doubtful that the financial troubles in the Occidental world will prove to be
the trigger of a total global financial meltdown
(one of apocalyptic scale).
That said, world investment markets and currencies will surely be
volatile and at times quite confusing for a time longer.
But, we must also not forget that approximately 90% of the world’s
population lies outside the bounds of the Occidental sphere.
Among them are some nations that could well prosper and continue to gain
must remember that the Antichrist is not yet on the scene. Bible prophecy
indicates that he will come to his zenith sometime during the first half of the
Tribulation period (perhaps earlier).
He could not be successful in commandeering the world and enjoining the
collective authorities of 10 kings if world financial systems were not
likely, however, that financial and economic troubles do begin to figure into
later developments of the Tribulation
(particularly the second and third seals— the riders on red and black horses)
and again later when the False Prophet induces all to take the sign in order
to “buy and sell.”
As such, for
now, the world will eventually find a patchwork solution to current financial
ails as in the past. But while this may appear likely, it provides us no reason
for either complacency or false hope. The world will continue to face banking
and currency crises as it has since banking was invented. In fact, in the last 2
decades alone, there are recorded 60 separate crises of this type around the
world. Admittedly, some of these have greater than others, and the most recent
financial debacle impacting the
is assuredly the most grave since the 1930s.
transfers of wealth take place during crisis periods. It remains a binary system
… a buyer for every seller, for the most part.
Enormous money has been made by some and lost by others throughout recent
developments. In fact, the
cyclicality and volatility of the financial markets ends up being a major tax on
the little people who do not understand the longer-term processes at work.
Inevitably, these move the world ever forward into heightened states of
commercial connectedness and an ever more centric wealth distribution. This is
clearly apparent … though no trend is transparent nor predictable over
shorter-term periods. There can be massive reversals and countertrends … the
proverbial “one step back, before two forward.”
pondering the relevance of calamitous financial events in
of late, we can only conclude that a sorry disciplining of the Anglo Saxon
nations is taking place. But why?
Is it a special judgment upon sinning nations, who formerly were the source of
most of the world evangelical activities and missionaries?
Is it the beginning of developments that will prove to explain why
is not plainly seen in endtime prophecy?
Or, have other interpretations of Scripture been correct all along?
think of quite a number of prophetic frameworks that will feel validated by
recent events. For example, the
position that the US is the “Babylon
the Great” of Revelation 17 and 18 will feel emboldened.
This perspective has been winning a growing number of adherents in recent
years. They now see the great
whore, from whose golden cup of capitalism and commerce they have drunk deeply,
and by whom their ship captains and traders have become rich.
For many reasons, it could not possibly be correct that
is endtime trading colossus of Babylon,
though it will have played a hand in its evolution.
about the modern splinter groups of Armstrongism and other varied versions of
British Israelism, who hold to the general view that the House of Israel
(the proverbial lost 10 tribe of
Israel) is indeed not lost?
They maintain that America
represents the Manasseh branch of Ephraim
(the son of Joseph, who was given the double portion.)
Their reading of Bible prophecy convinces them that the various tribes of
Israel, who have since become great nations and many kings
in the world (thus meeting part of the
covenant promises given to
and Jacob) will receive a chastening from God due to their wanton ways.
According to their frame of reference, this is to occur just before the
Tribulation. No doubt, these views
will gain profile given recent events.
that these views may be wrong, they nevertheless all conclude
(as do we) that repentance is
required. Nations and peoples are
called to turn away from the idolatries of wealth, materialism, self-sufficiency
without God and the abandonment of both ancient and New Testament gospel truths.
ahead, there are sure to be many more bank bankruptcies.
Should Washington Mutual go under — as many analysts think is likely —
the entire reserves of the FDIC will be spoken for.
But who then will protect depositors in the banks that are yet to fold?
According to one analyst (Chris Whalen, RGE Monitor) as many as 1400 banks could
be expected to fail in the US.
Obviously, the FDIC will need much more funding.
But as this entity is funded by charges upon banks themselves, this will
not be possible in the normal course.
Again, the US government just be called upon
inject sufficient capital to secure confidence in the nations money systems.
How much will be required?
Another $100 billion … perhaps $500 billion?
Richard Benson estimates (and this before
the most recent busts of Lehman, and the GSEs) that by the time the US
government has bailed out the various government loan agencies — from Student
Loans to the Federal Home Loan Board, and, including some $300 billion for the
rescue of Fannie May and Freddie Mac (the US Government Sponsored Agencies in
the mortgage markets) — some $600 billion will be required.
That would be in addition to the more normal cyclical government budget
deficits which alone is likely to soar past the $1 trillion market by the end of
It is not
difficult to see how America’s
government must go deep into debt over the next several years.
My own personal estimate is that the national government debt will more
than double as a ratio to GDP over the next 5 years.
This is not an outrageous forecast as this would not be nearly as
catastrophic as occurred to Japan over the past decade and a
half. We now are a nation of
indentured servants. Consider that
9.16% of all mortgages — representing almost one-tenth of all mortgagees — are
now in some stage of default. Could
it really be this bad? Statistics can be made to lie.
But, this fact speaks of its own veracity.
to FRB Flows of Funds statistics, homeowner’s equity dropped by $399 billion
during the 1Q this year, and $880 billion compared to year before.
We see a monstrous reality. The average homeowner today has less equity
(defined as a ratio of net equity to
total home value) in their home since these statistics have been collected
more that 50 years ago — lower than 50%.
And this, after one of the biggest real estate inflations of the last
century. This is the height of recklessness, it corroding the very timbers of America’s
households … a parallel to the evil that Zechariah saw.
What are people to do?
There are answers but no easy solutions.
Simple, godly stewardship is the best answer and reactions of fear and
panic are not helpful. It is an
ideal time to rediscover truths … the value of the “cleft in the rock”… the
peace that passes all understanding … the great riches that are possible through
contentment … our eternal promises and faith more worthy than gold.
It is about real stewardship and disinvesting ourselves of the idea that
the Bible was written to improve our investment prowess.
article series entitled What Chance a
Global Financial Apocalypse Now? as well as several conference presentations
(A Premillennial View of Global Collapse
and Beginning and End: Globalism
Prophesied) will be posted to our website in the near future.
These deal with further perspectives on current developments as well as
faith and deceit involved with mankind’s commercial systems is no small thing in
God’s eyes. Scripture verifies this
perspective repeatedly. During the prophesied Tribulation period there are
several judgments upon mankind’s commercialism, not just one. Have you ever
wondered why there are three different groups of people mourning the demise of Babylon the Great? There
are given three sets of woes, each mentioning an outcome that will happen in
“one hour.” Yet, the overall judgment and ailments afflicting Babylon the Great are clearly mentioned to
take place over a day. (Revelation 18:14)
Why? It may be
related to the reason that there is so much prophecy in the Old Testament about
Tyre. There are more than 20 separate prophecies that
and/or its sister city of Sidon.
Also, did you know that there may yet be as many as 7 different wealth overturns
in the future? Finally, you may be surprised to learn the extent to which
theology and religion are interwoven into the current opinions about America’s
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About the Author:
is a global economist/strategist.
Formerly a top-ranked global analyst and chairman of a large global investment
operation his writings focus on the endtime roles of money, economics and
globalization. He has been quoted
around the world and his writings reproduced in numerous other publications and
languages. His most recent book is
The Endtime Money Snare: How to live free.
[i] Walter Russell Mead, God and
America, and the Making of
the Modern World (Alfred A. Knopf,
New York, 2007)