Financial Bedlam: How the Mighty Fall

Wilfred Hahn


The enormous financial bail-outs and sell-offs of some of America’s 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.

Finally, 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 Main Street.  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. 

But, a 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 overall.

But, 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.

But, 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.

Consider 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.)

Moreover, 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 US 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.

That the 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.

The main 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. 

The 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.

Then, just 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 league.

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 collapse?

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.

Closer to 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.  Most certainly, America 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 UK in the 1970s following their catastrophic real estate bust of that time.

That 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 the US.  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.

I remain 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 economic power.

Also, we 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 operative.

It is 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 US is assuredly the most grave since the 1930s.

Massive 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.” 

Again pondering the relevance of calamitous financial events in America 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 America is not plainly seen in endtime prophecy?  Or, have other interpretations of Scripture been correct all along?

Here we 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 America is endtime trading colossus of Babylon, though it will have played a hand in its evolution.

Or, what 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 Israel 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.

Regardless 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.

Looking 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?

Analyst 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 next year.

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.

According 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.

An upcoming 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 Biblical outlooks.

The pride, 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 involve Tyre 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 future.


For resources on “endtime economics” and to subscribe to the free newsletter, Eternal Value Review, visit Wilfred’s website www. or contact him at

About the Author:  Wilfred J. Hahn 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 Gold: Britain, America, and the Making of the Modern World (Alfred A. Knopf, New York, 2007)