— Bible-based commentary on vital issues of the day —

Economic Outlook

Is history prepping for a re-run?

Markets were on a roll.  New corporations were being listed every few days.  Germany was unified, had a new currency and its mighty exporters were doing business around the world.  Greece had merged its currency with that of France and Italy in a bold experiment in monetary union.  A massive new European economy was flooding the world with cheap goods and disrupting old patterns of trade.  New technologies were creating global markets where money and information zipped from bourse to bank virtually instantaneously.  It seemed as if everyone would keep on getting richer and richer forever.  That is ... until the market suddenly crashed. 

You might be thinking that was a description of New York in 2008. Or London in 2000. Or Shanghai right now.  Actually, that was Vienna in 1873.  But on May 18th of that year, it all came crashing down.  Kaput.  The market plummeted and the panic quickly spread to Germany.  By November, the contagion reached Wall Street where it also brought down the U.S. economy.  This inaugurated what became known as the "Long Depression," lasting up to 20 years in some sectors.

In 2008 when the markets again imploded, there was a rush to make comparisons with the Great Depression of the 1930s, caused by a sudden collapse of demand and a shrinking money supply.  Monetary Keynesians back then, as again today, assumed that if the government expanded its deficits and central banks printed tons of money, it would fix the problem.  It surely has not, and it should be clear by now, that it isn’t going to.  This one, like that of 1873, is a structural depression and it won’t be resolved until the manner in which the economy works has been fixed.  Moreover, the world is now facing ...

THREE ECONOMIC CRISIS:

• Debt crisis. The developed world has been amassing debt on a spectacular scale for at least three decades.  According to McKinsey¹ data, global debt now stands at $158 trillion; up from $77 trillion in 2000.  Phrased differently, it now amounts to 266% of global Gross Domestic Product (GDP) ... compared with 216% a decade ago.  While economists used to think debt was essentially neutral, on the grounds that one person’s borrowing is another person’s loan, it’s beginning to dawn (on some) that borrowing on that scale is unsustainable.

• Currency crisis. For most of the post WW-II period, the U.S. dollar has been the anchor of the world's economic system. That worked well when America's was the overwhelmingly dominant economy.  It doesn’t anymore.  The dollar is now down to 60% of global reserves, as other countries diversify away from a currency that’s falling in value.  Therefore, at some point a replacement medium for international trade must emerge.  But until it does, more chaos lies ahead.

• Euro crisis.  The Euro is perhaps the most dysfunctional monetary system ever created.  Welding together currencies of 17 different economies, without a fiscal union to compensate for their differences, was a risky experiment.  By now, it’s obvious that it has failed.  Whereas it ostensibly was to promote growth and stability, it has become a cause of more volatility and depression.  Until the EU and Euro are reconfigured, there’s little chance of global economic stability.²

Indeed, since 2008, the world has been in another of its periodic transitions to a more appropriate economic and trade order.  Typically, socio/economic crisis have triggered these upheavals, characterized by widespread business dislocation, unemployment, plus loss and hardship for the average person.  If the economic earthquake of 2008 is likened to dislodging a gigantic boulder perched above a mountain village, the chaos wrought by its downhill rampage is what the world is now experiencing.

Yet to come are major inflation, greater unemployment, a deepening of the economic and moral depression now gripping the world, plus more of today’s spreading poverty.  We can realistically expect a continued (if not more rapid) decline of America, increased risk of military conflict and a further lurch toward totalitarianism.

Historically, today's social, economic and political climate precipitated the rise of extreme political forces and two world wars.  Those forces now boldly on display in Washington by a governing class which no longer respects the U.S. Constitution or voice of the people, and a president who openly desires to be a dictator.  Twentieth-century tyrant types are also coming to the fore in other lands ... as the world ramps up for a final nuclear showdown.  (Do monitor the Vatican-Germany nexus and keep an eye on that Bavarian baron: Karl-Theadore zu Gutenberg.)

Most important is what God’s Word tells us.  It says that a global currency and religion are in the offing, that the EU will distill into ten power blocks in submission to its Antichrist head.  That, via economic and trade means, the EU will catapult to global dominance for a brief season.  It also tells us that Iran and company will be dealt a swift and deadly blow by that consolidated power to its north.  All part of the end-game script.  That same holy writ urgently reminds that Jesus Christ will soon return to save Israel, judge the unrepentant and establish His 1000-year reign.

Note to all readers: while some of the above is speculative, God's Word is absolute.  It makes clear that none of us are assured of a "tomorrow" and in Second Corinthians 6:2, that today is the day of salvation.  Also the day for Christ’s own to shout, Hallelujah!  Maranatha!!

1. McKinsey Quarterly — http://www.mckinseyquarterly.com/home.aspx
2. The long, long depression by Matthew Lynn — 1/2/12, National Review Online.

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