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Cracks in the Economic Foundation
By Dene McGriff
Well, here we are – the Monday after Thanksgiving and just weeks
after the American Presidential election. By slight of hand and
a great deal of luck, the elites have maintained the appearance
of prosperity across the land. You have to give them credit for
holding it together as long as they have. After four years of
massive federal debt ($2.5 trillion) with much more red ink in
the future, and a balance of payments disaster that has grown to
over half a trillion a year (called the current account
deficit), along with record low interest rates which has led to
various speculative bubbles, the whole house of cards is about
to come falling down.
America’s spending binge has been supported by other countries
who continually buy up its debt. Once these countries decide
that the dollar and U.S. treasury bonds may not be a good
investment, the dollar begins to fall bringing everything else
with it. The United States has been absorbing 80 percent of the
world’s savings. But there are cracks forming in that great
foundation of prosperity, the greatest prosperity the world has
ever experienced!
Now, one country after another is beginning to dump their
dollars – Russia, India, China, Japan, etc.
This morning, the Bank of England's Chief Economist, Charlie
Bean, said... "At some stage action will have to be taken to
close the U.S. fiscal deficit and, when that happens, the real
value of the dollar will to fall if a sharp slowdown is to be
avoided." (from The Daily Pfennig 11/28/04)
“Last night, central bankers of Japan, China, and the rest of
developing Asia, must have tossed and turned. Since 2000, world
foreign exchange reserves - most of it in dollars and most of it
in Asia - have increased from $2 trillion to $3.5 trillion. The
increase in central bank foreign exchange reserves is about the
same as America's trade deficits during the same period.
“Central bankers have trillions of dollars in their vaults. And
their economies depend upon the U.S. consumer. In order to
spend, the U.S. consumer must have access to EZ credit - for he
has no savings and his income barely increases. In order to keep
the U.S. consumer consuming, central bankers must lend him
money. Indeed, a study by the New York Fed showed that it takes
more than the entire world's savings to keep Americans living in
the style to which they've become accustomed. Private investors
have already withdrawn much of their support for the dollar and
the U.S. consumer. If central bankers pull out too - the jig is
up. The entire world economy will have to face the consequences
of a collapse in consumer demand, a collapsing dollar...and the
end of the Dollar System.” (from the Daily Reckoning 11/25/04)
“On Friday, Deputy Chairman Konstantin Koreschenko said the
Russian Central Bank was moving away from the ‘dirty’ float of
the ruble against the dollar. The newspapers also reported today
that the bond market is down sharply on fears of a lack of
foreign central bank demand (for U.S. assets) will cause rates
to rise. And in case you haven’t been noticing since the
election the dollar has fallen against the Euro from 120 to 133
and a total fall of 70 percent from 78 three years ago. At the
same time, that old fake “gold” has gone from $252 to over $450
an ounce since February of 2001.
“But America's coming bust is likely to be in line with the
primary trend...a bust, not on the way up, but on the way down.
It is a slump leading towards a lower standard of living, not a
higher one. Why a lower standard of living? Because Americans
did not save money...they did not build factories...they did not
invest in the skills and enterprises that will help them
increase real earnings. Instead, they spent more than they could
afford on trinkets, geegaws, and luxurious McMansions. Few
people in the world can afford to live in the manner to which
Americans have become accustomed. Sadly, not even Americans
themselves”. (From the Daily Reckoning 11/3/04)
So what does this mean to you and me? You might say, so what? It
means that once the currency fails, everything will begin to
fail – it will bring down real estate, pension funds, stocks,
bonds, savings, businesses, etc. It means that your dollar is
losing value and things are going to cost more. If the dollar
loses half its value, things will cost that much more,
especially imports so WalMart may not be the best deal in the
future. But, some will say, that will help U.S. manufacturing by
making foreign products more expensive. True, if there is
anything left to manufacture after shipping off all those jobs.
The government is counting on the fact that this will curb
imports and increase production at home and that is true as far
as it goes.
The problem lies in stopping a precipitous slide that can’t be
stopped. If foreign central banks and foreign investors (who
have already mostly deserted the dollar) stop supporting the
dollar, interest rates will go up and bond yields down. In plain
English, that means that mortgages, credit will cost more,
slowing the expansion of the economy, lowering the amount of
taxes the local, state and federal government collects, further
increasing the debt, causing more borrowing, more devaluing of
the dollar and so forth. Interest will increase on credit cards,
adjustable rate mortgages, business loans, etc. causing a spiral
of personal and business bankruptcies by squeezing corporate
profits and the family budget.
We don’t realize it, but the biggest tax we all pay is not the
amount we shell out on April 15th, on our property or sales tax.
The biggest tax is INFLATION! Doug just came back from Oregon
and couldn’t believe that property prices have tripled in two
years. In four years, the price of my rental here in California
has tripled! Does that make any sense? Is there any added value?
Just think about it. The average new car is $30,000! And they
say the price of gasoline (inflation adjusted) is cheaper than
in 1972! So what does that tell us about inflation? Our economy
is a house of cards. Our paper money is being printed at record
rates, further decreasing the value of the currency.
Dear reader, we know that prophecy tells us that we will have to
take the “mark of the beast” to buy or sell. Before that
happens, the world economy will so deteriorate that we will work
all day long just for enough food to keep us alive. There will
be a great divide between the elites and the rest of us. “A
quart of wheat for a denarius and three quarts of barley for a
denarius and do not harm the oil or the wine.” (Rev 6:5) The
first part of this verse deals with the basic food required to
feed a family for a day, and the oil and wine – the luxury items
the elite will still have.
What can we do? Don’t get caught in the credit trap. Tear up
your credit cards. Pay off your debts. Owe no man anything!
Endeavor to be as free and independent of the world economic
system as possible. I know this is much easier said than done.
But don’t buy things you don’t need. Don’t buy things you can’t
afford, even if they are presents. Live on a budget. Get free of
the power of the world system, constantly enticing you to buy
more and more things! As the apostle Paul says, “don’t be
entangled by the affairs of this life.” (II Tim 2:4) Or as John
says, “Love not the world, neither the things of the world…” (I
John 2:15) Those who are ensnared by the world will most likely
be deceived and it is all about your heart and your money.
“Where your treasure is, there your heart is also.” (Matt. 6:21)
An economic earthquake is about to happen. You can feel the
tremors. Now is the time to get ready! We not only have prophecy
we can see the foundations crumbling. Equilibrium is a law of
economics. The huge debt and imbalances are causing the pendulum
to swing. Don’t caught on the treadmill! Turn to the Lord for
wisdom and guidance.
About the author:
http://www.the-tribulation-network.com/denemcgriff/cracks_in_econ
omic_foundation.htm
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