Inflation Rearing Ugly Head?

Inflation Rearing Ugly Head?
Vol: 6 Issue: 24 Sunday, March 24, 2002

We dodged the bullet all through the nineties. Even when the markets’ runaway earnings were exposed as so much smoke and mirrors, the Fed continued to manipulate the economy, raising and lowering interest rates, somehow actually ‘softening’ the blow when it came.

That isn’t to say that it didn’t hurt — millions of ordinary Americans saw their paper wealth evaporate — but as recessions and market collapses go, this one was relatively painless. Anyone who remembers the recession in the 70’s — together with the inflation that followed — knows this could have been much worse.

Twin Threats — Inflation and Deflation

The recession is over, says the Fed. It was so painless that some economists question whether we were ever really in an recession in the first place. Greenspan’s interest policies threatened to tip us too far the other way, toward deflation, but managed to hold the line.

Deflation is inflation’s evil twin. Inflation is when too few goods are being sought be too many people. Prices rocket skyward, causing inflation. Deflation is when too many goods are being offered to too few buyers. Prices plummet, causing deflation. Inflation was responsible for the pain of the Recession of the 70’s and early 80’s.

Deflation caused the Great Depression of the 1930’s.

The Fed has done all it can do to lower interest rates. If rates got much lower, banks would have to pay borrowers.

Sticker Shock

After decades of relatively steady prices, consumers are once again beginning to experience what we old-timers called ‘sticker shock.’ Clothing prices in February saw their biggest one month jump in a year. Airline tickets rose in each of the past two months. Gas prices are currently rising at the fast pace in a year. Medical costs are up 4.5 percent over the past twelve months.

“Just as the Fed was caught by surprise by the recession last year, they could be surprised this year by the strength of the economy and a jump in inflation,” said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis.

“We could get a triple whammy coming from stronger economic demand, higher energy prices and higher medical costs,” Sohn said. Recently imposed lumber tariffs have builders worried it will dampen the housing boom, currently the highest in four years.

Assessment:

The overall Consumer Price Index is only up 0.2% — just a modest increase. But the Index of Leading Economic Indicators remains flat, suggesting sluggish profits and weak export demand will continue. That is a perfect breeding ground for the twin specters of a period of domestic inflation in the midst of a global deflationary spiral.

While the major economies are struggling along, economies like that of Argentina are in free-fall. The global economy overall is like a delicately balanced house of cards. Pull out the wrong card, and the whole thing collapses.

The Ride of The Four Horsemen

The Apostle John wrote of what we often refer to as the ‘Four Horsemen of the Apocalypse’. These four riders encapsulate an overview of the unfolding of the Tribulation Period.

The first, the rider on the white horse,[Rev 6:2] is the Antichrist. He is catapulted to power after he appears to bring peace to the Middle East. The rider of the second horse [Rev 6:4] is War. There was given him a great sword.

The rider of the black horse symbolizes global economic collapse. He holds a pair of balances, and cries, A measure of wheat for a penny, and three measures of barley for a penny; and see thou hurt not the oil and the wine.’ [Rev 6:6]

A ‘measure of wheat and three measures of barley’ symbolizes a day’s food. A ‘penny’ is a day’s wages. “Oil and wine” symbolize wealth. We see a picture, then, of an economy in which the average working man can barely feed himself, while the wealthy scarcely feel the pinch.

The fourth rider, on the black horse [Rev 6:8] is Death. His ride claims a quarter of humankind with war, famine, and with the ‘beasts of the earth’.

It is no stretch to say that scenario is an increasingly probable outlook for the near future. The Arab-Israel conflict rages on, demanding the intervention of the rider on the white horse. Meanwhile the global war on terror would need little to push the world over the brink and into a global conflict. The economy needs only a gentle nudge in the wrong direction to collapse under its own weight.

The ride of the Black Horseman would logically follow.

That is not to say we are in the Tribulation. But global conditions are certainly poised to make that transition.

The only event remaining before all this takes place is recorded in Revelation 4:1.

John finished recording the letters to the Seven Churches, and, “After this I looked, and, behold, a door was opened in heaven: and the first voice which I heard was as it were of a trumpet talking with me; which said, Come up hither…”

Maranatha!

This entry was posted in Briefings by Pete Garcia. Bookmark the permalink.

About Pete Garcia

Christian, father, husband, veteran, pilot, and sinner saved by grace. I am a firm believer in, and follower of Jesus Christ. I am Pre-Trib, Dispensational, and Non-Denominational (but I lean Southern Baptist).

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