The Sky is Falling and Falling and Falling and Falling. . . .
Vol: 84 Issue: 25 Thursday, September 25, 2008
We’re on the brink of another Great Depression. That’s what Sarah Palin told Katie Couric in one of Palin’s worst performances since being tapped by McCain.
John McCain says we’re in a major financial crisis. And last night President Bush went on TV to tell the nation that we’re on the verge of a “long and painful recession.”
In stark language he warned that if the credit crisis was not resolved, the ‘stock market could plummet and erase retirement accounts’ and businesses which could not access credit could close, ‘wiping out jobs for millions of Americans’.
Bush summoned both McCain and Obama to the White House for a ‘consultation’ with whoever his successor might ultimately be.
John McCain announced he was suspending his campaign to return to Washington and do his job as a senator.
Barack Obama, who hasn’t been a senator long enough to know what his job there actually is, said a president should be able to do two things at once.
So Obama is planning to skip the Senate and prepare for a presidential debate that may not take place.
(Meaning that a president should be equally able to do nothing at once.)
The media and the Democrats have been talking down the economy since the dawn of the Bush administration. It has evidently been a winning strategy since most Americans are convinced the economy is terrible, despite eight years of uninterrupted growth.
Now, the economy is in trouble. Everybody says so. So why am I still experiencing that sense of cognitive dissonance that I’ve come to regard as a visiting friend?
The media, the Democrats and now, the president and many top Republicans are all reading from the same page on the script. But something about it makes me dizzy. What they’re saying doesn’t seem to line up with what is happening.
The sky is falling, the economy is in the tank, we’re facing the prospect of a recession, a depression or worse.
The government is proposing a $700 billion dollar bailout for the banking industry to prevent a credit crunch — the Congress is waffling. But the US Gross Domestic Product for the second quarter of 2008 INCREASED by 3.3%.
I Googled the phrase “negative US GDP” and got the following return: “Your search – “negative US GDP” – did not match any documents.”
Congressional Democrats argue that it isn’t a “bailout” exactly — from a business perspective, it’s a pretty smart business deal that is likely to turn the government a HUGE profit.
(Warren Buffet made a $783 million profit on his investment of $5 billion in Goldman Sachs — in the past twenty-four hours.)
“I think the Treasury will pay back the $700 billion and make a considerable amount of money,'” Buffett said, adding that if he had $700 billion on the government’s terms to buy distressed assets, he would jump at the opportunity.
“Unfortunately, I’m tapped out,” he said regretfully.
In the interests of full disclosure, I am just some guy with a Bible. I’m not a big financial guru.
I don’t have a big stock portfolio — or even a small one. I have no investments and no 401k. I am the last guy anybody should take financial advice from.
And I also know that I am speaking into the wind on this one — not only could I be wrong, but based on the pronouncements of those who should know, I am certainly wrong.
But I’m not buying it. It doesn’t pass the smell test. The Federal Reserve has been creating money since the 9/11 attacks. The way that the Fed ‘creates’ money is via debt. We’ve discussed it before, but let’s quickly review a brief history of fractional reserve banking.
In medieval times, people would store their gold with the local goldsmith who would issue a receipt for the gold on deposit. The receipts were then used for large transactions, giving rise the phrase, “as good as gold.”
The goldsmith soon began issuing more receipts than there was gold on deposit. As long as everybody didn’t show up to redeem their receipts on the same day, the theft was never noticed.
The goldsmith would ‘create’ money issuing these extra receipts as loans against which he would take real property as collateral. If the borrower repaid the loan, then goldsmith had real money to replace the fake receipt.
If the borrower defaulted, the goldsmith acquired the collateral plus what had already been paid on the ‘loan’.
What was clearly out and out theft eventually became the basis for fractional reserve banking. Here’s how it works in a nutshell:
If a bank makes a $100k loan, it need only have $10k on deposit. The other $90k only exists on paper until the borrower repays it. But the $100k is carried on the books as a loan ‘asset’ until it is repaid.
The problem with creating too much money all at once is that it diminishes the value of the currency already in circulation.
On September 11, the US dollar was worth nearly twice as much as a Canadian dollar and almost at par with the euro. Six years later, the US dollar is at par with the Canadian dollar and the euro is worth $1.50 US.
There are a lot of reasons for that — low interest rates for investors, the Iranian Oil Bourse, six years of war, etc., but the biggest reason is because the Fed created too much money too fast and it has to claw some of it back before it — the Fed — collapses the economy.
Let’s return to the way that the Federal Reserve system allows money to be ‘created’. It lends out nine times as much money as it has on deposit in exchange for collateral on real property.
The money doesn’t actually exist until the borrower pays it back, but the Fed can keep lending it over and over, in essence shrinking it each time, until eventually, it takes $200,000 to buy a $60,000 house.
Before you know it, houses become so expensive that folks can’t afford to keep up the payments, so they ‘default’ on the unpaid balance and the bank is stuck with a house.
If it gets stuck with enough of them, it is a bit like the goldsmith getting caught with more paper out there than there was gold to cover it.
Five hundred years ago, they’d have just hanged the goldsmith from the nearest tree and put out a “Goldsmith Wanted” sign at the edge of town. (Ah, for the good old days when bankers jumped out windows. . . .)
Everything about the current meltdown from its informal name, “mortgage crisis” to its proposed solution (clawing back the excess to restore the dollar’s former value) says this is a managed crisis whose outcome was predetermined before the ‘crisis’ itself was allowed to come into being.
And, as a managed crisis, its’ outcome was predetermined by its planners before it even began. If I’m wrong on this, it will soon be obvious. But I don’t believe I am. I’m counting on being wrong — but expecting not to be.
The Bible does predict a global financial meltdown — but this isn’t it. The Bible’s financial meltdown calls for economic hardship so severe that it will take a day’s pay just to earn a day’s food — that meltdown occurs somewhere in the early part of the Tribulation Period in conjunction with the plagues of famine and pestilence and death during the ride of the Four Horsemen.
If the Tribulation were generations away, then it might be possible for the global economy to melt down, endure a recession or even depression, then recover enough for a major collapse as part of the judgment phase.
But I believe the signs indicate the Tribulation Period is very, very near. There isn’t enough time for it to collapse on this side of the Tribulation, and then recover enough for there to be another collapse significant enough to merit the status of Divine judgment.
We’re so close to that period now, I believe, that if the economy were to fail now, it would seem one continuous failure.
As I said, I could be completely wrong. I’m not a financial genius. I don’t have vast holdings. I wouldn’t take financial advice from me and I wouldn’t expect you to, either.
I am bucking one hundred percent against the trend, and based entirely on my understanding of the Bible’s timeline for the last days.
I don’t usually crawl this far out on a limb, and if it gets sawed off behind me, its the Lord punishing me for my presumptuousness.
But if we are where I believe we are on the Bible’s timeline, then I predict the following: This ‘crisis’ will evaporate quietly. The dollar will begin to gain strength against international currencies. There will be no depression and probably no recession.
If not, then I’m wrong on the Bible’s timeline and the Rapture isn’t as close as I think it is.
But if I’m right, then fasten your seat belts.