The Truth About the Economy
By Dene McGriff
Today (8/10/11), the stock market dropped over 500 points again after having gone up 450 the day before and down 640 the day before that. What is this all about? Why so much confusion? Where is it going? Is America on that long slide down to “third world-dom”? Is China taking over as top dog?
I have been writing on the economy on this website for quite a few years now. I called the housing bubble back in 2004, the derivatives problem which led to the crash in 2008 and the continuing deflation (depression) the entire world is experiencing. So what is the problem? Is it the US debt? Does it have anything to do with the US? Will America be destroyed? I would use the analogy of attacking a Chihuahua with a baseball bat – one swipe and he’s a goner. Ever try and attack an elephant with a baseball bat? The elephant will probably survive just fine but the attacker may not. America may have problems but they are nothing compared to the rest of the world. Bottom line is that we are much more able to absorb the blows than they are.
What is the Problem?
Let’s start with today. Is the problem the credit downgrade of the U.S. by Standard and Poor’s? No, in fact Treasury sales are better than ever (the markets aren’t that stupid) and long term interest rates continue to drop. No, it is Europe and specifically France. France has been supporting Greece and there isn’t enough money there to save them. The stronger nations of Europe have been trying to save the weaker PIGIES (Portugal, Italy, Ireland, Greece and Spain) but France and England are not far behind. Does this floundering European Union sound like the burgeoning power that will rule the world one day as some Christians think? They can hardly agree on anything. The EEC is a joke and it is disintegrating before our eyes.
So, you say, China holds all the cards and yes they have a pretty good hand. But I have news for you, China has 1.5 billion problems: an aging population with few women (since baby girls are eliminated), not to mention the logistics of providing fresh food and water, housing and other services for huge population. Corruption and cronyism, demography and regional inequities will overwhelm and destabilize the new Asian miracle. The same might be said to a slightly lesser extent for India.
So who does that leave on top? You guessed it. As we have said in the past, there is only one nation known as prophetic Babylon which matches this picture: apostate Christian, the great consumer nation, the greatest military power, and a friend of Israel (at least for now). So the economic demise of America/Babylon may be greatly exaggerated. Let’s look at the facts as to why America is nowhere near falling into oblivion.
There is a tremendous amount of debt all over the planet – corporate debt, government debt, local debt, personal debt, bank debt, not to mention the so-called unfunded liabilities (also an international problem) of retirement, medical care for the poor and elderly, unfunded pensions, etc. Nearly every country in the world is having the same problems that we are but it is much worse. The government “solution” is to print money (increase the money supply), both in cash and credit markets and just spend, spend, spend. Debt is parlayed and expanded in the form of derivatives. One would think that since the 2008 meltdown fiasco we learned our lesson, but we haven’t and the derivative debts continue to grow exponentially. The world is awash in funny money – fiat currency with no backing, but rather than causing hyperinflation, we see deflation which is the financial enema solution to excess liquidity. Dead broke businesses, banks and factories go out of business and local governments and countries default (just don’t pay their debt). The irony is that the world knows that America will never default and that is why the dollar is golden – even if they have to tax and take away nearly every dollar earned. Nations flock to buy US Treasuries. They can’t get enough even when they make nothing on them. Those are the facts.
So in this article, we want to look at the debt ceiling crisis, why there isn’t enough money in the world to bail out the PIGIES, what will be the result of this failure and where we are headed as individuals.
From a prophetic point of view, we see that America will not decline commercially. Up until the very end America will be the leading economic and military power. However this doesn’t mean all goes well for you and me. All of the crashes and bailouts have been at our expense. More on that in a minute – the $16 trillion heist! The long term trend is that the rich will get richer and the poor will get poorer and the middle income will continue to slip into poverty. Right now, I am making one sixth of what I made twenty years ago. I have three grown children and all are struggling to keep their heads above water.
The middle class is shrinking and here are stats to prove it.
percent of all U.S. stocks are in the hands of 1 percent of the people.
So what are the prospects for your future? Not very good. I know you don’t like to hear this but all of the bailouts have occurred at your expense. Let’s talk about the bailouts and stimulus. Who caused the crisis to begin with? We all now know that it was the banks and their reckless derivatives. Who got bailed out? How much money did you receive? Nothing? I didn’t either. Imagine that. But read on. It gets much worse for us little peeps even though America will continue to prosper.
The Bailout and Dismantling of Europe
Look at Europe. Greece already received $153 billion and now the Eurozone and IMF are providing another $152 billion. Where does that money come from and who benefits? It comes from tax payers. The bailout doesn’t go to the Greek government. It is just passing through to pay the banks to pay the 14% interest they already owe on their $476 billion in original debt! This guarantees another default which will filter back through the banking system in Europe, the US and other countries. Greece is very small potatoes. It is 38th in size, $318 billion in 2010, whereas Italy is 10th and Spain 13th in size with a total economy of nearly $3 trillion. Looking at it another way, the chart on the right shows the size of country debt by GDP. We hear about the PIGIES all the time (Portugal, Ireland, Italy, Greece and Spain), but look at the other countries that are in equally bad condition. Countries like the UK, France and Germany are the ones providing the loans to the PIGIES, but when the PIGIES default, who will cover those countries? One guess is allowed. Guess who will be left to save them all?
Analysts know that Italy and Spain are close to default and will soon be followed by England and France. It isn’t a matter of the amount of debt. Japan and the U.S. have shown that they can and will pay it back. It is whether they can finance the debt and at what price. The U.S. and Germany finance their debt for practically nothing (in the 2 percent range) whereas the PIGIES are paying all time highs of 14 to 30 percent. These are holes they can’t dig out of and as one country after another defaults, Europe will be torn apart. But will the Euro die? Probably not. Once the PIGIES drop out of the EU, then the EU will survive. The PIGIES however are doomed because they won’t be able to finance their debt. I would like to emphasize at this point that Europe and the rest of the world will look, perhaps grudgingly, to America to save them and establish order.
America and the Debt Crisis – Smoke and Mirrors!
America has a debt problem, no doubt about that and neither party faced it. The so-called $4 trillion in cuts are not cuts at all. It is not a cut in spending but a cut in the increase. The deficit was slated to double from $14 to $28 trillion over a ten year period. The agreement was to cut that increase in debt back to only $10 trillion. The graph on the left shows the growth in the national debt through 2020 at that rate. It shouldn’t take a rocket scientist to realize that this is not sustainable. One lesson we should have all learned from the recent debt ceiling debate, is that if the rating agencies downgrade the US economy, we pay a higher interest rate on our debt. Let’s look at some round numbers for a moment. If we say that our national debt is $14 trillion and we pay 2 percent on that debt that makes our debt payment a mere $280 billion and everyone agrees that is okay. That represents about 8 percent of the total Federal budget. Historically, we paid 8 percent on our national debt. That would quadruple the amount spent on debt. You do the math. What would the debt payment be at 8 percent on a $24 trillion deficit?
The more you tax, the more you grow government, the more of the GDP allocated to government, the smaller the productive economy and the higher the tax rate to pay for this massive debt. This is why some legislators are screaming about debt and wanting a balanced budget! The “compromise” reached by Democrats and Republicans did not limit spending but merely the size of the increase in deficit spending.
So what does this mean? Bottom line it means massive tax increases if the administration has its way or massive cuts in government programs such as the military, Social Security, Medicare, Medicaid and Education.
The question you all may have is how did we get into this situation? Where has all the money gone? What about the stimulus and bailouts? According to Bloomberg News in 2008, the total bank bailout amounted to $8.5 trillion. According to the first audit ever done in the 99 year history of the Federal Reserve, they loaned over $16 trillion to US and foreign banks. Now think about it, the federal banking system is run by a private banking cartel called “The Federal Reserve” which oversees our financial system made up of dollars – those little greenbacks that are backed by the “full faith and credit of the United States of America.” We’ve heard those words before but what do they really mean? “We the people” are the ones backing these huge loans. Please read this article about the “Greatest Bank Robbery”. For more information on the Federal Reserve, please see the article I wrote some years ago.
Some of you may think that I am contradicting myself. How can I say America is strong when it is destroying itself? There are two answers to this question. First, America is still golden to the rest of the world. In spite of the downgrade in the credit rating, interest rates have gone down rather than up and the world is flocking to buy our debt. Second, it would appear that the long term plan is to destroy all fiat currency and come up with some kind of digital world currency in order to help establish the New World Order. It is also impoverishing those of us in the middle while the rich seem to grow richer.
Where do We Go from Here?
I would remind Christians that the book of Revelation clearly indicates that there will be an increasing gap between the rich and the poor, a subject I explored in great detail in the chapter on the four horses of the apocalypse. Please see the section on the black horse. Most Christians are also familiar with the absolute control the Antichrist establishes by requiring everyone to take the Mark of the Beast in order to buy or sell (Revelation 13:13-17) so the end of the age will have not only a one world government but a one world economy – talk about going global!
There is some truth to the debt crisis, but like most crisis in America this is manufactured, apparently designed to rob from the tax payers. We are not a PIGIE. We do not have the tremendous population pressure experienced by China or India, pressures that will eventually tear them apart and stall their miracle economies. America still has tremendous natural resources and a population that is being molded into a patriotic frenzy that highlights America’s “Manifest Destiny” to save the world (whether they want saving or not). There will soon be another Middle East war in Israel, a defense treaty with Israel, followed by a more massive civilization conflict between the Islamic and post-Christian worlds and the ultimate rise again of China and the powers to the East as armies mass for the final conflict in the battle of Armageddon. We know the sequence of events.
Meanwhile, don’t trust in your 401K’s, your IRAs, pensions, investment or even gold. The world is having birth pangs and a new era is about to begin. Unfortunately, the Laodicean Church will be found Lukewarm and asleep in their “blessed rapture hope” of escape. We are closer than we think and it is no coincidence that the year 2012 finds prominence throughout the world, and, as you will soon see, even in the sacred Scriptures. Doug is about to present some earth shattering revelations. Now is the time to not look to Mammon or anything in this world for our salvation, but to get out of the little box that has programmed our minds and open our hearts and minds to fresh revelation that God desperately wants to share with us – that generation spoken of in Daniel 12 that has a “need to know” what is coming down and why. This is the generation of destiny, of sacrifice and of glory. We need to humble ourselves before Him and present ourselves a holy sacrifice and let Him speak to us and reveal His purposes to us.
Dene McGriff, Sacramento, August 11, 2011 Sacramento