Chapter Five – The Coming Global Financial Collapse!

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The global economy is in the worst crisis since the Great Depression of the 1930s! In 2008 alone, a staggering $50 trillion in wealth was erased around the world.
Despite unparalleled affluence in the Western world, personal and corporate bankruptcies are soaring. So is use of credit by consumers. Millions are losing jobs. More millions their homes. The U.S. national debt is measured in trillions of dollars! Headlines of credit fraud, identity theft, graft and corruption fill the news. Thinking people know events are spinning out of control.

The sobering statistics that follow are but a snapshot in time and grow worse by the day. As you read, factor in an increased amount to each statistic and trend.
The world’s largest economy, the United States, the place to begin review, is now more than $13.7 trillion in debt—and this debt is growing by over three billion dollars daily! This amounts to an over $44,000 bill for every U.S. citizen—or over $124,000 per taxpayer. Some expect the debt to be above $14.5 trillion after the next fiscal year—which means a growth of additional billions each day next year! (In reality, these numbers will almost certainly be higher.) Such debt can never be repaid! In fact, most nations of the West are also now being crushed by impossible debt. Catastrophe now looms—and, in the case of America, here is why.
The United States received about $2.1 trillion in tax revenue in 2009—a number much lower than what the government originally projected. Spending was over $3.5 trillion for 2009.
Now suppose that these numbers represented the income and spending pattern of an American family of median income. Such a family would take in just over $50,000 (2008 estimate), but be planning to spend over $83,000—while already carrying more than $326,000 in debt! Individual families would never do this—or if they tried, would go bankrupt before it could happen.
But governments can print money.

Exploding Deficits

The national debt is projected to approach $20 trillion in 2014!—and hit $26 trillion in 2019!—almost double the present. Such deficit spending is unsustainable.
Money is borrowed at existing rates of interest. Understand that just a very small 1 percent rate increase on the debt will raise the interest payment of $200 billion by several hundred billion each year. But this is only true if the deficit did not rise! Many think all these projections to be very conservative. They will likely be much worse.
No thinking person believes such overspending can continue without end. Further, the addition of expensive new government programs and exotic new kinds of taxes will only greatly exacerbate the downturn. America will not stop spending because it is conditioned to believe it can have anything it wants. It need never deny itself. A country this big, this great, and one with such a rich history, cannot fail.
This thinking is tragically wrong. What world empire—with half America’s problems—survived?
The economies of America and other nations of the West will in time collapse into full-blown bankruptcy. This will happen, although things could temporarily get a little better. Various individual states will in fact likely precede the federal government and country into bankruptcy, and thus, hasten the overall collapse. Of course, nature abhors a vacuum, and a European-based world government will step in to fill America’s abdication as global leader.
This cannot now be far away.
The world as you know it—including your life—will change beyond your wildest imagination.

Private Debt

So far, we have only discussed government debt. Private debt—from loans and credit cards—amounts to an additional $52,000 for every American, compared to an average savings of only $3,120.
In 2008, $6.9 trillion was lost in the U.S. stock market and $3.3 trillion in its housing market. These are devastating losses to peoples’ investments, including stocks, bonds, retirement plans, employee stock ownership and home values. Lifelong hopes and dreams crash daily!
Employment is now shrinking at the fastest rate since the Great Depression. Unemployment lingers around 10 percent in the United States. And this does not include the (many millions of) discouraged workers who have given up looking. Many other countries are much worse!
The combination of exploding debt and unemployment is hitting home! In 2009 alone, well over one million Americans declared bankruptcy, with more and more families also winding up jobless and in despair—facing abject poverty. This problem is worldwide. Many well-educated middle class people now live on unemployment, or welfare and food stamps—having never thought this could happen to them. Tent cities are springing up across America. Thousands are living in cars, and a small but growing number now live in sewer systems.
The Federal Reserve reported that the total American household worth dropped 2.7 percent in the second quarter alone (April to June) in 2010—or $1.5 trillion—to $53.5 trillion. This is 18.7 percent below its pre-recession peak of $65.8 trillion. Worse, this sudden unexpected decline comes after slight improvement over the previous four quarters.
The combined budget deficit and weakening dollar threaten to introduce hyperinflation, ruin the finances of its citizens, and totally destroy America’s economy. China, Japan, Germany and other creditor nations are deeply concerned about investing more money in an essentially bankrupt country. If they either pull out of American investments or call in their loans, the consequences will be disastrous. One of the world’s richest men, Warren Buffett, declared early in the crisis that the U.S. economy has “fallen off a cliff.” But things have worsened.

Banking System Gone Wrong

Most troubling for this superpower—long the engine of the world’s economy—are the ongoing woes in its banking system. In 2008, 25 banks collapsed. In 2009, the number was about six times worse, and in 2010 the rate has accelerated, with a much higher toll expected for the year.
What started with subprime mortgage losses has now grown into a full-blown financial crisis. U.S. banks have lost many, many billions of dollars, and this will grow much higher. No one knows how much—and thus where it ends.
America’s economic problems have ignited a global firestorm! Several European and Asian countries are also in recession. The Japanese Nikkei index trading on the Tokyo Stock Exchange—the world’s second largest market—continues its long fall. Markets in Russia and throughout the European Union are also suffering. Many countries face shrinking economies, big deficits, mounting debt, unstable currencies and rising unemployment. Financial markets are unravelling with a speed not seen since the Crash of 1929.
To compound matters, increasing economic, health and hunger crises in Third World nations are adding to the First World economic burden. As leaders scramble for solutions, deep fear pervades the world’s corridors of power!
All of this threatens to destroy the global economy. Attempting to solve the crisis, leaders are calling more often for a unified economic system. More now suggest one currency, one economy and one world government!
Understand. The world economic outlook is grim and growing darker daily. It is important to first understand the origins—the causes—of today’s economic distress.
The crisis began with the so-called “credit crunch”—the reduction in the availability of loans. Banks became reluctant to lend—whether to individuals, businesses or other lenders.
Banks traditionally operated by taking deposits from customers and lending to those seeking loans. The difference between the interest rate paid on deposits and the higher one charged on loans—the “spread”—was profit. If customers defaulted, banks were liable to depositors for payment. They held the risk “on the books”—it was their responsibility.

What Changed

It was therefore in a bank’s interest to carefully screen customers before lending. The customer needed a good job and sizeable down payment. This conservative approach enabled banks to be sound—and highly profitable—for decades.
In the 1990s, banks changed their way of operating. Seeking ever-higher profits to satisfy shareholders, and to secure executive bonuses, they decided they could make even higher profits if they loaned more. Careful screening of applicants stopped.
Customers who previously never qualified under standard lending procedures—“subprime” customers—were aggressively targeted as a lucrative source of income. Loans were provided to people with no income, no job and no assets—so-called NINJA loans.
Other “sweeteners” were provided, such as no down payment and interest-only payments. Those who approved these loans were no longer attached to the risk of default—and were handsomely paid for their efforts. The subprime mortgage market became a ticking bomb, waiting to explode.
Look at how this has come home to roost. In 1980, only one in every 400 mortgages had a down payment of 3 percent or less. By 1990, it was one in every 200 mortgages. In 2003, it had become one in every seven—and by 2007, it had fallen to one in every three! As the housing bubble grew, banks lowered standards to get as large a slice of the real estate market “pie” as they could. In less than three decades, they grew 133 times more eager to approve loans with tiny down payments.
In the process banks in effect invited large numbers of homebuyers to default. The inevitable crash in home values came to pass, devaluing the average home by far more than 3 percent! (Some counties in Florida have seen home prices drop by over 50 percent from their 2006 peak.)
With the steep and steady decrease in home values, resale rates are also plummeting. At the time of this writing, the National Association of Realtors (NAR) reported a decrease of over 27 percent in month-over-month U.S. home resales from June to July 2010—the steepest drop ever recorded (The Associated Press). Annual resale estimates were scaled back to 3.8 million—also the lowest number the NAR has ever recorded (The Wall Street Journal).
Such decreases can be largely attributed to the unwillingness of sellers and buyers to budge: “Potential buyers are hesitating because they think home prices still have further to fall. Potential sellers—those with the stomach to put their homes on the market at all, anyway—are reluctant to lower their prices” (The Associated Press). This self-perpetuating cycle is almost certainly destined to continue!
The result? Every day, due to inability to reverse or control their losses through sale of their home, growing numbers of Americans are simply mailing their house keys to mortgage lenders and walking away from houses. And many of these homes are insured by the government. The number of families in danger of home foreclosure is said to be 10 times greater than its pre-recession rate of just two years ago! This is resulting in billions of dollars’ worth of homes sitting empty, with banks left holding the bag. Despite all this, some banks still offer jumbo loans with little or nothing down for “qualified buyers”!
Economic upheaval in the United States will yield untold troubles there. Weak defence. More enemies. Emboldened enemies. Less aid to other nations. Collapsing infrastructure. Wide-ranging political repercussions. Civil unrest and violence. A loss of prestige and influence. A spiral toward second- and eventually third-world status!

Two Critical Factors

Two more developments have played a significant role in the onset of the current crisis. The first was deregulation of the U.S. financial services industry with the 1999 repeal of the Glass-Steagall Act. Carefully crafted during the Great Depression to control stock market speculation, Glass-Steagall prevented retail and investment banks, and insurance companies, from owning each other.
With the repeal, huge financial services conglomerates rapidly formed, combining these types of financial institutions. Industry behemoths such as Citigroup and JP Morgan were born. This meant that retail banks seeking ever-higher profits could dive into high-risk speculative ventures through ownership of—or being owned by—investment banks. This brought disaster in 1929.
The second change was the low interest rate policy pursued by the Federal Reserve. These rates encouraged banks to target subprime customers with variable rate mortgages. They offered initially low “teaser” rates that would reset upward in two or three years. With home prices rising, customers took the bait, believing that when the reset arrived they could refinance at affordable rates.
Many mortgage brokers misrepresented terms and conditions to eager customers who were themselves providing fraudulent information. Many banks did not bother to check the information. Predatory lending invited predatory borrowing!
Banks then sold risky bonds as safe investments to unsuspecting investors. Rating agencies, paid by the banks, rated these bonds (those with subprime components) as being safe—even giving some the highest rating.

The Big Picture

With big, steady, annual increases in real estate prices, builders nationwide went on a building spree. This created a sense of “easy money”—“something for nothing.” In their greed, many scammed the system. This does not count the many others who were outright corrupt—and scammed people in the usual ways. And of course predatory lawyers are now enjoying a field day at every turn!
The crisis began slowly in the middle of 2007. Due to a glut of homes for sale, housing prices fell moderately. But the scales were tipped—as the first round of rate resets was coming due. Faced with exploding payments, falling prices, and inability to refinance mortgages, millions defaulted. Confronted with higher payments, and on mortgages now greater than the home’s value, owners began abandoning their mortgages—again, many simply turning in keys.
Rising numbers feel no moral obligation to fulfil what they promised to repay, believing it better to just walk away. This is in stark contrast to years ago when borrowers felt an obligation—a moral and ethical duty!—to pay off loans. With moral values long disintegrating nationwide—and throughout the West—many lack the fiscal responsibility—the character!—of previous generations.
As the crisis intensifies, mortgage defaults are multiplying. And everyone is on the hook. “Monoline” insurance companies have suddenly become liable for vast billions in debt. Investors have been left holding bonds that will never be repaid. Banks are finding it difficult to sell additional bonds as investors have backed out of the market, leery of poor investments. The banks’ fee income has dried up—leaving them with massive capital deficiencies.
Thus, banks have sharply reduced lending to each other, and to the public, fearful that loans will go unrepaid.
Evidence is clear that shockwaves from the crisis are being felt in other sectors of the economy. Liquidity is drying up and less money is available to finance commercial loans.
The credit crunch has pushed beyond retail banking, and now affects major business deals and commercial real estate. Municipal bonds (that fund cities, colleges and hospitals)—once considered safe investments—can no longer easily find buyers.
As more loans reach interest rate resets, more defaults will occur. The crisis will deepen.
This will not be helped by the fact that many economists have formally declared that the world has become “unstable.” The International Monetary Fund announced in October 2010 that “Southern Europe” is condemned “to death by slow suffocation” and “that fiscal tightening will trap North Europe, Britain and America in slump for a long time” (Telegraph).
A more accurate statement is that a fast-moving financial tsunami now approaches the shores of the world economy! While governments will enact an array of gimmicks attempting to turn it back, and will almost certainly bring an appearance of improvement—or even of permanent solution!—the levees they build will this time not hold. These barriers will be breached, and blown out. All temporary economic “upticks” will be washed away with them.
The discerning realize this!

The Role of Greed

The main motivating factors behind the crisis were greed and covetousness. Human nature has been accurately described as vanity, jealousy, lust and greed. Understand. Banks were greedy for ever-higher profits. So were investors who took foolish risks for higher return on investment. And greedy individuals sought loans they could not repay to purchase material goods they coveted, but did not need—and could not afford!
Simple lack of self-control drives many into bankruptcy. Impulse buying has turned the loan industry into a thriving business. Credit is now used for luxuries, leaving little to show for it except the monthly bill.
Obsession with material goods is fuelling—in fact, supercharging—the mounting debt crisis. People now routinely spend more than they make. They want the best clothes, newest gadgets and fanciest cars. “Keeping up with the Joneses” and “Everyone else is doing it!” drives millions of consumers.
Jesus warned, “Beware of covetousness: for a man’s life consists not in the abundance of the things which he possesses” (Luke 12:15).
Do any still believe this?
Governments, financial institutions and millions of citizens are all sliding toward bankruptcy.
The present generation is very different from those of the past. Most now live solely for pleasure, ease, comfort, gain and entertainment. Thoughts of personal responsibility and character-building have almost disappeared. Tens of millions today reflect—“I want”—“I want a lot”—and “I want it now!”

Foretold Long Ago

The apostle Paul foretold all that is happening: “This know also, that in the last days perilous[dangerous] times shall come. For men shall be lovers of their own selves, covetous...unthankful...lovers of pleasures more than lovers of God...” (II Tim. 3:1-2, 4).
Make no mistake. As trends and conditions degenerate, violence will ensue—and in a big way. Uprisings, riots and tumults will increase in number and severity—so will violent crime, as the increasing number of desperate people take desperate action in an attempt to save themselves—at all costs. With this, the confusion of people asking, “What do we do?”—“Where do we go?”—“Who do we listen to?”—will grow beyond anything ever before seen.
The cacophony of fearful uncertainty will be deafening!
Back to the subject of finances. Differing opinions on why the personal debt crisis—and how to take control of your finances—fill newspapers, magazines, books and radio talk shows. But financial counselors offer advice that misses the crux of the problem.
With so many “experts” presenting theories (so often contrary to what other “experts” say), whose advice should be followed? Where can people find real solutions to real problems?
The answer to the above questions is the Bible—God’s Instruction Manual for mankind! Just as manuals exist for how to operate complex machines, the Creator God included a Manual for the most complex creation ever made—human beings.

Cause and Effect

Only by carefully following the guidelines—the immutable laws—in this Manual, can humanity achieve success.
Think of the following. God has created laws to govern every aspect of His Creation. Just as the laws of gravity and inertia govern portions of it, God has ordained laws that govern all aspects of money matters. By following them, people can ensure financial security.
Most just do not understand that laws govern every action in life. The law of cause and effect—where actions always bring reactions—applies to everything.
For example, everyone understands the law of gravity. If one accidentally drops a brick on his foot, the result could be broken bones. If a skydiver jumps from an airplane, and the parachute fails to open, the result is certain death. This is easy to understand.
Here are examples of the law of cause and effect that are just as real. If a person is constantly sick, it is obvious laws of health (proper diet, enough exercise, sufficient sleep, etc.) are being broken. The effect of bad health has one or more causes. If a marriage ends in divorce, it can be attributed to one or more causes: poor communication, financial woes, death of a child, sexual problems, drug use, etc. If someone is arrested for drunk driving, it is not hard to see the cause of the arrest.
Most never identify “cause and effect” as a universal law governing almost every action in life. They are unaware that this is a general principle at work in the world.
Yet every effect can be traced to one or more causes. Unwanted or illegitimate pregnancies, crime, drug addiction, bankruptcy, and a thousand other effects, can all be linked to specific causes.
The Bible teaches, “…the curse causeless shall not come” (Prov. 26:2). Another translation is, “…the baseless curse never goes home” (Moffatt). This scripture is saying that every difficulty carries a reason—there is a cause for every effect! Most people ignore right causes—and, as a result, reap a host of bad effects.
Why can man not see this law at work when looking either at the world as a whole or at lives individually? Why has religion also ignored this important relationship between cause and effect?
There is a hidden cause for the conditions of the world and its inhabitants!

Choice Before You

Jesus explains what most never notice because they never pick up the Bible: “I am come that they might have life, and that they might have it more abundantly” (John 10:10).
Before entering this path, a choice must be made. Almighty God revealed this choice to ancient Israel: “I call heaven and earth to record this day against you, that I have set before you life and death, blessing and cursing: therefore choose life, that both you and your seed may live” (Deut. 30:19).
God will not force anyone to follow His ways. The choice is simple: Obeying Him leads to blessings and happiness—disobedience leads to misery and unhappiness. Like the Israelites, many refuse God’s warnings. They ignore the fact that by not following His laws, bad effects will come. Through man’s rebellion, unhappy lives result, with none having any idea why.
Many workers now face the fearful reality of losing their jobs. The majority of these still do not budget and save. As spending and standards of living have risen, family saving has dropped—drastically! The result? Millions of people are on the brink of financial disaster, only a couple pay checks from the street.
Impulsive spending is the product of a generation lacking in strength and character, and is the accelerant bringing the mountain of debt now burying so many! Successful countries run on budgets. So do successful businesses—and successful households!
While consumer, corporate and national debt are now monumental, another far greater debt has been ignored! This one is toward God. Mankind has been stealing from Him for 6,000 years.
God declares, “The silver is Mine, and the gold is Mine” (Haggai 2:8), and “The earth is the Lord’s, and the fullness thereof” (Psa. 24:1). God owns everything—so says your Bible! He designed, created and maintains all things. This sets the stage for vitally important knowledge.

Can Steal from God

Everything people take for granted as theirs really belongs to God! But He has permitted man to use His planet and His resources. He allows us to be His stewards. All will one day give account of how they managed what was never theirs. God commands that we not steal from Him.
Yet most do.
How? Notice: “Will a man rob God? Yet you have robbed Me. But you say, Wherein have we robbed You? [God’s answer is] In tithes and offerings. You are cursed...for you have robbed Me, even this whole nation [the nation of Israel, referenced hundreds of times in the Bible, here referring to the modern nations descended from ancient Israel]. Bring you all the tithes into the storehouse...and prove Me now...if I will not open you the windows of heaven, and pour you out a blessing, that there shall not be room enough to receive it” (Mal. 3:8-10).
God only asks for a tithe—10 percent!—of what one makes (plus “offerings”)—and lets you keep the remaining 90 percent, although that still belongs to Him! He challenges sceptics to “prove” His promise of blessing the tithe payer.
There is a Church that knows and obeys God’s tithing laws—but also all the other laws and many truths in His Word. Part of the final Work of this Church is putting this book in your hands!
Again, most Western nations are staggering under impossible debt. There is a reason. So are millions of people. There is a reason. Terrible, national punishment now lies just ahead for the world’s greatest nations, in part because hundreds of millions of individuals in them have stolen from God—every day. This is just one of a long list of these nations’ sins. (I cover all of this, plus much more, in detail in my book America and Britain in Prophecy. It is one of the most important books you could ever read.)

The Normal Approach

God’s servants do not ever take political positions. We saw they are called “out of the world” (John 15:19). They “do not entangle themselves in the affairs of this life” (II Tim. 2:4)—and this includes involvement in the ineffective governments of men.
Voting for better politicians is not going to solve what are insoluble problems. The national and individual financial troubles catalogued here are consequences of nations and peoples disobeying God, not of merely bad politicians or wrong government policies. Most blame government policy instead of their own human nature.
Activists’ marches on the Capitol or letters to congressional representatives about today’s mushrooming political, social and economic problems will be in vain. None of these efforts will stop the fulfilment of horrific prophecies. Financial collapse will come!
Naturally then, comes the question…