Saturday, May 30, 2009


By Bruce Porteous

Will there be a global economic collapse, or can the world’s economy be saved from a total melt-down? Will the current stimulus packages work? Will there be an economic recovery?

These questions are now being asked by many business leaders, politicians and economists around the world. There appears to be little agreement on what will happen as the unprecedented economic crisis continues, in spite of optimistic forecasts from some world leaders. This article will explain the causes of the current economic crisis, and what the outcome will be, in simple, layman’s terms.

Firstly, let’s look at the causes of the current crisis. For over 30 years the Anglo-Saxon nations (USA, Canada, Australia, UK, New Zealand) and a few other countries have been spending considerably more money than they earned from exporting goods and services, accumulating large current account deficits internally, and massive external debts internationally. To finance these external debts they have borrowed money from creditor nations, in particular Japan and China. This has allowed the Anglo-Saxon nation’s financial institutions to have the capital to continue growing their economies, enabling them to finance costly wars and still import consumer goods to satisfy their self-indulgent life-styles. They have continued to expand their currency supply in order to maintain economic growth, but that caused an escalation of property prices, and growth in borrowings to finance domestic consumption. Up to now they have been fortunate to avoid being affected by the high inflation that normally follows an increase in the money supply, without a corresponding increase in productivity. This was, in part, made possible by switching to the purchase of imported goods and services produced by low-wage countries and paid for with the ever increasing supply of US dollars.

The problem arises when Federal Reserve Notes (U.S. dollars) accumulate in foreign hands. A Federal Reserve Note is an I.O.U. and rather unstable as it floats against the arbitrage basket of international currencies. The only alternative for these nations to avoid being overexposed to un-backed dollars which might tank at any moment, is to purchase United States Treasury Certificates which are (so far) considered safer as they are rated (so far)“triple A.” Either way, other nations are trusting that these I.O.U.’s will one day be useful for the purchase of goods, services or other more stable currencies. The purchase of these Treasuries (loan certificates) by foreign nations repatriates the dollars which are then spent domestically or overseas again…a vicious circle.

This inflow of money borrowed by the Anglo-Saxon nations has allowed them to maintain generous state-funded welfare programs that have directly contributed towards undermining the role of the family as the foundation of a successful society. This has encouraged people to look to the State for their needs, rather than the extended family accepting responsibility for other family members, sapping the drive and willingness of their people to compete in a competitive world. Socialism by stealth in Western nations has done so much to destroy the family structure, the foundation from which all successful societies are built. An increasing amount of Western Government revenues are drained into providing expensive welfare programs such as health care, pensions, benefits for the unemployed and inadvertently encouraging single parent families, but leaving little money for investment into infrastructure and provide capital to develop their economies. Asians culture encourages the extended family to accept responsibility of caring for other family members in times of misfortune, paying for their education and health care, rather than the State. Most Asians accept the premise that unless you work, you go hungry – sadly in the West it is expected by many that the State will provide, regardless if one works or not.

One of the results of the current economic crisis is that the Anglo-Saxon Governments no longer have revenue to support their expensive welfare programs; just at the time when there are the greatest financial demands being placed on them. An aging population, escalating health-care costs, growing unemployment is blowing out government budgets, causing unsustainable deficits. Meanwhile the Asian countries, not burdened with such extravagant welfare programs, have been able to use taxation revenue to invest into developing their domestic economies. As a result the Anglo-Saxon nations have become less competitive in the global market-place than the Asian economies. Added to this, the lack of domestic savings by the Anglo-Saxon nations has made them dependent on borrowing from those countries that have large current account surpluses, causing them to slip further behind in maintaining the standard of living that their people still expect to enjoy.

The end result has been a gradual break-down of the social fabric of western society till today they are crime-ridden, diseased, over-indulgent, debt-ridden and self-destructive. The Anglo-Saxon nations are now so heavily indebted to their overseas creditors, that even an increased amount of export revenues would not enable them to service their external debts. However with falling exports and large current deficits, it is only a matter of time before they slide into bankruptcy, unless they are able to operate with a current account to service and repay their international debts. The flow of US dollars into Asia has enabled their economies to obtain the capital to finance their domestic growth and accumulate overseas reserves. In turn, lending their surplus capital back to the Anglo-Saxon nations has allowed these countries to obtain the financing to purchase more imports from Asia. This arrangement has worked well up to now for all concerned, but is not sustainable. However, it is proving very difficult for the Anglo nations to expand exports to the rest of the world during a global economic recession which is causing a lack of overseas export markets for their goods and services.

Up to now the USA has been in the fortunate position of having the US dollar as the world’s reserve currency, and being able to print dollars to finance its deficits, avoiding the need to borrow in other currencies. As long as the global demand for dollars to finance world trade remains, it has been in everyone’s interest to continue with this arrangement and retain the US dollar as the world’s reserve currency. Over the last decade surplus dollars have been recycled back to the American banking system, creating surplus liquidity in the Anglo-Saxon nations, and encouraging their banks to adopt loose lending practices to generate paper profits from loans to domestic customers.

The current economic crisis was triggered when American and UK banks accumulated bad debts from reckless lending, as their customers began defaulting on their loans. This quickly led to a chain-reaction of banks defaulting and the need for government intervention to bail them out. This has led to the current global economic crisis we now have.

In an attempt to avoid a total economic collapse, the governments of UK and USA have created trillions of dollars of credit to inject into their banking system to save their banks from collapsing, as well as guaranteeing deposits. This was intended to allow the banks to continue lending to prevent their economies from going into free-fall, and government revenues collapsing. It appears this may be working, although the banks have still not written off trillions of credit card debts and real estate loans. The real question is, where has all the money gone that was lent though the bank's bad debts which have been written off? This money is still in circulation, but much of it is not recoverable from those who have defaulted on their loans. What has happened to this money? It has not just vaporised. Much of this money remains in circulation outside the USA and is now controlled by foreigners.

Another difficulty faced by the Anglo-Saxon nations is that trillions of dollars have been written off of their equity and property markets, wiping out much of the collateral from their banking system. Still not accounted for are the trillions (possibly quadrillions) of dollars involved in the derivatives markets – a sleeping time bomb ready to explode at any moment. In effect this has resulted in much of the wealth of Anglo-Saxon nations disappearing, lowering the standard of living, slashing government revenues, and will inevitably result in widespread poverty.

The Federal Reserve policy of creating new currency to replace toxic bank loans is like putting fuel on the fire. In the short-term it may prevent the US economy from unravelling, but in the long term it will be disastrous. It will result in run-away inflation as money looses value. Admittedly the US does not have much choice – if they had not propped up their financial institutions, the economy would have unravelled already, collapsing government revenues, and dragging the world into a depression. They would not have had the revenue to service their national debt. Either way, the economy collapses. The option of printing currency to inflate the money supply in an effort to stimulate consumer demand and maintain economic activity is a very risky one, and will eventually lead to erosion of the fiat value of the currency and uncontrollable inflation. Governments flooding markets with currency to revive economic growth without increasing goods and services will only result in the collapse of the currency.

So what happens next? The flood of money that has been injected into global markets may lead to temporally restoring consumer confidence and spending for a short period. Sadly, the imbalances that have led to the current crisis have not been addressed. Nothing has been done to correct the imbalance of global trade between the Anglo-Saxon nations and Asia. The Asian nations continue to accumulate more and more US dollars from exports and income from their investments. The flow of capital from the West into Asia to finance imports continues. The outcome can only result in one thing – a total collapse in the value of the currencies of the Anglo-Saxon nations.

The coming collapse of the US dollar will result in significant readjustment of global economic and military power. It will result in the end of the Anglo-Saxon nations’ dominance of the global economy. They will be replaced by two significant economic power blocks (Asia and the EU) filling the vacuum created by their collapse. It will also be a time of further economic turmoil, followed by political upheaval. It will lead to the end of many of the democratic freedoms which we have today, replaced by authoritarian regimes regulating the global economy. Not only will there be a denial of political, economic and social freedom, but also religious freedom. These institutions will be replaced by authoritarian institutions regulating how people live their lives, denying much of the individual freedom that we have come to accept today.

There is general agreement amongst many world leaders that the free-market unregulated economic model advocated by the USA can no longer continue. In its place they are advocating what UK Prime Minister Gordon Brown calls a “new world economic order”. What is planned is to have much greater controls on the movement of money, where and how capital is used – controls on speculation in futures, derivatives, commodity trading, etc. Technology available today will enable a single world currency supported by one global central bank, to control both the supply and movement of money around the world. This is being advocated by Germany and France under the pretence of controlling tax avoidance and regulating markets, in reality it will go much further than this – controlling the movement of money and all commercial transactions, with a cashless society where governments can monitor all commercial and personal transactions.

The Euro is the only currency large and strong enough to replace the US dollar as a world reserve currency, or a new world currency. Germany is the one country which has sufficient currency reserves to underpin the confidence in the Euro allowing it to become the new global reserve currency, having been for years the world’s largest exporter. Increasingly German dominance is now dictating the direction of Europe – all that is lacking is the leadership.

The EU lacks a leader who can unite the various competing political and nationalistic factions to enable decisions to be reached to bring about a cohesive economic policy and revive the European economies. As the economic crisis spreads throughout Europe, unemployment continues to grow, and political unrest becomes more severe, the need for the appearance of a strong leader will create a power vacuum into which someone will surely step. Europe now desperately needs a modern-day Napoleon, Hitler or a revived Holy Roman Emperor who can save the continent from economic and political disintegration - a strong and commanding personality who can unite the EU and lead it to economic recovery. Yet unity cannot happen unless the present disparate political structures that currently exist are reformed, and the proposed new constitution adopted. The materialization of a single leader that can unite the various European nations into a unified United States of Europe, who has the ability to revive their economies, and provide the decisive leadership required to lead them out of this crisis is the obvious necessity.

The fate of the Anglo-Saxon nations now looks extremely bleak. The collapse of their currencies will be followed by total economic collapse. They will be unable to repay their international debts. They will slide into bankruptcy. There will be wide-spread poverty, starvation, great suffering of their people as their nations slide into insolvency. Disease will become wide-spread. Many drug-dependant people will perish. Crime will spiral out of control, as a total break-down in law and order develops. Most jobs will disappear. Governments will have no revenue to continue functioning or pay for public servants or services. They will no longer have the income to maintain their defence forces.

Throughout history empires rise, declined and collapse. The coming collapse of the Anglo-Saxon Empire will happen quickly – this group of nations will disintegrate, which will result in the reshaping of the political and economic landscape of the world. Without the stabilising influence these nations have had on the world, many of the freedoms we take for granted today will disappear. The Anglo-Saxon nations originally had a value system based on the Bible, but as they have rejected the teachings of the Bible and the Law of God, so has their influence in the world declined. Now these nations are facing total economic collapse, not economic recovery as many hope. They are now being cursed for rejecting the teachings of the Bible and the Law of God.

1 May, 2009

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