Global Economics from a Biblical Worldview

Global Economics from a Biblical Worldview

The comfort with which most Americans have lived their lives is likely to end within this decade--due to global events that are now manifesting themselves.

History shows that there are definite cycles that our economy experiences. Certain classes of investments are held in high esteem, while others are neglected for long periods of time. Then the cycle reverses. This is simply due to the sin nature of man. The old adage of markets being driven by greed and fear is true. The Bible tells us to neither be greedy (1 Tim 6:10) nor to be fearful (Matt 10:22-33). However when the world economic system is controlled by men who are not moored to a Biblical worldview, then greed and fear will drive our economy. And the root of this greed and fear is money.

What is Money?

Today our monetary system is made up of fiat money - money by “decree”, or simply - money printed “out of thin air”. Fiat money has been tried for thousands of years but it has one thing in common. Every fiat money system in the history of the world has failed. This is a very important fact! Ours will be no different! The question is, when will it happen, and what form will the destruction take.

Contrast fiat money – created by man - with God’s money, which is silver and gold. I believe there is a reason why a limited amount of these “precious metals” have been placed in the earth by our Creator. It was to give us an honest form of money, which would help man keep in check our struggle with greed and debt. God gave our Founding Fathers wisdom to see that God’s money would help protect “the people” from mismanagement of the country’s monetary system by the government.

When the Federal Reserve was created in 1913, our country began the long journey from using God’s money – established by the Bible first and our constitution second – to our current fiat monetary system. This private entity, controlled by the world’s powerful bankers, has fallen prey to the greed of man and has maneuvered our economy into a corner that will possibly ignite a hyperinflationary monetary environment within the next few years. The result could be the destruction of the US dollar as the world’s reserve currency. How did the Fed paint us into this corner?

The Trap is Set

After the turn of the century, the Fed had a major problem - how to keep the economy from entering a deep recession. Following the double shock of the NASDAQ market collapse and 9/11, the Fed needed to stave off a major recession and deflation similar to the 1930’s. To accomplish this, they lowered interest rates to multi-decade lows and cranked up the electronic printing press. This deadly combination saved the economy for a time, however it led to a bubble in the housing market. Our cash flow society took the opportunity provided by low interest rates to increase the size of their mortgage and all other forms of debt. Furthermore, lenders took the opportunity to lower credit standards to absurd levels, adding to our debt woes. This flies in the face of what God tells us in Proverbs 22:7 – “The rich rules over the poor, and the borrower is servant to the lender.”

Today, rising interest rates, falling home prices, and a tightening of credit standards have caused buyers for homes disappear. The imbalances created by this situation have led to what is known as a “liquidity trap” – a perfect storm of circumstances that has caused credit markets to seize up. The credit crisis may have begun in the mortgage market, however it has spread into other markets. The toxic waste known as OTC derivatives, which were used to package suspect subprime mortgages with other debt, was sold into markets throughout the world, rated AAA, or “investment grade”. Now these debt instruments are being exposed as junk, and the reaping of the fields of greed and deceit which were sown has just begun.

Sophie’s Choice

In this 1982 movie based on a novel by William Styron, a young mother on her way to a Nazi concentration camp had to make a horrible choice - which one of her two children would she send to the gas chamber and which one would she save? This is where the Fed finds itself today. They are on a tightrope between two horrible choices. 1) Raise interest rates to defend the dollar and choke off price inflation. This would cause huge problems with the mountain of debt our country has piled on and would crush housing or 2) lower rates to save the credit bubble, knowing price inflation will increase as the dollar falls and all those cheap imported goods and commodities rise rapidly in price.

The first choice involves playing with a deflationary depression similar to that of the 1930’s as the money supply is held in check and debt defaults skyrocket forcing mass foreclosures, bankruptcies, closings of banks, and widespread loss of capital as the stock markets crash. The latter choice would force the government to inflate and most likely hyper inflate the currency - essentially destroying it as they pay off existing debt with dollars worth far less in terms of purchasing power. Based on comments by Fed Chairman Ben Bernanke and current monetary policy, it appears as though the choice will be made to sacrifice the currency. This choice will likely result in hyperinflation and the destruction of the US dollar as the world’s reserve currency.

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