This Means War

Where global trade disputes are leading—and how they will upend your life
 

Is China waging war on the United States? Many would say the notion that Beijing is actively trying to topple the U.S. is preposterous. But is it?

Sun Tzu, the fifth-century Chinese military general, taught that “all war is based on deception.” What if China has managed to blind America to its true motive? The thing about deception is that the deceived have no clue they have been deceived.

Is it even possible to discern China’s true ambitions?

It is. First, we must look past the politically correct words being uttered by politicians on both sides. We must see beyond platitudes and promises, and look squarely at the incontrovertible facts.

Among those facts are China’s unscrupulous land grabs in Australia, New Zealand and across the continents of Africa and South America. The fervor with which it seeks to gratify its insatiable appetite for raw materials. Its near monopoly over vital and strategic rare earth minerals. Its aggressive, unrelenting acquisition of foreign companies and businesses. Its insidious relationships with anti-American, anti-democratic states and tyrants. The brash confidence with which its leaders operate in international relations. Its striking military aggrandizement and growing appetite for military provocation.

Perhaps the most significant fact, especially for Americans, is the enormous leverage China has over the U.S. economy—and the fact that China’s leaders appear ready to use it as a weapon!

If we look at the facts, it’s hard to deny that the United States and China—even now—are at war!

Presently, it is a financial war. Moreover, the globalized nature of our world means this trade and currency war is not confined to just these two economies. In fact, the increasingly radical actions of these two behemoths have set off global trade and currency wars—wars that history and Bible prophecy say precede a tumultuous and terrifying future.

Race to the Bottom

Around the world, national economies, especially those of industrialized states, continue to suffer the aftershocks of the global financial crisis set off in the United States in September 2008. In Europe, North and South America and Asia, economies are stagnant, or only growing at a snail’s pace. National debt is soaring, industry is seizing up, and unemployment is rocketing.

Governments are looking at their stalling economies and becoming desperate.

A new trend is emerging. In an effort to kickstart their economies, more and more countries are enacting beggar-thy-neighbor fiscal policies to devalue their currencies. When the currency of a nation loses value, it becomes cheaper to foreign countries and investors. Foreign nations and investors are motivated to buy more goods, causing an increase in exports, which means more industry and manufacturing, and eventually lower unemployment. Sounds like a great way to help an economy, right?

The problem is, it amounts to an act of war against other nations.

In our globalized world, when one country devalues its currency to boost exports (and the broader economy), other national economies are significantly disadvantaged. The exports of the disadvantaged economies become uncompetitive. The result? Manufacturing and industry slump, unemployment rises and consumer spending drops. To remain competitive, the disadvantaged must react by devaluing their own currency.

If it persists, this race to the bottom threatens to paralyze global trade and destabilize the entire financial system! It would wreak particular havoc on the most debt-laden national economies.

This is precisely what experts fear is now happening.

In September, Brazil’s Finance Minister Guido Mantega declared that “we’re in the midst of an international currency war.” Billionaire investor and financial guru George Soros agrees. “I share the growing concern about the misalignment of currencies,” he wrote in the Financial Times. “Brazil’s finance minister speaks of a latent currency war, and he is not far off the mark” (October 7; emphasis ours throughout).

Dominique Strauss-Kahn, the head of the International Monetary Fund (imf), warned that in governments the world over the idea is beginning to “circulate that currencies can be used as a policy weapon.” “With almost no country wanting a strong currency … as they try to stimulate economic recovery, and with the U.S. and the EU pushing for a yuan revaluation, the big theme in 2011 is shaping up to be some sort of currency wars,” warned Chris Weafer, chief strategist at Russian investment firm Uralsib.

In October, Robert Kuttner, co-founder of the American Prospect, wrote, “Trade war is here—and we’ve disarmed.”

China vs. America

The two actors at the center of this global drama are China and the United States. In an effort to sustain high exports, China’s government has for years intervened to keep the yuan low compared to the U.S. dollar. Although this has long frustrated Washington, it was able to put up with Beijing’s currency manipulation as long as the U.S. economy chugged along at 3 to 5 percent growth per year.

But as the U.S. economy slows, Washington is searching for ways to boost manufacturing and, along with it, employment and consumer spending. To increase exports, the Federal Reserve has driven the dollar low. During September alone, the dollar tanked 4.5 percent against a basket of major currencies contained in the U.S. Dollar Index—by historical standards, a huge drop.

But economic growth remains slow, for a number of reasons. One primary reason: China. As long as Beijing keeps the yuan lower than the dollar, goods manufactured in the U.S. remain uncompetitive. How bad are the consequences? So bad that the White House—hardly a confrontational administration—now appears willing to confront Beijing on the issue.

In October, for example, the U.S. House of Representatives passed the Currency Reform for Fair Trade Act. Under this new law (which has yet to pass in the Senate), punitive tariffs would be imposed on Chinese exports as long as Beijing intentionally devalues the yuan to promote its own economic growth.

Of course, America was accused of using this law to start a trade war with China. Truth is, as Democrat Rep. Linda Sanchez stated before Congress, “We are already in a trade war. And China is using cannons and we’re standing here shooting [air-gun] pellets.”

Whichever way you look at it, the consensus is the same: Trade war is starting between China and the United States!

This is deeply alarming, especially for Americans! Why? Because if a full-scale trade and currency war erupts, China has decisive leverage over the United States.

This fact is becoming increasingly evident. In March 2009, the Pentagon conducted its first ever series of economic war games. “The soldiers were Wall Street traders and executives, economists and academics,” reported Eric Weiner in the Los Angeles Times. “The weapons were stocks, bonds and currencies. The participants were divided into teams: the U.S., China, Russia, Japan, the European Union and so on” (October 6).

“What the exercises showed was that the U.S. consistently lost to China in economic warfare,” Weiner noted.

In September, when U.S. President Barack Obama met with China’s Premier Wen Jiabao on the sidelines of the UN General Assembly, he demanded that China stop manipulating its currency. Wen, aware he was operating from a position of power, responded in a ho-hum manner—in essence saying, Just how much money do you owe us again?

China’s leaders, wrote Weiner, “know what our leaders are only beginning to understand—that China would probably win a global trade war.”

This past summer, Ding Yifan, a chief official at China’s Development Research Center, said that if America became too belligerent, China could not only refuse to lend more money, but could also dump its current holdings of U.S. government debt. His comments came during a conference where Chinese officials questioned the creditworthiness and reliability of the dollar. Since then, the question of the dollar’s value has emerged as a serious topic of discussion in government halls around the world.

The Threat Is Real

Too many people don’t take this threat seriously enough. Many analysts say that if China were to dump its dollar holdings it could cause interest rates to soar, and that would hurt China as much as it would America because it would destroy its best customer. Additionally, the U.S. Federal Reserve could simply print up whatever money was needed to cover government spending and push interest rates back down. Thus China would lose the most in any trade war, goes the argument.

These views are woefully simplistic. Those people are deceived.

First, if the Federal Reserve began widespread dollar printing—on the scale required to redeem China’s vast holdings—it would send the dollar’s value plummeting and destroy its place as the world’s reserve currency. The importance of reserve currency status cannot be overstated. Since the world uses dollars to conduct international trade, there is a built-in demand for dollars that supports their value even when the government runs gargantuan budget deficits. If demand for the dollar stops, the money Washington uses to pay its bills and fund its social programs vanishes. America sinks.

Just think, if America’s biggest creditor, which is also the world’s biggest exporter, pulled the plug on America, would the world even want dollars anymore? And even if America could survive China’s “nuclear” dollar option, what would happen if just one other major country—like Germany, Japan or Saudi Arabia—took China’s side and got rid of its dollars?

This scenario may sound extreme, but it’s one that pundits are beginning to realize could happen!

Second, what if China and the rest of the world found another currency to replace the dollar as the world’s reserve currency? Even now, as fear of trade and currency war increases, a growing number of world leaders and finance gurus are entertaining the idea. Calls are going out—and not just from the likes of Iran or Russia—for the end of the dollar’s reign. Other powers and emerging powers, like France and Brazil, have also called for a new global currency.

The imf is already making a move. Last year, it began issuing a type of currency called sdrs (Special Drawing Rights), based upon a basket of major currencies. In effect, the imf began acting like a global central bank—even selling bonds denominated in sdrs. China and Russia have invested billions in them. According to Omnis analyst James Rickards, the shift away from dollars has already started and will accelerate. sdrs could replace the dollar as the world’s reserve currency in two to five years, he told the New American. “It’s not speculation, it’s actually happening” (September 15).

In case you are wondering, the imf is dominated by European countries.

The movement away from the dollar is supported by the United Nations too. “A new global reserve system could be created, one that no longer relies on the United States dollar as the single major reserve currency,” said the UN’s World Economic and Social Survey for 2010. “The dollar has proved not to be a stable store of value, which is a requisite for a stable reserve currency.”

Watch closely: If America gets too testy, Beijing has the leverage to up the ante and draw even more countries into a concerted attack on the dollar. If a legitimate alternative to the dollar emerges and is embraced globally, this would mark the death knell of the American economy!

A Global Phenomenon

It is not just China and America engaging in currency manipulation and trade war.

As the Telegraph’s Ambrose Evans-Pritchard reported in September, “Brazil, Mexico, Peru, Colombia, Korea, Taiwan, South Africa, Russia and even Poland are either intervening directly in the exchange markets to prevent their currencies rising too far, or examining what options they have to stem disruptive inflows” (September 29).

On October 5, the Bank of Japan announced it would cut its key interest rate and institute a ¥35 trillion (us$418 billion) monetary easing program. By forcing the yen down, Tokyo is trying to help its largest companies (and employers), such as Toyota, Sharp and Sony, remain competitive in the global market.

Grasp what is happening here: Nationalism is emerging as a powerful and dangerous force in global finances!

The decision by the likes of China, America and Japan to devalue their currencies comes with disastrous consequences for the world’s smaller currencies and economies. As advanced economies devalue their currencies, the currencies of smaller economies, such as the Brazilian real, tend to rise, especially as investors seek higher yields and better returns. This, as Brazil’s finance minister lamented in September, “threatens us because it takes away our competitiveness.”

Similar trends have occurred with the Canadian dollar and Swiss franc. Also, the Australian dollar rose in October to its highest level against the U.S. dollar since 1983.

As Germany’s Der Spiegel declared in October, “The whole global currency system is in a state of jeopardy. It seems as if the world has been turned upside down—and has become very dangerous. Indeed, for better or worse, the well-being of entire countries depend on the value of these currencies, meaning that instability on the currency markets also threatens the structure of the global economy” (October 5).

Global economic chaos looks imminent!

First Trade War, Then …

Ultimately, trade and currency wars carry with them a greater danger than tanking economies and collapsing financial systems: They are a sign of the resurgence of nationalism!

As national economies and the global economy flounder, national governments are turning inward. They are becoming more protectionist. And the longer national economies wallow, the more inclined world governments will be to embrace nationalist financial policies—even if it means arousing the ire of other countries!

A dangerous scenario is now developing.

History shows that trade and currency wars have a nasty tendency to snowball out of control. Remember the Great Depression. During the four years after the 1929 stock market crash, America regressed like at no other time in its history. Forty-two percent of America’s banks folded. Production at the nation’s factories, mines and utilities fell by more than half. People’s real disposable incomes collapsed by 28 percent. Stock prices cascaded to one tenth of their pre-crash height. Unemployment rose from 1.6 million in 1929 to a whopping 12.8 million by 1933—leaving one out of every four workers jobless. People lost their savings, their homes, their health and their hope.

Such conditions are starting to sound familiar once again. But what made the 1929 crash turn so much more deadly than the previous, short-lived crashes of 1920 and earlier? Many economists say it was unique because just months later, a trade war began that quickly engulfed the world.

Post-World War i industrial America, reeling from the effects of the stock market crash and subsequent job losses, erupted into protectionist fervor. Riding a populist wave, U.S. politicians imposed the Smoot-Hawley Tariff Act—one of the most draconian protectionist policies in America’s history. Historian Richard Hofstadter, with the benefit of hindsight, described the tariff act as “a virtual declaration of economic war on the rest of the world.”

That is just how the rest of the world saw it. Foreign nations were outraged. Within two years, 25 countries had retaliated; U.S. and foreign trade took massive losses. America exported $5.24 billion in goods in 1929; by 1932 the total had fallen to just $1.6 billion. Overall, world trade had declined some 66 percent by 1934.

In the 1930s, countries around the world defended and furthered their own interests even when it meant undermining the economies of other nations. Before long, the economic malady began to have dramatic social and political consequences. Populations became frustrated. Extremist ideologies and policies entered the mainstream. In some instances, like Germany, radical leaders tapped the mass frustration to gain political leadership.

By the end of the decade, the mass frustration had begun to boil over: The Second World War erupted!

Of course, trade and currency wars were not the sole cause of World War ii. But historians agree that economic chaos in the global financial system (and in national economies) played a central role in preparing the world for war.

Today, many prominent, mainstream figures are describing the global economy using military terms. Study World War ii and you’ll notice historians employing the same terms—“trade war” and “currency war,” the use of economic policy as a “weapon”—in their explanations of what led up to the Second World War.

To the question “What comes after global trade war?” history has a simple and terrifying answer: military conflict on a global scale!

An Apostle’s Warning

Throughout his 53-year work, Herbert Armstrong often described the conditions that would precede the biblically prophesied collapse of the United States. Despite being the most stable currency in the world, the American dollar would one day be in “jeopardy of being devalued,” he once wrote. When the dollar plummets, he warned, inflation would erupt and this would lead to “eventual economic collapse for the United States.”

So strong was Mr. Armstrong’s faith in Bible prophecy, he warned as early as the 1960s that World War iii had already gotten underway, and that it was “ECONOMIC in nature.” About America and Britain in particular, Mr. Armstrong stated, “God prophesied a virtual trade war will get under way against the United States and Britain—and [that] our national economics will falter, and then collapse!”

He delivered that forecast in March … 1968!

Forty-two years later, it is now evident that the trade war that will end in the collapse of America and Britain is here.

Are you ready for global financial chaos? It doesn’t matter if you live in America or Europe, South America or Africa—the economic bedlam that Bible prophecy says precedes global political and military conflict has begun.

China is waging economic war on the U.S., a war that is intensifying and will soon precipitate America’s collapse. As a means to this end, China is forming an economic axis with Germany and Europe (more about this pivotal development on page 12, “The Silk Superhighway”).

Scripture says this China-Europe economic axis will be responsible for besieging America and causing its final economic downfall. “And he shall besiege thee in all thy gates, until thy high and fenced walls come down, wherein thou trustedst, throughout all thy land: and he shall besiege thee in all thy gates throughout all thy land, which the Lord thy God hath given thee” (Deuteronomy 28:52).

As America falls, prophecies in Revelation 17 and 18 show that this European empire will replace the U.S. as the nucleus of global trade and commerce. In the end time, the Apostle John wrote in Revelation 18, the “merchants of the earth” will be “waxed rich through the abundance of her delicacies” (verse 3). (For more information about this prophecy, request a free copy of Daniel Unlocks Revelation.)

Why should you be concerned by trade and currency wars? Because these financial crises are creating the biblically prophesied conditions that precede World War iii!

Don’t remain ignorant of these developments. Take these crises seriously. More importantly, make it a goal to educate yourself on how to prepare for this imminent period of global chaos and carnage.

If you are willing to embrace God’s law and lifestyle, the Bible reveals that God mercifully provides a way to escape the impending turmoil. When the global tribulation strikes, God says that those who follow His law and support His work on Earth will “flee into the wilderness, where [they] have a place prepared by God” (Revelation 12:6, Revised Standard Version).

To learn more about this place of safety, and how you can find solace there during the soon-coming tribulation, request and study our free booklet Repentance Toward God.