In Japan We Trust
“The United States had been dealt history’s finest hand. Even as late as 1980 it had a far richer endowment in natural resources, human abilities, and inherited wealth than any countryever. [Yet] this endowment had been squandered….” So wrote author R. Taggart Murphy on page 223 of his book The Weight of the Yen (emphasis mine).
Today, there are those trying to “talk up” America with a show of unmerited confidence so that the present “bubble” economy and over-valued stock market will continue an unabated upward climb. Yet it is obvious to any right-thinking person that the United States is in an ever-deepening spiral of decline. America’s economy only appears healthy.
In the years between 1980 and 1987, America transformed itself from the world’s greatest creditor nation into the world’s greatest debtor, with a humiliating national debt now in excess of 5.4 trillion dollars. Truly, America’s great prosperity has been squandered! To understand how America lost that prosperity, we must understand the source of the “natural resources, human abilities and inherited wealth.” How did the United States of America receive “history’s finest hand”?
The Blessings of Abraham
The late Herbert W. Armstrong wrote on page 9 of his 1980 version of The United States and Britain in Prophecy, “It may not be generally realized—but neither Britain nor the United States became great world powers until the nineteenth century. Suddenly, in the very beginning of the nineteenth century, these two—until then small, minor countries—suddenly spurted to national power and greatness among nations, as no nations had ever grown and multiplied in wealth, resources and power before.
“By 1804 London had become the financial hub of the world. The United States had exploded out of its swaddling clothes of the 13 original states and had acquired the expansive Louisiana Purchase. It was fast sprouting up to become the mightiest nation of all time. But Britain burst forth to greatness first, and until the World Wars had become the greatest empire, or commonwealth of nations, in all history.
“Between them the British and the American peoples had acquired more than two-thirds—almost three-fourths —of all the cultivated physical resources and wealth of the world. All other nations combined possessed barely more than a fourth.” (If you have not already done so, please write for your free copy of United States and Britain in Prophecy.)
All of this happened because God promised in Genesis 12:1-2 that He would make a “great nation” out of the descendants of Abraham. That nation was ancient Israel, and America and the commonwealth nations of Britain are its primary descendants. Many other scriptures support Genesis 12:1-3—for example, Genesis 17:1-8; 22:16-18; 24:60; 26:1-5; 27:26-29; 28:13-14; and 35:11. The modern-day descendants of ancient Israel, in particular America and the British nations, were given national prosperity, in payment of God’s promise, through a superabundance of natural resources, human abilities and inherited wealth. And America went on to become the greatest single nation in world history. How then did this vast national treasure of resources, abilities and wealth come to be squandered?
Borrow Your Way to Prosperity?
In the preface of The Weight of the Yen, a clear understanding by the author is evidenced early-on about the heart and core of a problem which will ultimately lead to America’s demise. Mr. Murphy, an American investment banker who spent 15 years working in Japan, wrote on page 15, “As bankers [in Tokyo during 1983] we were sitting in the midst—often as middlemen—of the greatest transfer of wealth in history. Matters had gone far beyond temporary [Japanese] trade surpluses, slowly strengthening currencies, and a few uncompetitive American companies whining about foreign competition. Japanese companies had achieved a superior cost position in almost any key manufacturing industry one cared to mention. Thanks to this position, the companies were inevitably accumulating vast cash hordes, and those cash hordes in turn were swelling the vaults of Japan’s banks and insurance companies. But Japan’s financial system had not been designed to handle cash in those quantities.
“[U.S. President] Ronald Reagan provided a solution. Just as the Japanese emerged with large quantities of excess cash [in the early 1980s], the American government enacted a series of laws that suppressed taxes, did little to control aggregate [or total] spending, and made only token gestures to raise the savings rate [of citizens]. The predictable result: a ballooning federal deficit [resulting in America’s present national debt]. Doomsayers expected a crash, but the U.S. Treasury [Department] found a brand-new source of funds with hundreds of billions of dollars to lend: Japan.”
Instead of following godly financial laws with prudence and conservatism, America turned to Japan for help in a humanly devised scheme based upon a continuation of over-spending and ever-increasing debt, ignoring the plain instructions of man’s Creator. But such a scheme is doomed from the beginning because man cannot trust himself or other humans!
Jeremiah 10:23 warns mankind that “The way of man is not in himself: it is not in man that walketh to direct his [own] steps.” Further, the prophet Jeremiah tells us in chapter 17 verse 5, “Thus saith the Lord: Cursed be the man that trusteth in man, and maketh flesh his arm, and whose heart departeth from the Lord.” Psalm 118:8 tells us, “It is better to trust in the Lord than to put confidence in man.” And in Psalm 146:3, “Put not your trust in princes, nor in the son of man, in whom there is no help.” In Proverbs 3:5-6 we are clearly instructed to “Trust in the Lord with all thine heart; and lean not unto thine own understanding. In all thy ways acknowledge Him, and He shall direct thy paths.” And finally, there is plain instruction regarding the pitfalls of indebtedness in Proverbs 22:7 which admonishes, “The rich ruleth over the poor, and the borrower is servant to the lender.”
But in spite of these and other such clear instructions from our Maker, man turned to man in absolute financial folly. And in the case of America and Japan, after a few years of this financial “marriage,” they found that their goals and ways of thinking are light-years apart.
As we look around today, it is easy to see that America’s industrial and manufacturing base has almost vanished as one U.S. business after another has closed its doors due to Japanese competition. To understand why, one has to understand the difference between the Japanese approach to business and the approach of American-style capitalism. Had these differences been understood and appreciated even as late as the mid-1980s, it is possible that many of today’s economic problems could have been avoided.
To Americans, Japanese companies do business at prices which seem to make no sense. As one IBM executive was quoted in The Weight of the Yen, the Japanese have “no understanding of the need for profit.” This is exactly opposite to the way American businessmen think; probably 99 percent of Americans still do not fathom this fundamental and extremely important difference.
Mr. Murphy continues on page 81 of his book, “[Japanese] bureaucracies, on the one hand, and private [American] companies in market economies, on the other, measure themselves by different criteria and behave differently as institutions. One cares about profits and making money; the other, about status and influence. Profits come from making things or performing services that are worth more to consumers than the cost to the provider of making those things or performing those services. The [well-being] of the consumer is irrelevant as long as he or she can pay for the product or the service. Status and influence, however, come from fulfilling expectations—particularly the expectations of those in positions of greater power and authority—and thus in turn from acquiring the ability to demand that other groups live up to expectations. Large Japanese companies have not been very good at making money, but then they were not set up to do that. They performed exceptionally well at their primary tasks of providing stable employment and income for middle-class male heads of households and of building productive capacity in those industries deemed by the most powerful people in Japan to have strategic significance.”
Simply put, the American and Japanese people think differently! America put itself in direct competition with a country which is driven only slightly by profits—a country which wants primarily to dominate an industry in order to receive status and influence and to provide its people life-long employment and stability. For greed-driven America, to take Japan as a “lover” amounted to fiscal insanity!
Savings and Loan
In discussing the Japanese mind-set, Mr. Murphy goes into great detail on pages 88 to 109 to explain one of the most amazing differences between Americans and the Japanese: the “household savings rate, [which is] among the world’s highest and a rate that since 1960 has never dipped below 15 percent of household income” (compared with America’s 3.8 percent in 1997). This traditional Japanese frugality, called “holy poverty” by some, provided surplus cash at home for loans instead of using foreign money to finance the economic miracle of Japan’s phenomenal industrial growth which began about 1953, on up through the 80s boom and into the recession which followed. As Mr. Murphy put it on pages 90-91, Japan mobilized “household savings to leverage the entire economy.
“The concept of leverage…is a simple notion: Borrow a lot of money in order to grow as fast as possible and in turn rapid growth must occur in order to service [make payments on] the debt. When it works, leverage permits much higher growth rates than other financing methods—waiting to accumulate reserves, for example, or selling pieces of the enterprise to others (called welcoming foreign investment in a national context). But it is also risky. Any slowdown can make it impossible to service the debt.
“The linchpin of the strategy for Japan was the continuous transfer of wealth from households to industrial corporations…. Virtually every aspect of Japanese economic life is structured so as to boost savings and extract wealth from consumers…. Land for housing is kept deliberately scarce [so that] people will be forced to save in order to secure this expensive but essential good. Those savings are available for use [meaning loans] by Japanese industry…. Education is another essential good that helps squeeze savings out of households… whether one goes the public or private route, securing a future for one’s children means saving money….
“Until the 1980s Japanese households had effectively no option for financing major expenditures except for savings. Credit cards, installment plan financing for consumer durables, and other forms of consumer credit all were stymied in order to encourage savings at every point….”
After the end of World War II, the enormous amounts going into such institutions as Japan’s Postal Savings System (the world’s largest bank), provided Japanese administrators with much-needed cash and low-cost financing for the economic miracle. But because of changes in the Japanese economy during the 1980s, a massive cash surplus developed, to the tune of hundreds of billions of dollars both at the personal and corporate level. It is at this point in history that the Reagan Revolution in America entered the picture with a seemingly unlimited appetite for borrowed money.
The Rise and Fall of Modern Israel
Thirty-seven years earlier, in 1944, a new international monetary regime was designed at Bretton Woods, New Hampshire, and was subsequently called the Bretton Woods System. As The Weight of the Yen explains on page 111, the principal architect of Bretton Woods, John Maynard Keynes, along with other world leaders, chose the United States to lead that system as “the hegemon, the great power that sits at the center of the global economy. A hegemonic power supplies a universal currency or something close to it, it provides an open market in which foreign countries can earn that currency, and its central bank functions as a kind of global central bank, acting as lender of last resort and intervening to head off global banking and currency crises. Britain had played this role in the Victorian era. Now the United States would assume the mantle of hegemony [meaning superpower status]….
“But in one of history’s ironies, the American delegation to Bretton Woods overruled Keynes’ attempts to build in provisions that would force surplus countries into sharing adjustment burdens for payment imbalances [meaning that if an out-of-balance condition developed between trading countries due to one selling more to the other than it bought, the one having the surplus would bear the costs of bringing down its surplus]. The Americans believed the United States would be a surplus country as far into the future as they could imagine, and they did not want it stuck with the bill for profligate [recklessly extravagant] policies in deficit countries. A quarter century later, however, the United States had itself become the leading deficit country, pleading helplessly with the world’s other major economies that they reduce their [trade] surpluses.”
America set itself up for failure by limiting its ability as the world leader (hegemon) to control and adjust its own trade imbalances with the rest of the world. Because America is a consumer society which fuels the rest of the world by buying their products with its “universal currency,” it was inevitable that dollars would end up in the hands of foreigners through trade deficits. After all, part of the definition given above for a hegemon is that “it provides an open market in which foreign countries can earn that [universal] currency.” Eventually, America’s trade deficits became so severe that massive amounts of dollars flowed into Japanese hands. And because America lacked the power to force Japan to lower its surpluses, Japan then loanedthe dollars back to America to pay the interest on the swelling national debt, caused in large measure by the deficits. To the shame of America, Japan began using the U.S. dollar as its de facto second currency, thus exerting fundamental control over the fiscal policies of the United States.
The pride of America’s power was broken, just as God said it would be! (Lev. 26:19). America found itself “pleading helplessly,” even though it was the most powerful country in human history! The unmitigated arrogance of the American delegation at Bretton Woods set the United States up for a fall by thinking the U.S. would never experience deficits. Without doubt, Proverbs 16:18 is a true statement about America: “Pride goeth before destruction, and an haughty spirit before a fall.” And fall America will, along with the rest of the nations of Israel! Hosea 5:5 prophesies, “And the pride of Israel doth testify to his face: therefore shall Israel and Ephraim fall in their iniquity; Judah also shall fall with them.”
The Trap Was Set
The Weight of the Yen states on page 145, “Japanese institutional investors early in the 1980s found U.S. treasuries [bonds, T-bills, etc.] irresistible. An institutional investor such as an insurance company has two principal concerns: safety and income…. U.S. treasuries in the early 1980s offered both…. Who could believe that the United States, the greatest and most powerful country in the world, would ever default [or not repay lenders] on its own securities?”
With all the currency fluctuations which have occurred since the early 1980s hurting the value of U.S. treasuries, Mr. Murphy writes, “Japanese institutional investors found themselves trapped: unable to move out of treasuries lest they destroy the global financial system.”
Ronald Reagan’s “Republicans had captured the White House with a simplistic platform and a simplistic leader. They pretended to the American people that they were solving the country’s problems when what they were doing was borrowing money. Borrowing money made it possible for Americans to spend more than they had earned, and they spent it on Toyotas and Panasonic VCRs. The Japanese could then lend the money back to the Americans [by buying treasuries] so that the party could keep going. Political elites in both countries pretended that the party could last forever, and neither elite was honest about the price that would eventually be exacted.”
The Trap Snaps Shut!
November 25, 1997, John Crudele wrote an important article in the New York Post entitled “Secret U.S.-Japan Pact Comes Back to Haunt Us.” In that article, Mr. Crudele explained how America had once again been outsmarted by the Japanese. He wrote, “Back in September 1995, the United States came to an agreement with Japan that then seemed of little consequence. Washington agreed that it would purchase [buy back] U.S. government debt [U.S. Treasury bonds and securities] held by Tokyo in the event the Japanese had to sell.
“Two years ago the Japanese were experiencing economic problems but nothing like the obstacles faced by that country today. The failure of Yamaichi Securities this week [Nov. 1997] has caused the Japanese to do the unthinkable—take the U.S. up on its offer to buy [back] those bonds.
“It was unclear yesterday just how much of the $200 billion to $300 billion worth of bonds held by the Japanese government and its financial institutions will have to be unloaded. But if Tokyo must cash in any significant amount, it would be very bad news for the U.S. financial markets…. Problems encountered by the Japanese could cause serious consequences in this country…. The U.S. Treasury and Federal Reserve must now print billions of dollars in extra currency to ship to Japan in exchange for their bonds.
“But let’s not understate the effects. Japan’s financial crisis, which has easily slipped across oceans in our newfound global economy, is now at our doorstep…with Japan essentially too broke to keep loaning its yen to Washington.”
The Wall Street Journal of December 18, 1997, stated “Treasuries then fell further on widely circulated reports that the Federal Reserve was selling treasuries of five years and shorter in maturity on the Bank of Japan’s behalf.”
Not only is there a great threat from continuing repatriation (selling back) of foreign-held U.S. treasuries, but also the double-threat of no longer financing the interest payments on America’s $5.4 trillion national debt. The Christian Science Monitor of February 3, 1998, reports that “interest payments alone [on the national debt] consume 16 percent of all [U.S.] federal outlays or $1 out of every $6 in federal spending. That means interest payments consume $5,000 in taxes each year from the average family of four. The $240 billion in interest payments each year on the national debt is nearly as much as is allocated for defense spending.” America can forget about paying the $5.4 trillion principal owed on the national debt. But if the United States cannot at least pay the $240 billion per year interest on the debt, then the loans will be considered in default and non-performing, meaning the loans will not be repaid. Such a failure on the part of the United States will bring down the entire house of cards that constitutes the global economic system.
Mr. Murphy continued on page 175 of his book by summarizing: “The prospect of a hollowed-out, de-industrialized America genuinely dismayed [Japan’s elite officials]. They were profoundly disturbed by what the United States was doing to itself. Japan’s administrators regarded manufacturing as the sine qua non [Latin: an indispensable thing] of national wealth. They were obsessively concerned with international competitiveness. They viewed deficits and loose fiscal policies as cancers that sapped vitality from a country and destroyed economic discipline. From their perspective, the United States had embarked onslow-motion suicide.”
Importance of the Asian Financial Meltdown
Unbeknownst to the world, Japan could foresee the impending economic collapse of the United States and was trying to “get out of bed” with its American lover, but those plans came crashing down in 1997.
The Weight of the Yen continues on page 306, “As the buying power of the United States dwindled, measured by the relentless rise of the yen, Japan would need markets elsewhere to keep its economic methods going. Only one plausible substitute for the American market existed: the great arc that stretches from Korea and Taiwan through the coastal provinces of China to the ASEAN countries [Association of Southeast Asian Nations: Indonesia, Malaysia, Philippines, Singapore and Thailand]. If the trends of the last 15 years continued [which they did not], by early in the next century some 600 million people in this arc would enjoy living standards and buying power comparable to those in southern Europe and portions of the United States. Japanese institutions already dominated much of this arc.”
But now that market has collapsed in the Asian Financial Meltdown of 1997. Prior to that collapse, Japan was playing a waiting game. Mr. Murphy wrote on page 307 that Japan’s “heroic efforts to forestall a serious American trade policy could best be understood as delaying tactics. Japan was said to need the United States for a few years longer until it [Japan] had achieved the necessary critical mass in Asia and would no longer be dependent for a continuation of its methods on the United States.”
Japan wants out of this relationship with the United States! But as Japan knows, extracting itself will destroy the global economic system.
The crash of Southeast Asia’s economies has slammed the door shut on Japan’s plan to replace America, but that will not stop Japan from abandoning America. Jeremiah 30:14 says of America, “All thy lovers have forgotten thee: they seek thee not.” This abandonment will be the slamming shut of the trap as the United States falls from its lofty perch as hegemon to the world. And America did it to herself!
Destruction and Slavery Await
Proverbs 22:7, quoted above, tells us that “the borrower is servant to the lender.” The Hebrew word translated as “servant” can also be rendered “slave,” and that is exactly the end result of all this massive indebtedness. Bible prophecy makes it very clear that in the near future American citizens are going to be taken into captivity!
Why is this going to happen? Because America is going to default on her national debt! In the December 1983 Plain Truth is a startling quote which reads, “One economist equates a national declaration of default with an act of war.” When, not if, the United States defaults on its national debt, it will be the same thing as declaring war on the other nations of the earth! And because of this, America is going to be desolated and then occupied by its enemies and the American people taken out of their country and into slavery as repayment for that colossal debt.
In the parable of the unmerciful servant, found in Matthew 18:23-35, the human tendency to sell people into slavery, as well as selling everything they own in order to satisfy a debt, is clearly seen when it says, “But as he was not able to pay, his master commanded that he be sold, with his wife and children and all that he had, and that payment be made” (New King James Version). Do Americans think they are too “good” for this to happen? Article after article in the news is telling America that the world hates her arrogance and dominance! Selling people and their possessions has happened throughout man’s history, and that is exactly what is coming on the nations of biblical Israel very soon!
In Leviticus 26:23-25, God warns the nations of Israel, and especially America, “And if by this discipline you are not turned to me, but walk contrary to me, then I also will walk contrary to you, and I myself will smite you sevenfold for your sins. And I will bring a sword upon you…and you shall be delivered into the hand of the enemy” (Revised Standard Version). Slavery is coming upon Israel again! The individual and national sins of America, especially the sins of her leaders, will bring a “sword,” meaning war, onto American soil! And because Americans refuse to learn these lessons now, those who survive that war will be taken into captivity and slavery! Your Bible says so!
God continues in Leviticus 26:31-39, “And I will lay your cities waste…. And I will devastate the land, so that your enemies who settle in it [foreign powers occupying America!] shall be astonished at it. And I will scatteryouamong the nations, and I will unsheathe the sword after you; and your land shall be a desolation, and your cities shall be a waste…while you are in your enemies’ land…. And as for those of you that are left, I will send faintness into their hearts in the lands of their enemies; the sound of a driven leaf shall put them to flight, and they shall flee as one flees from the sword, and they shall fall when none pursues. They shall stumble over one another, as if to escape a sword, though none pursues; and you shall have no power to stand before your enemies. And you shall perish among the nations, and the land of your enemies shall eat you up. And those of you that are left shall pine [or waste] away in your enemies’ lands because of their iniquity; and also because of the iniquities of their fathers they shall pine away like them” (RSV).
America and the other nations of biblical Israel are going into the worst time of trouble ever in mankind’s history! (Dan. 12:1; Matt. 24:21). Yet the good news in Jeremiah 30:7 and 10 is that, after the lessons are learned and Christ has returned to this earth to restore peace and prosperity, then America and the other nations of Israel, as well as all humanity, will be saved out of all this grief and trouble. But this will only transpire after experiencing the horrible suffering which mankind brought upon itself!
In typical human arrogance, a Washington D.C. economic consultant was quoted by the December 15, 1997 Christian Science Monitor as saying, “It is not beyond the capability of man to manage this crisis….” How much better it would have been to have said, “In God we trust.”