1998 will go down in history as a record-breaking year. Record-high temperatures warmed the globe during the first half of the year. The El Niño and La Niña effects produced records in all types of weather around a world battered by hurricanes, tsunamis, tornadoes, floods, ice storms and devastating drought.
As the year reached its apogee, a storm of a different nature threatened to break records on a grand, global scale. The year which produced the biggest-ever corporate merger (Amoco/BP) and the world’s biggest-ever corporate collapse (Brunei-based Amedeco) felt the ground swell of an economic tsunami.
By mid-September, U.S. Federal Reserve chairman Alan Greenspan, who only weeks previous had touted the strength of the U.S. economy as the stock market ran the gamut of its 1990s bull ride, used very measured terms to touch on a creeping fear in world financial markets. Commenting on the evident deepening of global financial turmoil, Mr. Greenspan declared, “The crisis in emerging market economies is now pressuring Latin America. There is little evidence to suggest that the contagion has subsided. The collapse of the Russian economy reveals evidence of a deepening of the contagion, leaping from Asia.” Then, mindful that finance ministers worldwide would be wracking their brains for ways of limiting the effects of this “contagion” on their national economies, Mr. Greenspan issued a note of caution. “Policy makers are warned to be sensitive to deepening signs of global distress.” Finally, as if to inject a note of reality into those economies which have seemed, to date, least affected by the “Asian contagion,” the Fed’s Chief cautioned, “It is impossible for Europe and America to remain an oasis of prosperity in such an emerging situation.”
In an unprecedented move, finance ministers of the major nations and representatives of all the world’s major economic policy formulation bodies (the World Bank, the IMF, the G7 and G22), met in October to consider ways and means of dealing with the emerging, global financial crisis.
An Ominous Equation
Take the attributes of the East Asian financial meltdown, add in the Russian economic collapse, the domino effect on Latin American economies, the looming year 2000 computer problem and the impending introduction of the euro in January 1999; factor in the proven ineptness of world leaders in dealing with this international socio-economic cauldron, and the result of this unhappy equation is the prospect of unprecedented global instability.
The congruence of this extraordinary and unprecedented combination of special factors, following decades of worldwide economic growth and comparative stability, suddenly stares the U.S. bleakly in the face. As some economic pundits have put it, these are “uncharted waters.”
No one predicted nor prepared for such a world scenario. Wasn’t this to be, following the cessation of over 40 years of cold war, a new world order? Was not this to be the decade of convergence, to use the economists’ buzz-word, with all its promise of progress toward equality, the generalization of international health, wealth and happiness?
Well! Although a fundamental tenet of the economist and the futurist is eternal optimism, the hard experience of man, documented through millennia of histories, is another matter. Economic theorists, it seems, tend to neglect the fact that so many things can go wrong in this world—revolutions, coup d’etats, war, ethnic cleansing, natural disasters, crime, the resistance of deeply rooted cultural and religious practices which impinge on economic progress, plain bad government—all these are the unknowns. It is such influences which ultimately reach out to impact the world’s stock markets, creating the greed- and fear-driven bull and bear markets which produce the boom and bust cycles of this world’s economies.
The China Factor
Earlier this year, Economic Intelligence Review editor and publisher Christopher Story stated, “The entire cycle of currency depreciations can be traced back to the huge devaluation of the Chinese yuan in January 1994—an aggressive and unfriendly ‘beggar-thy-neighbor’ devaluation by any standard, probably motivated by political as much as by economic considerations…” (Economic Intelligence Review, Jan.-Feb. 1998).
The result of this action is now plain for all to see. On October 23, 1997, the Hong Kong stock market crashed, creating a powerful flow-on to East Asian stock exchanges. The much-touted tiger economies of East Asia, having gone into free fall, are now caught in a slough of deep recession, with IMF policies having actually worked to exacerbate their negative condition. Japan admits that it faces its worst financial crisis since World War II and, in fact, latest figures show her national economy bordering on depression.
One obvious consequence of all this is the flight of capital from East Asia pouring into U.S. dollar holdings. The risk in this is that, should U.S. interest rates run firm, the dollar will be driven further upwards, driving Asian currencies further down in terms of the dollar. This would then further destabilize the world trading system, as the U.S. and Western economies attract a flood of low-priced Eastern goods. The result would be closure of non-competitive domestic industries in the West. This is a sure recipe for global economic disaster.
The Euro Risk
Germany’s Bundesbank has issued its verdict on the European Economic and Monetary Union (EMU). Clearly, from all reports, it believes that the EMU will be a disaster. What is most apparent to the Bundesbank leadership is that most nations accepted for European monetary union have fudged their financial figures to gain entry to EMU.
“Thus even the best-managed EU Governments will need ten years of fiscal balance or surplus even to bring their public-sector debt positions within the limit of 60 percent of GDP required by the European Union’s collective treaty. In other words, the start-up conditions breach the considered and agreed Treaty requirements so comprehensively that there can be no prospect of the Euro Zone surviving peacefully over the medium term” (Economic Intelligence Review, May-June 1998).
The brilliant British economist Peter Jay has described EMU as “Europe’s engine of destruction.” A few astute observers have noted that, despite the drop in the value of gold, leading European central banks have been hoarding the yellow metal. One reason for their retention of bullion stocks may well be as a hedge against the prospect of a euro collapse, providing a support for new national currencies.
The UK and U.S. stock markets were pumped up powerfully over the past 20 years, shrugging off regular corrections until September this year when the U.S. stock market commenced its roller coaster ride in the wake of reality dawning following the East Asia, Russia and Latin America collapses. The world shudders under the pressure of this bursting fiscal balloon. Global economic chaos looms ahead of us all. What will be the outcome? Have we forgotten recent history? Should a global financial collapse occur, we ought to
remember that under similar conditions Adolf Hitler came to power and launched this world’s most devastating war.
As Peter Jay has stated, “There is a possibility of a breakdown in existing economic systems in the West, leading maybe to anarchy, maybe to governments ruling more by strong-man tactics. What would our daily life be like if that forecast were fulfilled?” (The Crisis of Western Political Economy, p. 58).
Your Bible predicts such a scenario. In Revelation 18 we read of a powerful geo-political power, described as a “beast,” influenced by a great false church, typed as a whorish woman, which will dominate world trade. Herbert W. Armstrong predicted that, just as a similar “beast” power rose out of the great depression of the late 1920s and early 1930s to wreak havoc on the earth, this beastly power would, in the future, arise with even greater force. He further predicted that this powerful ten-nation combine would arise out of great social and economic depression. That is exactly in line with Mr. Jay’s scenario. Stand by for the fulfillment of these remarkable prophecies of your Bible. The world is indeed on the brink of catastrophe!
What will solve this world’s economic and financial woes? Peter Jay puts it this way: “I have come to the conclusion that the problem lies right in the very heart and nature of the type of economic system which we are trying to operate, and that once one has perceived this one realizes that one is confronted with an infinitely more serious problem than it would be if it were merely a matter of bad management or bad luck” (ibid., p. 31).
Mr. Jay hits the problem right on the button! But he, like all world economists and financial commentators, fails to come up with a replacement to the current world system of trade and economics. The International Monetary Fund and the World Bank have met to consider this vexing question, yet, predictably, with little result.
A fundamental problem that all wrestle with is the fact that economic performance, culture and religion are inextricably linked. As David Landes has noted, any changes in one will work back on the other. At the source of these converging influences on our world economy lies human nature. Our systems of finance, economics, politics, societal organization and administration are set to ultimately fail, for they are rooted in a nature that feeds on vanity, jealousy, lust and plain greed.
Only a system founded upon an opposite nature, which engenders a global human attitude of humility, generosity, self-control and an innate desire to produce and give goods and services to the collective benefit of all mankind, will succeed, grow and yield profit for all.
A pipe dream? No! A godly vision! A vision which is shared by those who support the publication of this magazine. A vision which grows in the minds of a scattered band of people, from all walks of life, all classes and creeds of mankind. This dedicated body of loyal supporters share a great common hope of a future, founded upon a world government which will enforce a perfect economic system in this world for 1000 years of growth and stupendous prosperity. Write now for your copy of Isaiah’s End-Time Vision, grasp the vision of that future and start training now to install that perfect system under the loving and authoritative reign of its perfect Creator (Isa. 9:6-7).