Could the United States survive another Great Depression? Forty percent of Americans do not have enough money set aside to cover an unexpected $1,000 expense, and runaway inflation is pushing people deeper into debt. The Consumer Price Index rose 7 percent in 2021, a level not seen in almost four decades. According to economist Peter Schiff, the actual inflation rate would be closer to 11 percent if the cpi still included housing prices in its calculus.
The average U.S. household will likely see $3,500 disappear this year due to inflation, which is bad news for the quarter of Americans who lack emergency savings. Household debt is already up 6 percent this year, and many people report that financial strains are harming their mental health. A study by Debt Nation Relief reports that the average American loses four hours of sleep each week worrying about debt.
Analysts expect U.S. companies to pay their workers 3.4 percent more in 2022, which will lead to an increase in prices of goods and services. Yet that pay increase equates to only half of the official inflation rate. So American workers need to prepare to get by with less. Joe Biden says the current inflation rate is only temporary, but his government is still creating $250 billion out of thin air every month. In early February, the national debt surpassed $30 trillion.
It is self-evident that creating more dollars makes all dollars worth less, so concerned citizens need to be doing all they can to storm-proof their financial houses in preparation for a crisis.
The last time inflation was above 7 percent, the late Plain Truth editor in chief Herbert W. Armstrong was warning Americans to prepare to greatly reduce their standard of living. Yet few people heeded his warning and most completely forgot about it once the economy stabilized during the Reagan administration.
Now inflation is back with a vengeance, and the national debt is crushing citizens and crippling the federal government’s ability to deal with the economy.
It’s time to realize that we have entered something worse than a mere economic crisis.
Opinion polls show that two thirds of American voters disapprove of Biden’s inflation. Midterm elections are coming this fall, so even radical Democrats are looking for a way to at least temporarily stabilize the dollar.
An influential group of Bank of America economists expects the Federal Reserve to raise interest rates seven times this year to fight inflation. If interest rates rise high enough for Americans to start saving money again, then much of the money the government has pumped into circulation will be pulled back out of circulation and stashed away in various financial investments. This would lower inflation and reassure Treasury Bond holders that investing in the dollar will yield a profit that isn’t immediately devalued due to inflation. Under normal circumstances, a Federal Reserve interest rate hike would be long overdue.
But this problem is complicated tremendously by trillions in national debt.
America spent $526 billion paying interest on its national debt during fiscal year 2021, up $40 billion from the previous year. That means 13 percent of all federal taxes collected were handed over to America’s creditors as interest payments. Any measurable increase in interest rates would take up billions of dollars of the federal government’s budget. Obviously, any dollar spent on interest cannot be spent on other budget items, so a rate hike means the government will have to raise taxes or start running even bigger budget deficits if it wants to keep spending at current levels. And bigger deficits, of course, create yet more inflation.
Investors see the dollar as an increasingly problematic investment. They are turning to everything from Chilean pesos to cryptocurrencies to sovereign bonds in Southeast Asia to avoid inflation and a possible crash in the value of the dollar, especially if governments around the world stop using it as the standard reserve currency.
“The dollar’s peak is definitely behind us,” George Boubouras, the head of research at K2 Asset Management in Melbourne, Australia, told the Business Standard. “Currency traders are factoring in the Fed’s hikes and economic recovery well and truly now. There’s plenty of opportunities across sovereign bonds, credit and stocks from emerging markets to Europe with convictions the dollar could weaken further” (January 13).
If governments stop using the dollar as a reserve currency, the United States will no longer be able to borrow money at low interest rates. It will finally be forced to slash spending, increase taxes, or print money to finance its deficits. All these options will put a great financial strain on Americans who are already caught between rising prices and empty shelves.
But that is not even close to the worst of it.
End of an Empire
Financial historian Niall Ferguson has repeatedly warned that nations and empires often collapse when the cost of servicing their debts exceeds the cost of defending their borders. The U.S. is dangerously close to this tipping point. Last fiscal year, the government spent $526 billion on interest and $753 billion on defense. It would take only $227 billion in additional interest to make the debt a bigger budget item than the military. If the actual interest rate paid by the U.S. government rises by even 1 percent, interest on the debt becomes the second-largest budget item after Social Security.
“[B]ankruptcy is the Sword of Damocles hanging perilously close to Uncle Sam’s neck,” Hunter DeRensis wrote for the American Conservative. “What would transpire if Social Security checks stopped showing up in mailboxes and Medicare benefits got cut off? When presented with that choice, will the average American choose his social safety net or continued funding for far-flung bases in Stuttgart, Okinawa and Djibouti? Even the most militaristic congressperson will know which way to vote, lest they find a mob waiting outside their D.C. castles” (Nov. 20, 2018).
Closing bases may stave off bankruptcy for a few months, but it would also allow America’s enemies to take control of choke points like the Panama Canal or the Strait of Malacca. Threatening or blocking these passages would snap already strained supply chains. The D.C. castles may be surrounded by mobs after all.
In his book The United States and Britain in Prophecy, Mr. Armstrong explained that the Americans and the British descended from ancient Israel. And Bible prophecy directed at these descendants warns that God will suddenly break the financial and military power of the modern Israelites because of their sins, including rank materialism and debt.
“And it shall come to pass in that day, saith the Lord, that I will cut off thy horses out of the midst of thee, and I will destroy thy chariots: And I will cut off the cities of thy land, and throw down all thy strong holds” (Micah 5:10-11).
Today, Americans worship the work of their hands. Because of this, God says He will cut off the weapons systems and throw down the bases in which they trust. He has already broken the pride of America’s power, as Afghanistan, Iraq, Vietnam, Korea and other conflicts have shown (Leviticus 26:18-19), but now He will break the power itself!
Americans have been living far beyond their means for generations. They can no longer escape the consequences of their faithlessness toward God and indulgence in sin.
“It’s time you knew the real meaning of the present financial crisis—the high real interest rates and the fear of continued unemployment,” Mr. Armstrong wrote in his May 1983 Plain Truth editorial “Prepare to Greatly Reduce Your Standard of Living!” “Those of us in the United States have enjoyed the most prosperous living standard of any nation in all the history of mankind. There is a reason for this unmatched prosperity. There also is a reason for the present abnormal economic conditions and the continuing fear in financial and government circles that the West may well be in the beginning of a most severe debt crisis. A number of times I have published an economic analysis of the real causes of economic distresses in the United States and elsewhere. But now the stranglehold of economic disturbances is tightening around our necks.”
Mr. Armstrong proceeded to focus not on rates and consumer prices but on biblical proofs that America descended from the ancient Israelite tribe of Manasseh. He explained the end-time prophecy in Leviticus 26:19 in which God promises to break the pride of Israel’s power if its people turn against Him and His laws. “God has given the United States more national power than any nation ever had,” Mr. Armstrong wrote. “But already the noose is around our necks and is almost daily tightening! Economic ills are starting greatly to reduce our standard of living! I warn you, prepare greatly to reduce your standard of living! Even greater punishments are to follow!”
Every American needs to heed Mr. Armstrong’s warning and prepare to reduce his or her standard of living. An interest rate hike could temporarily tamp down inflation, and a conservative victory in the midterms could temporarily stabilize the economy. But the nation’s structural economic and debt problems will get much worse unless the nation turns back to the God who made America great and gave it its wealth in the first place!