Tag Archives: depression

GLOBAL OUTLOOK BLEAK FOR 2019

There have been an increasing number of articles warning about the global economy.   The latest predicts a depression worse than the Great Depression.   None are specific, in terms of “when” but all say the signs are there.

The most common problem cited is debt.   Governmental debt is already over $22 trillion in the US.   This is the highest amount any country in history has ever owed, so it’s difficult to predict what will happen.   In addition, there’s also corporate and private debt.   The figures given do not include mortgage debt, which is also extremely high.   Nor do they include the annual commitments for Medicare, Medicaid, Social Security and other government programs, the so-called entitlements.

The 2008 financial crash started as a mortgage failure.   So did the 1873 crash.   It began in Austria-Hungary and spread around the world.   This particular crash was known as The Great Depression, more than fifty years before the depression of the thirties.   It would be a mistake to think it cannot happen again.

In fact, depressions have been a regular feature in America’s history.   There have been as many as 47 recessions and depressions since independence.   After the end of the Revolutionary War, there was a depression, in which the economy slumped by 50%.   The depression of 1873 lasted 25 years, on and off.   Unemployment was at 50% in the 1896 election, resulting in the highest turnout ever – a full 80% of voters participated that year.

Not every year saw the economy in deep depression.   It came in three waves.   It finally ended with the Spanish-American War, which got the economy moving again.

PANIC OF 1873

The 1873 depression in the US started with the collapse of Jay Cooke & Co., then a major component of the American banking establishment.   Contributory failures were the post-Civil War inflation, rampant speculative investment and losses in the Chicago and Boston fires (1871 & 1872).   Bank reserves plummeted in the first two months from $50 million to $17 million.

“The failure of the Jay Cooke bank, followed quickly by that of Henry Clews, set off a chain reaction of bank failures and temporarily closed the New York stock market.   Factories began to lay off workers as the United States slipped into depression.   The effects of the panic were quickly felt in New York, and more slowly in Chicago, Virginia City, Nevada (where silver mining was active), and San Francisco.

“The New York Stock Exchange closed for ten days starting 20 September.    By November 1873 some 55 of the nation’s railroads had failed, and another 60 went bankrupt by the first anniversary of the crisis.    Construction of new rail lines, formerly one of the backbones of the economy, plummeted from 7,500 miles (12,070 km) of track in 1872 to just 1,600 miles (2,575 km) in 1875.    18,000 businesses failed between 1873 and 1875.    Unemployment peaked in 1878 at 8.25%.    Building construction was halted, wages were cut, real estate values fell and corporate profits vanished. ”  (Panic of 1873, Wikipedia)

GRUNDERKRACH

I single out the 1873 depression because of the similarities in the global situation today.   The depression in German speaking countries is known as the Grunderkrach, or Founders Crash.   When Germany was united following the Franco-Prussian war, a lot of money flowed into the country, mostly from French war reparations. Loans were then made, mostly for mortgages.   When people couldn’t pay them, the banking system collapsed.   This spread to the US and Britain.   It was the beginning of the end of Britain’s global supremacy.

The Great Recession of 2008 began as a housing crisis.   It actually began two years earlier when housing prices started falling.   For years previously house prices had been rising fast.   Millions of people bought homes, homes they could not afford.   The banks loaned to people who should not have had loans.   It was a recipe for disaster.

The same thing is happening again.   Bad loans and speculative investments are pervasive.   Student loans are so high they could be the cause of a collapse by themselves.   Government debt is at an all-time high as are corporate debt and consumer, non-mortgage debt (credit cards).

I am reminded of what the late President of France, Charles de Gaulle, said over 50 years ago.   He did not want Britain to join the EU (he had incredible foresight!).   He dismissed the US and the UK as “the Anglo Saxon debtor nations.”   The British-American economic systems have been built on massive debt.   It works well . . . for a while!   Eventually, there comes the day of reckoning.

That may be this year.

We should never have borrowed so much money, especially after the Crash of 2008.   Often it’s been encouraged by government, when it makes little sense.   Social engineering has boosted the value of homes and increased the number of loans (more profits).   A government decree made under the last administration was that all neighborhoods should be 25% minority; the only way to achieve that was to give 100% loans to people who had never owned a house. Additionally, 100% loans have been made to immigrants, who have had little time to learn how the economy works in the US.

Remember, at stake here is America’s global leadership role.   A serious set-back for the economy would weaken the US.

It’s interesting here to note that the euro is set up very differently, with government borrowing limited to 3%.   The euro has its own problems, but could emerge as the greater currency in the event of a global depression.  It’s already used by more people than the US dollar.

Debt can mean the borrower ends up in servitude to the lender. Note the following warning from scripture:   Proverbs 22:7 7  “The rich rules over the poor, And the borrower is servant to the lender.”

This is a far cry from the promised blessings for obedience:

Deuteronomy 15:6 says:  “For the Lord your God will bless you just as He promised you; you shall lend to many nations, but you shall not borrow; you shall reign over many nations, but they shall not reign over you.”

A second cause of financial concern is impending TRADE WARS.   These will slow down the global economy.   Once again, uncertainty is an issue here.

A third reason the global economy is at risk is BREXIT, now less than two months away.   This could seriously affect inter-European trade.

A fourth factor, increasingly seen, is the economic Rule of Inequality. This is an economic law that predicts the likelihood of revolution based on the gap between the rich and the poor in any country. China is very concerned about this.   There is only one country with a greater gap and that’s the US.   Trump’s election was our “revolution” – if he is not able to deliver, there will be trouble ahead.

There are many countries around the world with a similar gap. France is going through weekly demonstrations about the rising gap between rich and poor; Venezuela and Zimbabwe are on the brink of revolution.

Other factors to watch are China’s slowdown and even the weather. Both can impact economies.

The above are all the predictables.   There may be other factors, unpredicatables, such as war, that can add to economic woes.

It remains to be seen.   But the warnings are there.   The only question is “When?”

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RUSSIA & CHINA POSE BIGGEST THREATS TO US

“Former national security adviser Zbigniew Brzezinski warned in 1997 that the greatest long-term threat to US interests would be a “grand coalition” of China and Russia, ‘”united not by ideology but by complementary grievances.”   This coalition “would be reminiscent in scale and scope of the challenge once posed by the Sino-Soviet bloc, though this time China would likely be the leader and Russia the follower.”

Nobody listened back then, but now it’s becoming clear that the two countries are cooperating to deal with what each perceives as the American threat.   The latest development is in Venezuela, where they are supporting President Maduro and condemning the US for backing the “usurper,” Juan Guaido.

In the past, the US has thought a Sino-Russian entente outlandish. Only now it’s happening.   As Mr. Brzezinski warned, it’s not that they have a lot in common, but rather they share a common enemy.

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UK TO CRASH OUT OF THE EU

Now, nothing can stop Brexit from happening.   Even many supporters of remaining in the EU see that.   The way Europe has treated the UK will make it impossible to avoid a hard Brexit.   (This assumes no change of heart in the EU.)

The facts are that British incompetence has led to Europe just wanting to get it over with.   Looking back on almost 50 years of membership there is a realization that Britain has never been a good fit, either, so why try to keep the British in?

A third reason is NATO.   Most of the other European countries sense that the US is pulling out of NATO, that it doesn’t want the responsibility or cost of defending the other members.   This is why Europe is trying to put together its own military force.   Britain, more pro-American, would only get in the way of this.

So, expect a full Brexit on March 29th.

This will not prevent Mrs. May running around Europe like a chicken with its head cut-off!

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BOOK QUOTE

“From July 1780 until the end of the year, the Catawba River Valley and the adjacent northern districts were the scenes of some of the most brutal warfare ever fought in what is now the United States.   It was a civil war, with all its horrors, as neighbors and families turned on one another with a vengeance.”   (page 140, Partisans and Redcoats, by Walter Edgar, 2001)

OUT OF TOUCH

Jeb Bush

Following the Republican debate Thursday evening, one newspaper quoted on PBS’ McLaughlin Group observed that Jeb Bush spoke as if he thinks that America’s problems are all psychological and not real at all.   The Bushes have done well and live the dream and can’t understand why others have failed to achieve the same.

On Sunday, reports from Moscow showed a similar problem. President Vladimir Putin, by some accounts now the richest man in the world, thanks to the accumulation of ill-gotten gains, ordered the destruction of 350 tonnes of food from the EU in retaliation for western sanctions on Russia.   Mr. Putin’s decision shows that he is oblivious to the fact that millions of Russians are struggling to feed their families.  40% of Russia’s food was imported before the sanctions were announced.

Jeb Bush and Vladimir Putin aren’t the only two politicians who are out of touch with reality.   It’s difficult, for example, to imagine how Hillary Clinton, who, together with her husband, earned approximately $30 million last year, can possibly claim to represent the middle class.

It’s dangerous when politicians at the top are out of touch with people at the bottom.

In 1789, France’s Queen, Marie Antoinette supposedly said: “Qu’ils mangent de la brioche”—“Let them eat cake.”   That same year, the monarchy was overthrown and, three years later, the hated Marie lost her head to Madame Guillotine.   It wasn’t that simple.   The queen actually did a great deal for the poor through her charitable work and the words she supposedly uttered were recorded over a century earlier, attributed to the Spanish wife of King Louis XIV.

But hungry people don’t care about historical accuracy – they just want to eat.

A lack of food has been a regular cause of revolution throughout history.   In 1917, a bread riot in Petrograd (St. Petersburg) started the revolution that led to the downfall of the 300-year-old Romanov dynasty.   It’s not inconceivable that something similar could happen to Mr. Putin.   Of course, the revolution did not improve the situation – seven decades of communism included many years of famine and regular food shortages even at the best of times.

No nation is exempt.   If billboards in Michigan are to be believed, one in five Michigan children go to bed hungry.

Former presidential candidate Ross Perot warned a few years ago that food stamps are all that stand between us and anarchy – in other words, take away free food for the poor and you could see a revolution in the United States.

In June, 1932, veterans marched on Washington demanding that a bonus they were promised by Congress should be brought forward as, in the midst of the Depression, they could not afford to feed their families.   They built shanty-towns outside of Washington and were determined to stay until Congress met their demands.   President Herbert Hoover sent in troops under the command of General Douglas MacArthur to tear down the camps and send them home.   Reports at the time tell of great hunger amongst the vets and their families, including young children.   President Hoover was seen to be out of touch and uncaring (the shantytowns were dubbed “Hoovervilles”) and lost the election a few months later to Franklin Roosevelt.

Mr. Bush should remember the fate of the last Republican presidential candidate, Mitt Romney, who lost the 2012 election to Mr. Obama.   Mr. Romney was recorded dismissing the “47%” of the electorate who depend on government and who, therefore, were not going to vote for him anyway.

Mr. Romney and Mr. Bush, both claiming to be conservative, should have read a biography of Benjamin Disraeli, the nineteenth century Conservative British prime minister who warned of Britain becoming “two nations,” one rich and the other poor.   He reshaped the Conservative Party to be a party that reached out to the working-man.   If the Republicans are to succeed, they have to do the same, to show how their policies will help improve the life of Joe Citizen.   To do this, they need to distance themselves from Big Business.

They can do it.   The 1896 election was held in the midst of a Great Depression that saw 50% of the people unemployed, at a time when there were no unemployment benefits for those who were out of work.   Understandably, the election saw the highest turnout in American history.   80% of the electorate voted.   The presidential election that year was won by Republican William McKinley.   He promised the people sound money and high tariffs to increase employment at home.   It’s interesting to note that the same issues still prevail.

Left-leaning parties, whether the Democrats in the US or the Labour Party in Britain, do not represent working people.  They are the parties of Big Government, which gives jobs to their supporters, but leads to a rise in taxes.   Those taxes are paid by ordinary people and small businesses, making life harder for the majority of people.

Leaders, and aspiring leaders like Jeb Bush, cannot afford to be out of touch with the common people.   This is especially true in democracies where every citizen has the vote.   Perhaps Mr. Bush and Mr. Putin should copy Britain’s Prince William, who spent the night sleeping on the streets of London to get the feel of homelessness.   At the very least, his gesture showed empathy with the poor, a realization on his part that tens of thousands of people are homeless and unable to take care of themselves.

Only a return to conservative values, including restoration of the traditional family, can help people get out of poverty.   Conservatives everywhere need to convince the voters that they represent them and not Big Business.

They could start by following the example of Menachem Begin, an Israeli conservative and former prime minister.   Mr. Begin spent many years in prison under the Bolsheviks.  Reading a biography of Benjamin Disraeli helped him maintain his sanity and inspired his future conservative course.   Focusing on struggling voters makes more sense than pursuing big business!  After decades of Big Government, people want change.

IS EUROPE GOING INTO A DEPRESSION?

EU

The French government has resigned for the second time in four months, following opposition from a couple of cabinet members to German imposed austerity measures. These left-wing members of the French parliament want the priority to be growth not fiscal discipline.

It should be noted that growth is the number one priority of the US Federal Reserve. In contrast, the eurozone believes the priority should be living within your means, hence the austerity imposed on a number of European countries.

The result after three or four years of austerity is a deepening recession throughout the EU. The latest country to go into recession during the second quarter is Germany, the economic engine that supposedly pulls the rest of the eurozone along.

Could Europe’s recession become a depression?

Before the Great Depression of the 1930’s, any downturn in the economy was described as a “depression.” In the 30’s the word had such a negative connotation that, after World War II, it was decided to use the milder word “recession” to describe a milder downturn. If an economy has negative growth for two consecutive quarters, it’s in recession. If the downturn is 10% or more, it’s a depression.

The problem is that a recession can easily become a depression. Deflation is a serious threat in Europe – that’s where prices and wages keep on going down. There is little that can be done to correct deflation, which is considered the worst thing that can happen to any economy.

As economies go into reverse, the consequences are hard to predict.   A look at history can help.

Rising unemployment and spreading poverty, despair, and hopelessness led to the rise of fascism in the Europe of the 1930’s. A number of countries, including Germany, turned to dictators who promised them everything. Those dictators, in turn, led their countries into war, which at least helped boost economic growth. Vast populations blamed the Jews for their financial problems, claiming the Jews controlled the world’s financial system; the result was the Holocaust in which six million Jews died.

Could it happen again?

Of course it could. European history shows that the Jews have been turned on repeatedly throughout history.

Could a depression bring about the collapse of democracy? All EU members are required to have a democratic system of government but most governments in the EU have lost a great deal of support during the economic crisis. If conditions worsen, there is no guarantee democracy will survive. When people are going hungry, they don’t care about constitutional niceties!

Could the EU fall apart?

Yes, it could. The Euro has been a great success for the wealthier nations but is hindering growth in other countries. In the past, countries like Greece, Portugal and Spain could devalue their currencies to boost trade; they can no longer do this when their currency is controlled externally.

In Revelation, chapter 17, we see that a union of ten nations is prophesied to come together at the end time. The EU is a union of 28 members, who, most of the time, are not very united. The UK is even considering pulling out of the Union, which is unprecedented.

A new and different union would emerge after a collapse of European economies. It would also have to emerge fairly quickly if it is to defend itself against the rising threat in the Middle East.

Keep watching events in Europe as well as the Middle East. The latter is the main focus of Bible prophecy but Europe is in second place. Europe and the Middle East have impacted each other greatly down through the centuries and will continue to do so.