Good Economics, Standard Theology


Bruce Porteus

WILL  THERE  BE  A  GLOBAL  ECONOMIC  COLLAPSE,   OR  RECOVERY?

Will there be a global economic collapse, or can the world’s economy be saved from a total
melt-down? Will the current stimulus packages work? Will there be an economic recovery?

These questions are now being asked by many business leaders, politicians and economists
around the world. There appears to be little agreement on what will happen as the unprecedented
economic crisis continues, in spite of optimistic forecasts from some world leaders. This article will
explain the causes of the current economic crisis, and what the outcome will be, in simple,
layman’s terms.

Firstly, let’s look at the causes of the current crisis. For over 30 years the Anglo-Saxon nations
(USA, Canada, Australia, UK, New Zealand) and a few other countries have been spending
considerably more money than they earned from exporting goods and services, accumulating large
current account deficits internally, and massive external debts internationally. To finance these
external debts they have borrowed money from creditor nations, in particular Japan and China. This
has allowed the Anglo-Saxon nation’s financial institutions to have the capital to continue growing
their economies, enabling them to finance costly wars and still import consumer goods to satisfy
their self-indulgent life-styles. They have continued to expand their currency supply in order to
maintain economic growth, but that caused an escalation of property prices, and growth in
borrowings to finance domestic consumption. Up to now they have been fortunate to avoid being
affected by the high inflation that normally follows an increase in the money supply, without a
corresponding increase in productivity. This was, in part, made possible by switching to the
purchase of imported goods and services produced by low-wage countries and paid for with the ever
increasing supply of US dollars.

The problem arises when Federal Reserve Notes (U.S. dollars) accumulate in foreign hands. A
Federal Reserve Note is an I.O.U. and rather unstable as it floats against the arbitrage basket of
international currencies. The only alternative for these nations to avoid being overexposed to
unbacked dollars which might tank at any moment, is to purchase United States Treasury
Certificates which are (so far) considered safer as they are rated (so far)”triple A.” Either way, other
nations are trusting that these I.O.U.’s will one day be useful for the purchase of goods, services or
other more stable currencies. The purchase of these Treasuries (loan certificates) by foreign nations
repatriates the dollars which are then spent domestically or overseas again.a vicious circle.

This inflow of money borrowed by the Anglo-Saxon nations has allowed them to maintain generous
state-funded welfare programs that have directly contributed towards undermining the role of the
family as the foundation of a successful society. This has encouraged people to look to the State
for their needs, rather than the extended family accepting responsibility for other family members,
sapping the drive and willingness of their people to compete in a competitive world. Socialism by
stealth in Western nations has done so much to destroy the family structure, the foundation from
which all successful societies are built. An increasing amount of Western Government revenues are
drained into providing expensive welfare programs such as health care, pensions, benefits for the
unemployed and inadvertently encouraging single parent families, but leaving little money for
investment into infrastructure and provide capital to develop their economies. Asians culture
encourages the extended family to accept responsibility of caring for other family members in times
of misfortune, paying for their education and health care, rather than the State. Most Asians accept
the premise that unless you work, you go hungry – sadly in the West it is expected by many that
the State will provide, regardless if one works or not.

One of the results of the current economic crisis is that the Anglo-Saxon Governments no longer
have revenue to support their expensive welfare programs; just at the time when there are the
greatest financial demands being placed on them. An aging population, escalating health-care
costs, growing unemployment is blowing out government budgets, causing unsustainable deficits.
Meanwhile the Asian countries, not burdened with such extravagant welfare programs, have been
able to use taxation revenue to invest into developing their domestic economies. As a result the
Anglo-Saxon nations have become less competitive in the global market-place than the Asian
economies. Added to this, the lack of domestic savings by the Anglo-Saxon nations has made
them dependent on borrowing from those countries that have large current account surpluses,
causing them to slip further behind in maintaining the standard of living that their people still expect
to enjoy.

The end result has been a gradual break-down of the social fabric of western society till today they
are crime-ridden, diseased, over-indulgent, debt-ridden and self-destructive. The Anglo-Saxon
nations are now so heavily indebted to their overseas creditors, that even an increased amount of
export revenues would not enable them to service their external debts. However with falling exports
and large current deficits, it is only a matter of time before they slide into bankruptcy, unless they
are able to operate with a current account to service and repay their international debts. The flow of
US dollars into Asia has enabled their economies to obtain the capital to finance their domestic
growth and accumulate overseas reserves. In turn, lending their surplus capital back to the
Anglo-Saxon nations has allowed these countries to obtain the financing to purchase more imports
from Asia. This arrangement has worked well up to now for all concerned, but is not sustainable.
However, it is proving very difficult for the Anglo nations to expand exports to the rest of the world
during a global economic recession which is causing a lack of overseas export markets for their
goods and services.

Up to now the USA has been in the fortunate position of having the US dollar as the world’s reserve
currency, and being able to print dollars to finance its deficits, avoiding the need to borrow in other
currencies. As long as the global demand for dollars to finance world trade remains, it has been in
everyone’s interest to continue with this arrangement and retain the US dollar as the world’s reserve
currency. Over the last decade surplus dollars have been recycled back to the American banking
system, creating surplus liquidity in the Anglo-Saxon nations, and encouraging their banks to adopt
loose lending practices to generate paper profits from loans to domestic customers.

The current economic crisis was triggered when American and UK banks accumulated bad debts
from reckless lending, as their customers began defaulting on their loans. This quickly led to a
chain-reaction of banks defaulting and the need for government intervention to bail them out. This
has led to the current global economic crisis we now have.

In an attempt to avoid a total economic collapse, the governments of UK and USA have created
trillions of dollars of credit to inject into their banking system to save their banks from collapsing, as
well as guaranteeing deposits. This was intended to allow the banks to continue lending to prevent
their economies from going into free-fall, and government revenues collapsing. It appears this may
be working, although the banks have still not written off trillions of credit card debts and real estate
loans. The real question is, where has all the money gone that was lent though the bank’s bad
debts which have been written off? This money is still in circulation, but much of it is not
recoverable from those who have defaulted on their loans. What has happened to this money? It
has not just vaporised. Much of this money remains in circulation outside the USA and is now
controlled by foreigners.

Another difficulty faced by the Anglo-Saxon nations is that trillions of dollars have been written off of
their equity and property markets, wiping out much of the collateral from their banking system. Still
not accounted for are the trillions (possibly quadrillions) of dollars involved in the derivatives markets
– a sleeping time bomb ready to explode at any moment. In effect this has resulted in much of the
wealth of Anglo-Saxon nations disappearing, lowering the standard of living, slashing government
revenues, and will inevitably result in widespread poverty.

The Federal Reserve policy of creating new currency to replace toxic bank loans is like putting fuel
on the fire. In the short-term it may prevent the US economy from unravelling, but in the long term it
will be disastrous. It will result in run-away inflation as money looses value. Admittedly the US does
not have much choice – if they had not propped up their financial institutions, the economy would
have unravelled already, collapsing government revenues, and dragging the world into a depression.
They would not have had the revenue to service their national debt. Either way, the economy
collapses. The option of printing currency to inflate the money supply in an effort to stimulate
consumer demand and maintain economic activity is a very risky one, and will eventually lead to
erosion of the fiat value of the currency and uncontrollable inflation. Governments flooding markets
with currency to revive economic growth without increasing goods and services will only result in the
collapse of the currency.

So what happens next? The flood of money that has been injected into global markets may lead to
temporally restoring consumer confidence and spending for a short period. Sadly, the imbalances
that have led to the current crisis have not been addressed. Nothing has been done to correct the
imbalance of global trade between the Anglo-Saxon nations and Asia. The Asian nations continue
to accumulate more and more US dollars from exports and income from their investments. The flow
of capital from the West into Asia to finance imports continues. The outcome can only result in one
thing – a total collapse in the value of the currencies of the Anglo-Saxon nations.

The coming collapse of the US dollar will result in significant readjustment of global economic and
military power. It will result in the end of the Anglo-Saxon nations’ dominance of the global
economy. They will be replaced by two significant economic power blocks (Asia and the EU) filling
the vacuum created by their collapse. It will also be a time of further economic turmoil, followed by
political upheaval. It will lead to the end of many of the democratic freedoms which we have today,
replaced by authoritarian regimes regulating the global economy. Not only will there be a denial of
political, economic and social freedom, but also religious freedom. These institutions will be
replaced by authoritarian institutions regulating how people live their lives, denying much of the
individual freedom that we have come to accept today.

There is general agreement amongst many world leaders that the free-market unregulated
economic model advocated by the USA can no longer continue. In its place they are advocating
what UK Prime Minister Gordon Brown calls a “new world economic order”. What is planned is to
have much greater controls on the movement of money, where and how capital is used – controls on
speculation in futures, derivatives, commodity trading, etc. Technology available today will enable a
single world currency supported by one global central bank, to control both the supply and
movement of money around the world. This is being advocated by Germany and France under the
pretence of controlling tax avoidance and regulating markets, in reality it will go much further than
this – controlling the movement of money and all commercial transactions, with a cashless society
where governments can monitor all commercial and personal transactions.

The Euro is the only currency large and strong enough to replace the US dollar as a world reserve
currency, or a new world currency. Germany is the one country which has sufficient currency
reserves to underpin the confidence in the Euro allowing it to become the new global reserve
currency, having been for years the world’s largest exporter. Increasingly German dominance is now
dictating the direction of Europe – all that is lacking is the leadership.

The EU lacks a leader who can unite the various competing political and nationalistic factions to
enable decisions to be reached to bring about a cohesive economic policy and revive the European
economies. As the economic crisis spreads throughout Europe, unemployment continues to grow,
and political unrest becomes more severe, the need for the appearance of a strong leader will
create a power vacuum into which someone will surely step. Europe now desperately needs a
modern-day Napoleon, Hitler or a revived Holy Roman Emperor who can save the continent from
economic and political disintegration – a strong and commanding personality who can unite the EU
and lead it to economic recovery. Yet unity cannot happen unless the present disparate political
structures that currently exist are reformed, and the proposed new constitution adopted. The
materialization of a single leader that can unite the various European nations into a unified United
States of Europe, who has the ability to revive their economies, and provide the decisive leadership
required to lead them out of this crisis is the obvious necessity.

The fate of the Anglo-Saxon nations now looks extremely bleak. The collapse of their currencies will
be followed by total economic collapse. They will be unable to repay their international debts. They
will slide into bankruptcy. There will be wide-spread poverty, starvation, great suffering of their
people as their nations slide into insolvency. Disease will become wide-spread. Many
drug-dependant people will perish. Crime will spiral out of control, as a total break-down in law and
order develops. Most jobs will disappear. Governments will have no revenue to continue functioning
or pay for public servants or services. They will no longer have the income to maintain their defence
forces.

Throughout history empires rise, declined and collapse. The coming collapse of the Anglo-Saxon
Empire will happen quickly – this group of nations will disintegrate, which will result in the reshaping
of the political and economic landscape of the world. Without the stabilising influence these nations
have had on the world, many of the freedoms we take for granted today will disappear. The
Anglo-Saxon nations originally had a value system based on the Bible, but as they have rejected
the teachings of the Bible and the Law of God, so has their influence in the world declined. Now
these nations are facing total economic collapse, not economic recovery as many hope. They are
now being cursed for rejecting the teachings of the Bible and the Law of God.

Bruce Porteous

Bruceporteous50@yahoo.co.nz

1 May, 2009

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24 responses to “Good Economics, Standard Theology

  1. A good article, although a bit to simplified on some points and the opposite on others. Also missing minor bits to really understand what huge trouble we are in. As example can we mention the increasing defaulting on company loans and on the bonds market in the US. But the main culprit at the moment – partly mentioned in the text – is that very low interest rates in combination with newly printed money are making people spend their last savings and continue buying houses and other things they in reality cannot afford. When the interest rates goes up, which they haft to do sooner or later, the defaulting on this market (as we seen some of earlier in UK and US) will further enhance this crisis beyond anything ever seen before because this bursting bubble will correspond with the hyperinflation and the collapse of the dollar. The “Great” depression was nothing… And even worse than this; with no savings, low production rate and sky-high personal debts on top of governmental debts means that a potential recovery is decades away.

    And the answer to the question about was all the money has gone isn’t really as simple as stating they have “gone overseas”. They are also to a large extent “trapped” within the banking and financial sectors with some lenders using it as collateral and some buying “things” from each others. Every time you expand the money supply, especially when you do it thru QE the financial sector (and governments) gets the money first and the inflation do not really starts to show until they have started to spend this money. This however isn’t really the problem; the problem is that the amount of money continues to grow all the time building this bubble.

    And 2 comments:

    “Federal Reserve Note is an I.O.U.”
    Actually it is not. Nowadays it is only useless paper and coins backed up by the “goodness” of the state. It has gone from real money to being money as IOU’s but since the fall of the gold standard and the eliminations of restrictions which means that the only “value” behind money is the state. This has reduced money to nothing else but useless things we use to trade with.

    The author also focuses a bit to much on trade. Trade surplus or minus doesn’t really matter that much, it is the basic production within the economy that is the real indicator.

    But whatever your take is, you better face it; we are screwed beyond even my apocalyptical mind.

  2. QUOTE
    The problem arises when Federal Reserve Notes (U.S. dollars) accumulate in foreign hands. A Federal Reserve Note is an I.O.U. and rather unstable as it floats against the arbitrage basket of international currencies. The only alternative for these nations to avoid being overexposed to unbacked dollars which might tank at any moment, is to purchase United States Treasury Certificates which are (so far) considered safer as they are rated (so far) ”triple A.” Either way, other nations are trusting that these I.O.U.’s will one day be useful for the purchase of goods, services or other more stable currencies. The purchase of these Treasuries (loan certificates) by foreign nations repatriates the dollars which are then spent domestically or overseas again. a vicious circle. UNQUOTE

    Is the Fed now not buying those I.O.U.‘s back?

    Monetarisation is the buying of guv’mint bonds by the central bank of the guv’mint issuing the bonds, says Wikipedia.

    A good part of the new money the Fed creates finds its way into the stock market. This is because the Fed spends this money to buy bonds. Very often, the person of institution who sells bonds to the Fed will buy stocks with part of the money he receives. So the stock market can be especially sensitive to monetary growth.
    (Harry Browne, “The Economic Time Bomb”, New York, St Martin’s Press, 1989, p. 850

    Got gold?

    Ivo

    http://bphouse.com/honest_money/2009/05/05/ecb-autonomy-and-anatomy-of-compromise/

  3. Ivo Cerckel; you are right about where the money goes and which way are the stock-markets going at the moment thanks to this inflatory stupidity? up, up and away… for a wee bit longer… The stock-markets had to high value even before all this madness… Combinate this with what Im writing and connect the dots. This is going to be so fun!

  4. The New, Real Israel

    This site is excellent, full of energy, decency and hope for Israel

    Please bookmark it, and get regular reports — Netanyahu is NOT “Israel”

    http://www.israel21c.org/bin/en.jsp?enPage=HomePage

  5. Thank you Tony…

    …er, what’s it got to do with the Bruce Porteus article above?

  6. Tony,

    …even though we are your mates,

    …this blog is _/not a notice-board/_ for stuff that in interesting to you (and may have possible merit for a few people) but does not address the issue in the article to which the comment thread applies.

    If you can’t stick to the topics, I will be forced to turn on universal comment moderation. I do not want to do that, for it’s not in the spirit of the Libertarian Alliance.

    Got that?

  7. The Israel21c stuff is a fine series of examples of exactly what Bruce Porteus is writing about.

    I’ll make your life a bit easier by opening up a linked site at:

    http://www.STARGATE.uk.net/alliance/

    Then we can all be happy together, Dave!

    OK? Smiles

    Ever,

    Anduril

  8. Tony,

    My life is difficult enough already, without other people trying to make it easier!

  9. And what’s all this “smiles” nonsense?

    “You smile if you want to – this man’s NOT FOR SMILING

  10. Dave:

    But Gordon Brown’s “Government” is quite funny!

    Dame Stella Rimington says on TV “Britain us now a Police State

    She DOESN’T MEAN Gordon Brown at 10, Downing Street, fer Chrissake!

    She’s referring to http://www.ACPO.police.uk

    The Chief Constables of ACPO contol the 44 Special Branches — MI5’s arms and legs, fer Chrissake!!!

    [ FX: "WAKE UP OUT THERE!!!" ]

    It’s a black farce…

    Anduril (with work to do…)

  11. Hmmmmm…. ‘security error…”

    Anduril

  12. Dave & Sean:

    F*cking good snarl-up, folks! Smiles…

    Anduril

    [ FX: "I'll be back..." ]

  13. Read, Learn and DI NOT DIGEST IT

    http://www.acpo.police.uk/policies.asp

    Anduril

    “Sapere Aude!”

    DARE TO USE YOUR OWN INTELLIGENCE!!!

  14. Tony’s getting to be a drag, tbh.

  15. davidncl:

    If you agree to take dull respnsibility for objecting to my avtivites, I’ll agree to accept full responsibility for all my postings.

    I neither know — nor care — what you ‘think’ (or what you may think you think).

    Do I know you? Do you know me?

    You do know that I’m one of the Founder Members and a part-owner of the Libertarian Alliance? Counsel’s opinion?

    [ "Put up or shut up" ]

    If you really do want to offer rational critical observations, write to me here and discuss it, or post your ‘phone number right here…

    Anduril

    • Tony is a founder-member of the LA, but as to “part-ownership”, I think Sean had better comment on this interesting assertion.

      And Tony, if you are going to go about doing eyeball-2-eyeball with other commenters, some of whom might be disposed to be friendly towards us, I for one will take it amiss. I have not spent three years trying to build this blog in order to host brawls.

      There are also plenty of people on here, who read us, who “neither know nor care” who or what “Christine” is, nor her relationship to American politicians of yesteryear.

  16. Dave:

    A superb response, fully worthy of a free man.

    We’re BOTH on the “Endangered Species” List!

    I fully recognize your Rights concerning this Blog! It is — beyond doubt — the fruit if your mind and your sustaiiined labour over years,

    Just as this Libertarian Alliance is the fruit of the minds and labours of a number of people over the years, to whim I pledged my life, my liberty, and my sacred honour…

    Christine is an Elemental embodiment of Anger.

    She is immortal , and she’s horrifyingly destructive, relentless amd focussed. In Stepen King’s horror-story, she’s driven by the spirit of a dead Vietnam Veteran (I’m a vontributor to the Vietnam Veterans’ Memorial Fund, and I wear their embroidered cap with pride… In John Carpenter’s magnificent movie, she is the embodiment of Possession. The drivers who think that they “own” her are overwhelmed by and destroyed by an unrestrainedly Willfull and immortal Anger. She is the archetype of an Ancient Greek Fury. She was created with the name “Fury.” And she is just that…

    It took me YEARS to understand just why I find her so scary… TERRIBLE YEARS — as you so well know, Dave…

    I watch your back and you watch mine. any attack on either of us is a fatal mistake. The Enemy knows this. You know this — and I know this.

    Christine is a work of Art. Here are Solzhenitsyn’s words on Art:

    Anduril (also an inspired Work of Art)

  17. http://www.defenselink.net.mil

    Anduril (Reading “The Western Way of War” by Victor Davis Hanson)

  18. And if all your Hopes survive

    Destiny will arrive

    And bring all your dreams alive

    For you

    Olivia Newton-John, singing “Magic!” by John Farrer

  19. Livvy sings “Magic!” onn the Midnight Special

    Anduril

  20. Livvy sings it for us

    Westernesse