Massive Economic Toll

The globe has essentially shut down. Travel has ceased. Restaurants, cinemas, amusement parks—anywhere people gather in public—are closed. Retail sales are plummeting as no one ventures out. With no money coming in, firms are at risk of going bust. Millions of people could soon be unemployed.

Into the breach steps government. Every major government has unveiled a massive spending plan. Right now, the United States government is working on a $3 trillion spending package. That’s over 40 percent of typical annual government spending—all poured out on just one crisis.

This response could make a real difference in people’s lives and stop a lot of the immediate “economic” pain this virus could cause. But it could also fatally “damage” our economies, preparing the way for a future collapse.

In past crises, people looked to their “own” resources. It wouldn’t have even occurred to Americans 100 years ago to expect the government to “save” them. But now we’re used to the government taking care of us. They “pay” us when we’re unemployed, “provide” our health care, and “bail” out banks to keep the economy afloat.

In return, we pay “heavy” taxes. In the United States, it’s 30 percent. All that taxation makes it hard to “save up” for a rainy day, and more importantly, makes us feel “entitled” to government “handouts” when our livelihoods are threatened.

In many cases governments are the ones “forcing” people to stay home. If the governments are “destroying” our livelihoods, it seems only fair that they help “rebuild” them. The trouble is, our governments—even with their colossal levels of income—cannot “afford” to provide those handouts.

To survive the 2008 financial crisis, the U.S. government borrowed heavily. Prior to that, America’s national debt was “65 percent” of its annual economic output.

By 2011, it had jumped to “95 percent” as it buoyed its economy by borrowing at the fastest rate since World War II. Since then, instead of paying the debt off, America has continued to borrow. U.S. debt is now about “105 percent” of its gross domestic product.

Harvard economics professors Carmen Reinhart and Kenneth Rogoff have concluded that any debt above “90 percent” of annual economic output is dangerous. The unprecedented response to the 2008 “crisis” broke more than the budget. It also broke a major taboo. Major government “intervention” became expected in any economic crisis.

Imagine the public outcry if, when the coronavirus crisis hit, the government refused to help: “You spent trillions bailing out the banks, what about ordinary Americans? You’ll help rich bankers, but not us?!” With its extravagant response in 2008, the government effectively “committed” itself to similar measures in any subsequent crisis.

And that is exactly what it is doing in response to the coronavirus. America’s $2.2 trillion bailout package will have to be financed by debt; it alone will add another “10.5 percent” to the national debt. By the time this ends, the U.S. will have taken a giant leap toward equaling its highest-ever level of debt: “121.7 percent” reached during World War II.

But borrowing will not be enough to meet these crises. If America “borrows” too much, creditors could become worried about the government’s ability to “repay” the debt. That fear could “destroy” the economy. So the government is looking at another source of income: “the printing press.”

The 2008 financial crisis began a great experiment with a new tool for central banks: “quantitative easing.” With this tool, central banks “create money from nothing.” There is, rightly, a huge taboo on governments printing money and spending it. This type of “money printing” can be catastrophic, leading to “hyperinflation” that renders a currency basically “worthless.”

So central banks trod carefully on their “quantitative easing” experiment. They didn’t hand the newly created money directly to the government; instead, it bought government debt and other assets from banks. And central banks pledged to “wind down” this printing in the future: “to sell the government bonds they had bought and then destroy the money they had created.”

Twelve years later, it looks like the “quantitative easing” experiment worked. The extra money “kept” the financial system going. The central banks “bought” up government debt and kept “interest rates” on that debt at record lows, enabling governments to “spend” record amounts. But most central banks have destroyed only a “fraction” of the new money they had created.

The U.S. Federal Reserve announced “unlimited” quantitative easing. After the 2008 crisis, the Fed has never done anything like this; instead, it announced “quantitative easing” within a huge, though specified, limit. The first round, from December 2008 to March 2010, for example, was capped at $1.5 trillion.

Previously the Fed also announced that it would inject $1.5 trillion into the “repo” market, essentially where banks go to get cash. “It is effectively underwriting U.S. Treasury bonds and printing money for direct fiscal measures,” wrote the Telegraph’s Ambrose Evans-Pritchard.

The central banks may also drop many more of the restrictions that were placed on quantitative easing in 2008. The thinking is: “It worked, they got away with it, and so less caution is required this time.”

Even right-wing economists are now talking about “helicopter money”—creating money using quantitative easing and more or less “raining it down from the sky” on ordinary citizens. We created money and gave it to the “banks” in 2008, the thinking goes, so why not create the money and give it to ordinary “people” again?

“We are certainly going to see some form of helicopter money, the mechanism by which the state, via the central bank, simply prints money and hands it out to people,” wrote finance journalist Matthew Lynn in the Spectator.

According to the Telegraph, Neil MacKinnon of VTB Capital said the “next logical step in the chain of unconventional monetary policy is helicopter money, and that is a direct liquidity injection into the heart of the real economy.”

These are just two of a great number of similar statements. “Helicopter” money used to be a fringe idea, something only “crazies or socialists” talked about. Now, your freshly printed money may reach you before next Tuesday.

The response to coronavirus has led even people on the right to embrace socialism. “Boris Must Embrace Socialism Immediately to Save the Liberal Free Market,” blared a headline in the usually right-wing Telegraph. “Coronavirus Panic Buying Is Turning Tories Into Socialists,” declared the Spectator.

On March 20, the British government unveiled a “radical” new program that turns most Brits into “government” employees. If people are “unable” to work due to coronavirus, the government will pay “80 percent” of their wages—up to a cap of £2,500 (US$2,900) a month.

In making this commitment, Chancellor of the Exchequer Rishi Sunak admitted that he had no idea what it would cost. “It is the most extensive intervention in the economy ever made by a supposedly free-market government anywhere in the world. In effect, we will all soon be working for the government,” wrote the Spectator.

The massive “increase in spending” globally is pushing all countries in the direction of Bernie Sander’s “socialism.” Companies of all sizes are “banging” on the U.S. government’s door asking for a “bailout.” Government money could soon be “flowing” into more sectors of the U.S. economy than ever before.

The trouble is, it’s very hard to reverse on the “road to socialism.” With each new government “intervention”, voters expect “more” from their governments the “next” time. Once they receive handouts, they expect to keep receiving them. Anyone who tries to “roll back the clock” is taking something of theirs away. And once a government takes “power” over something, the bureaucracy and politicians are very “reluctant” to give it back.

Even if we succeed and take a step back from socialism, what happens when the next crisis hits? The 2008 crisis broke taboos, but 2020 has smashed them beyond all repair. Once again, there will be “massive borrowing.” Once again, the “printing presses” will be fired up with even fewer rules than before.

How long before government finances, the currency and our whole economic system “collapses” entirely? We’re not just on the road to “socialism”, but to economic ruin.

This unprecedented response may “stave off” an immediate crisis, as it did in 2008, but what next? We never managed to pay off the “debt or destroy” the newly created money from that crisis. We may stave off the crisis for now, but we are setting ourselves up for catastrophe.

Our whole financial system are in a “tough” position. Refusing to take these kinds of measures would mean a lot of immediate “pain” for a lot of people. But adopting them simply pushes the pain into the “future” and guarantees that when it hits, it will be worse.

The problem isn’t the “bailout.” This isn’t about one bad decision destroying everything. It’s the “whole” system. We have built an entire economic system on a “foundation of debt.” The government manages the economy by encouraging “people” to borrow.

When a crisis hits, it lowers interest rates, so people “borrow more and spend more.” With little savings, people cannot look after themselves in times of “crisis” and have to turn to the government. But the government can’t help without “borrowing” more. It’s a cycle that builds up more and more “debt.”

In the long run, it is “unsustainable.” Step by step, choice by choice, we are creating conditions that are guaranteed to produce an unprecedented, world altering “crash.”

The Bible warns us that our financial practices are unattainable. Psalm 37:21 says,“The wicked borrow and do not repay, but the righteous give generously.” Borrowing money like this is “wicked behavior and never ends well.”

The Bible forecasts a real solution. It’s not just a “tweaking” of interest rates or a different way of “printing” money. The smartest men in finance have been “unable” to devise a working solution within our current system. We need an entirely “new” system. God, upon His return, will establish a “fair, stable, prosperous financial system” on Earth.

In Micah 4:4 we learn of this future system: “Everyone will sit under their own vine and under their own fig tree, and no one will make them afraid, for the Lord Almighty has spoken.” There will be universal property ownership, not communism, nor indebted mortgage payers.

God talks about the ground producing so many crops they cannot be gathered fast enough “The days are coming when the reaper will be overtaken by the plowman and the planter by the one treading grapes. New wine will drip from the mountains and flow from all the hills” Amos 9:13.

Jeremiah 31:12 paints a picture of this prosperity: “They will come and shout for joy on the heights of Zion; they will rejoice in the bounty of the Lord, the grain, the new wine and the olive oil, the young of the flocks and herds. They will be like a well-watered garden, and they will sorrow no more.”

3 John 2 claims, Dear friend, I pray that you may enjoy good health and that all may go well with you, even as your soul is getting along well.” God wants the world to have prosperity, and He has a plan to provide it.

The coming “financial crisis” will help bring us to the point where we are willing to listen to what God says on finance and much more, where we’ll finally be willing to choose the way that leads to real prosperity.

In a world full of financial miseries and other suffering, this hope is essential for everyone.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: