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Update on the Economy

Feb 27, 2008

I thought I would go back and check the web logs from a few months ago to see how the forecasts have actually turned out. I found my web log from October 2, 2007 called "The Dollar Meltdown," where I gave some statistics and forecasts for the near future.

I mentioned how when President Bush took office, it took just 87 cents to buy one euro. On October 2, 2007 it took $1.42 to buy one euro. Today it takes $1.51.

When President Bush took office, it took $273 to buy an ounce of gold. On October 2, 2007 it took $740, and today it is at $958.

When President Bush took office, oil cost just $22 a barrel, and people grumbled about it. On October 2, 2007 it cost $80 a barrel. I said then, "oil could easily hit $125 per barrel by next Spring." Well, it is now at $102 per barrel and climbing. So we'll see how that turns out.

The price of gold has gone up over 31% since the Fed began lowering interest rates and crashing the dollar last September. Silver has gone up about 25% just since January. My in-laws bought some silver bars for all their grandchildren two years ago at the high price of $7.45 per ounce. Today the price is at $19.22 per ounce. Not a bad investment for those who kept it. That's a 257% increase in two years.

Much of these price increases are simply the result of a drop in the purchasing value of the dollar. Those companies who have moved their manufacturing overseas in order to offer low-cost merchandise are now finding those production costs rising as the dollar plunges. I feel sorry for WalMart, which is the biggest agent for Chinese production in today's market. They may no longer have the lowest prices soon.

As the dollar goes down in value, domestic companies have an easier time competing and exporting products. That is the upside of the Fed's policy of trashing the dollar. A lot of Europeans are flying to America to do shopping, because their currencies will buy more. It reminds me of the days when Americans would fly to Hong Kong or Japan to buy things at low, low prices.

Another "upside" for Americans is the fact that we have bought foreign goods with dollars that were worth a set amount at the time, but as those foreign countries hold those dollars in reserve, they are losing money every day as the value of the dollar drops. That amounts to a tax on foreign dollars, and it is "good" for the economy, as long as those other countries are willing to endure the "money tax." But at some point one country could start dumping dollars for euros or some other currency, and this could trigger a "bolt for the door" as others would follow their example. At that point, we would see some serious repercussions in our current standard of living.

It is not my calling to be involved in America's fiscal policies or to tell the Fed what to do to try to save the economy or the dollar. To me, the problem goes deeper and can only be resolved by dealing with the basic problem of usury itself. That is an issue of biblical law, and because usury was legalized by the nation and allowed by the church years ago, we are now simply paying the price for our lawlessness. We got away with it for a long time, but eventually it catches up to us. Call it Judgment Day.

Meanwhile, for the average person, a little knowledge of these things can be helpful to those who have some savings to protect. Admittedly, about 40% of Americans have no savings at all, so this is somewhat irrelevant to them. But for those who do, the interest rates on your bank deposits are probably less than 5% per year. "Inflation" rates are already near 8% by government statistics. In other words, you are losing 3% a year, even if you believe the government's low figures. (Money has been created at the average rate of 18% per year, so that is the true inflationary rate.)

In an inflationary time, it does not pay to have money in the bank. It is better to put it into those commodities that are going up in price. (That, of course, excludes the housing market.) If anyone invested in wheat or rice recently, they could have tripled their money almost overnight. Silver and gold have done very well, too. Most commodities have increased in value relative to the dollar.

A number of large banks are now sliding toward bankruptcy, unless, of course, they can induce the government to bail them out. But if too many fail at the same time, that will be impossible or improbable. On January 14, 2008 the FDIC updated its policy in regard to insuring deposits in FDIC-member banks. It seems that they have never had to cover more than 175,000 depositors in any bank loss, but they now realize that they might have to cover many millions of people when some huge banks go bankrupt. They are trying to prepare for the worst, because they see the handwriting on the wall.

But the bottom line is that money in the bank is far less safe than it was even last year, to say nothing of the loss of your money's basic value through inflation and the drop in the value of the dollar. There seems to be less and less reason to trust one's money in the bank.

I recall my grandfather finally saving up enough money to buy the farm in northern Minnesota in 1930. When he went to the bank, he found it closed. He had to start all over again. This all happened after the "roaring twenties," and it is precisely the situation we have had in the "roaring nineties."

Even if the situation can be turned around, it will be a couple of years before this happens. It will take maybe another year or two to hit bottom, they say, so perhaps we will know by then if there IS a bottom to this. I suspect that God has engineered some disruptions in the foundations of economic Babylon, and that it will turn around only when the people decide to turn to God and obey His economic laws.

One other thing . . . When the Twin Towers were destroyed, Pat Robertson and others linked that event to God's judgment upon us for our policies on legalized abortion. Such people have no idea what they are talking about. In biblical law, the judgment fits the crime. There is no real link between abortion and the Twin Towers disaster.

The Twin Towers disaster has more to do with our refusal to abide by God's laws on foreign policy. It has a prophetic link, of course, to economics, since those Towers were the World Trade Center (trade and economics). But our policies on legalized abortion are bringing divine judgment upon us in the form of our bankrupt Social Security system, since we do not have enough of a younger population to pay the Social Security checks for those now retiring. So we have to rely upon foreign immigrants to resupply our population and to pay into the Social Security fund.

That, of course, leads to another problem, because as more and more non-Christian immigrants come into the country, it breaks down the basic Christian social order that was set up at the beginning. This contributes to the secularization of America that began a century ago. In Europe the problem is the Islamization of Europe, and when Muslim voters outnumber Christian voters, those countries will become Islamic, and ultimately the Christians will be stamped out or driven out.

That, too, is the result of rejecting God's law and giving man the right to legislate his own laws. Voters vote for legislators. Legislators pass laws according to the will of the people. If that is what we want, then that is what we will get, and we have no right to complain to God when we find ourselves in big trouble.

One big problem is that the Church cast aside God's law--at least the laws that they disagreed with--and then ceased to teach the law to the people. There is now a near-total ignorance of the law, especially as applied by the mind of Christ. I do what I can to reverse this trend.

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Category: Financial

Dr. Stephen Jones

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