January 17, 2008

Dear World News and Prophecy Subscriber,

When I opened my first brokerage account a few years ago, I sat in the office of the account executive who explained to me how stable and powerful his company was. "Merrill Lynch is the soundest and best run brokerage firm in the country," he boasted and then added, "it is the General Motors of the financial industry."

Today General Motors struggles and is no longer the top-selling carmaker in America; Toyota holds that distinction. As for Merrill Lynch, this week it has had to turn to foreign investors for an unprecedented bailout of more than $6 billion because of losses in the subprime lending market. A lot has changed and more change is on the way.

A story this week in the Financial Times says the United States may have lost its position as the world's leading financial market.

"The change may have occurred already, not least because US markets are beset by credit woes, according to research by McKinsey Global Institute, a think-tank affiliated to the consultancy.

"'We think the differential growth rates are so significant that it is quite likely Europe has overtaken the US,' said Diana Farrell, author of the report."

This comes during a difficult time for the American economy. 2008 has started with some sharp losses on Wall Street, the dollar continues to decline on currency markets and there is increasing talk that the economy will go into a recession—if it hasn't already begun.

This week brings news that several foreign nations are investing billions in American financial institutions to keep them from going into default. I have mentioned Merrill Lynch but another bailout is coming, as China is set to invest $9 billion in Citigroup. Both Merrill and Citigroup are set to announce huge multibillion dollar losses in the coming days.

The United States has sown a huge whirlwind of debt and trouble on world financial markets. Threats to the global economy by last year's subprime crisis have also caused other nations to lose confidence in America. European, Asian and Middle Eastern countries will not allow their rising economic status to be jeopardized by the incompetence of American financiers. We are approaching a full-blown financial crisis that could change the way business is done.

I am reminded of a scripture in Hosea 7:8-9 which gives a principle that applies to any nation. Israel was in trouble with other nations, and God's protection was soon to be removed. Yet the people and leadership did not see their foundation was crumbling. Notice, "Ephraim has mixed himself among the peoples; Ephraim is a cake unturned. Aliens have devoured his strength, but he does not know it; yes, gray hairs are here and there on him, yet he does not know it."

America's financial strength is being devoured by other nations as they come in and buy major interests in leading financial institutions—its economic heritage. No matter how you spin this, it represents a sea change in the history of the nation. Other countries are looking at America as a sick man, needing help.

Why are they willing to invest such large sums? One reason is they are holding billions of dollars. They can't afford to lose that money. A bank can survive someone defaulting on a $100,000 loan, but it can't afford to let a $100 million borrower to go under. It is in their interest to loan even more money to keep the borrower solvent, lest his debts also pull the bank under. Similarly, other nations cannot stand by and see major American institutions go under. These other countries don't want to jeopardize the global economy.

These investments will come with a price. Future American financial decisions will have to made with the interests of these other countries in mind. That will represent a change in American power. We are watching momentous events unfold.

World News and Prophecy is not in the business of predicting economic cycles, for we recognize the uncertainties and unknowables in that field. What we do understand are certain fundamentals of Bible prophecy. We know what applies to our day, and we know where the United States and Great Britain fit in what God says will happen in the end times. With that understanding locked into place, we can watch the present with a confident knowledge of why events are happening as they do.

There are sound financial principles that can keep you afloat during an economic recession. Live within your means. Don't get overextended with personal consumer credit. Pay yourself each payday by investing in a savings or mutual fund, if possible. Don't get caught up in a spirit of greed that clouds sound judgment on financial matters. People, banks and even nations get into financial trouble when they neglect sound fundamental economic policies. I am reminded of the proverb, "The rich rules over the poor, and the borrower is servant to the lender" (Proverbs 22:7).

Opportunity for preaching the gospel, however, continues to grow. God will open the doors for His message of His soon-coming Kingdom to be heard in this world. The hope of the gospel transcends the discordant messages heard in today's marketplace of ideas. World News and Prophecy is committed to helping you sort through it all and stay focused on the lasting spiritual values of God's Word.

Keep watching,