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Is it even remotely possible that the once-strong U.S. could collapse under the weight of inexorably burgeoning debts?
British historian Niall Ferguson has a sobering warning for the United States: "When the American Empire goes, it is likely to go quickly."
Writing in the March-April 2010 issue of Foreign Affairs, Ferguson alerts us that American alarm bells should be ringing very loudly, as "the United States contemplates a deficit for 2009 of more than $1.4 trillion—about 11.2 percent of GDP, the biggest deficit in 60 years—and another for 2010 that will not be much smaller. Public debt, meanwhile, is set to more than double in the coming decade, from $5.8 trillion in 2008 to $14.3 trillion in 2019. Within the same timeframe, interest payments on that debt are forecast to leap from eight percent of federal revenues to 17 percent" ("Complexity and Chaos: Empires on the Edge of Chaos," pp. 30–31).
Ferguson, a professor of economic history at Harvard University, paints a picture of rapidly expanding government debt in the years ahead. "According to the Congressional Budget Office's 'alternative fiscal scenario,' which takes into account likely changes in government policy, public debt could rise from 44 percent before the financial crisis to a staggering 716 percent by 2080. In its 'extended-baseline scenario,' which assumes current policies will remain the same, the figure is closer to 280 percent" (ibid., p. 21).
Is it even remotely possible that the once-strong U.S. could collapse under the weight of inexorably burgeoning debts? Ferguson suggests, "The next phase of the current crisis may begin when the public begins to reassess the credibility of the monetary and fiscal measures that the Obama administration has taken in response. Neither interest rates at zero nor fiscal stimulus can achieve a sustainable recovery if people in the United States and abroad collectively decide, overnight, that such measures will lead to much higher inflation rates or outright default" (p. 31, emphasis ours).
Just how concerned should we be for the health and stability of the U.S. financial system? And what effect will trouble in the U.S. have on conditions in the 27-member European Union, which together forms an economic market even greater than America's? For the past two-and-a-half years, the world has endured financial shockwaves of epic proportions, contributing to a deep and severe recession generally considered to be the worst since the Great Depression of the 1930s. Yet despite the difficulties, many aspects of the typical Western lifestyle have remained almost unchanged. Are we prepared for major upheavals that have the power to change the world order we have all grown used to? Are we willing to think the unthinkable?
Money can be likened to blood; unless it circulates around the system, the body dies! And that is what almost happened. Money—the lifeblood of the world economy—ceased to flow, and a shattering financial infarction brought the world financial system to the very brink of oblivion. Only concerted action by governments around the world—in effect rushing the patient into Intensive Care and placing it on life support—prevented its death. But the patient is still a long way from being nursed back to good health.
The problem, put simply, is debt; mountains and mountains of debt, everywhere you look, at every level: personal, business, corporate, banking and national. What it took was the injection of vast amounts of liquidity (money) into the veins of the global financial system—the financial equivalent of a massive blood transfusion—to get things moving again. For now, the ultimate catastrophe of complete economic meltdown, with the world descending into financial, political and social chaos has been averted. But by all accounts it has been a close call.
From our vantage point of May 2010, many would like to believe the worst is behind us; yet the world's financial system remains in a precarious and vulnerable condition. And there are several powerful reasons to conclude there's a great deal of pain and shock yet to come to that system and all that depends upon it.
As the crisis has progressed, entire nations exposed to unsustainable levels of debt, such as Iceland and now Greece, have got into severe difficulties and risk moving into default. More nations are predicted to follow what has come to be called sovereign debt and default. The task of running down or deleveraging that debt still remains.
The deep recession and credit crunch has especially exposed the structural deficiencies of the European Union (EU) and the folly of what some describe as its delusional aspiration of successfully uniting an entire continent. The one-size-fits-all exchange rate and single currency for its member nations was always likely to be cruelly exposed in a crisis. What is right for the large, well-disciplined German and French economies, for example, may not be right for smaller economies like Ireland, Spain or Portugal. The northern economies typified by Germany are thrifty, generally responsible and prosperous, while the southern economies, sometimes referred to as "Club Med" and typified in the extreme by Greece, are more profligate, corrupt and weaker.
The EU has been thrown into crisis by the financial problems of Greece—with fears that this will start a sovereign default domino effect, sucking in other weaker indebted economies such as Spain, Portugal and Italy. Even the once-mighty UK, saddled with crushing levels of debt, risks losing its much-prized triple-A credit rating unless its government takes forceful action to halt the slide. Some commentators now even acknowledge the prospect of an embarrassing and calamitous default.
Some ask whether this developing crisis could even result in the breakup of the Eurozone as currently constituted—though supporters of the EU still dismiss such an idea as crazy and unthinkable. It certainly suggests significant reforms or restructuring to provide mechanisms to deal with the emerging issue of sovereign defaults, which currently are not in place. Is it possible that one solution—also unthinkable because of its consequences—is for Greece to drop out of the single currency in order to set her own more appropriate interest rate levels to aid her recovery? Such is the extreme imbalance between different economies in the EU that it has even been suggested that Germany might pull out of the currency union in order that the wider economic problems can be resolved.
In his essay, Ferguson poses an intriguing question that invokes a well-known biblical metaphor: "What if collapse does not arrive over a number of centuries but comes suddenly, like a thief in the night?" (ibid., p. 22).
Biblical prophecy predicts an end-time European union of ten kings, nations or national groups (Revelation 17:12–14) that will briefly seek to dominate the world (v. 8). At present, the EU has 27 member states. We may see a revival of the idea of an inner core of EU nations—with Britain likely to find itself quickly shunted to the disfavoured outer core, after further economic weakening—even if some in the U.K. would prefer to stay in to reap the benefits of membership in a prosperous EU core.
One way or another, Bible prophecy indicates that a radical restructuring of the European Union must take place for it to achieve its desired dominance. That change, when it comes, will come quickly. Are the seeds of that restructuring already in place today? Certainly.
We should beware the siren song of those who say all is well, when the fundamentals speak otherwise. The Apostle Paul wrote, "The Day of the Lord so comes as a thief in the night. For when they say, 'Peace and safety!' then sudden destruction comes upon them, as labour pains upon a pregnant woman" (1 Thessalonians 5:2–3).
The great lesson to remember is that things once considered unthinkable can come to pass very quickly. The world order is changing before our eyes, and more major upheavals are not far away. Watch and be ready when they come (Luke 21:34–36)!