It is evident that new fractures are appearing in the global credit markets. These are not necessarily a sign that a new melt-down is imminent, but they do confirm that the global credit crisis is far from over and that the global monetary system remains at risk and is vulnerable to any sudden negative event.
The first link is from the Financial Times, and it discusses the banking/credit crisis that emerged recently in Dubai in the Persian Gulf. What is noteworthy is that Dubai’s government has announced that “it will not guarantee the debts of Dubai World, the state-owned company [now] struggling” and that “lenders were mistaken to think that there was sovereign backing” for Dubai World’s debt. This policy is in very stark contrast to the practice of the U.S. government which considered well-connected big American banking institutions “too big to fail” and threw trillions of dollars at them to save them from bankruptcy. The article notes that the Dubai government clearly intends “to cut Dubai World adrift” to sink on its own if necessary. The USA could have saved trillions of dollars if it had implemented the same practice toward the reckless big U.S. banks that devastated their own balance sheets with reckless greed and foolish business practices. Dubai’s government is exercising a more responsible governmental policy than the U.S. government, in my judgment. Unless greedy, stupid financial decisions are allowed to result in the failure of the big banks and firms which made those decisions, there will be no return to sanity in the banking industry because American banks and firms will assume that a compliant and foolish U.S. government will continue to sell the nation and its taxpayers down the river to bail out reckless big banks and firms. The first link’s story also has links to other important reports about the Dubai credit crisis that readers of this blog will find of interest.
The second signal that serious fractures remain in the global financial markets comes from Germany. German Prime Minister Angela Merkel stated bluntly that “We are in a very critical situation” as she seeks to work with financial leaders to try and head off another credit crunch. Her statement was prompted by a report that German banks will have no choice but to write off more mega-billions of bad loans. Merkel’s government seems to be considering a measure to buy up “toxic securities from banks” as was done by the U.S. government, but her governmental partners consider this plan to be “anathema.” The report (from the British media in the second link below) also notes that private lending is contracting in the Eurozone, and one analyst warns this will lead to “deflationary pressures late next year” in the Eurozone.
Germany and the USA have a different national ethos in how to deal with a financial crisis due to their very different national histories. Germany experienced the hyperinflation of the Weimar Republic which spun entirely out of control, leading to the collapse of the German economy and ushering in the election of Adolf Hitler. Germany intensely wishes to avoid repeating that historical precedent so it favors policies that are deflationary. The USA has the exact opposite national ethos. It experienced the severe national wound of the Great Depression that was only “solved” by the return to full employment necessitated by World War II. Because its attitudes are shaped by the memories of the Great Depression, the USA prefers to risk high inflation to avoid another Great Depression. The USA leads the dollar-based Anglo sphere and Germany is the main nation of the Eurozone. They are tending to adopt conflicting national policies to the current global economic crisis, and this will tend to increase the stresses in the global economic balance as differing national economic policies by major western nations will worsen the global imbalances.
As I’ve noted many times in this blog, world events confirm that we are heading toward the prophesied collapse of the current economic/monetary/commercial system called “Babylon the Great” in Revelation 17 and 18. The fractures in the current global system are getting worse. You need to be prepared as much as possible for this eventual collapse as no one knows when it will occur. If you have not read my article,” Should Christians Prepare for Future Hard Times” (at the articles link at this website) I urge you to do so as soon as possible. It offers a balanced biblical approach to what our attitudes should be when we can see difficult times looming ahead of us. None of U.S. knows how much time we have to make such preparations. At some point in the future, the “music will stop” and you will run out of time to make any further preparations. When prophesying how suddenly the end-time crises will hit the earth in the latter days, Jesus Christ warned that they will “come as a snare on all them that dwell on the face of the whole earth” (emphasis added). That is a prophecy about a severe crisis that will hit everyone on the earth suddenly and without warning. You have been warned. I hope that you will not be caught “unaware” when this future crisis hits.