WSJ: “Dollar’s Fall Roils World” & CNBC: “US Owned by China”

Money Museum at the Federal Reserve Bank of Ch...
Image by Steve Rhodes via Flickr

The first title mentioned above — “Dollar’s Fall Roils World” — is taken from the front page headline of the Wall Street Journal print edition today (10/8/2010).  The subheading reads, “As Global Leaders Meet, Strains Rise Among Nations Competing to Save Exports.”  The article can be read online here, but may require a subscription for full access.

As the article points out: “In the six weeks since the Federal Reserve began discussing the prospect of further easing monetary policy, the dollar has fallen 7% against a basket of currencies.”  The graphic accompanying the print article notes that the dollar has:

  • hit a record low against the Swiss franc,
  • hit a 27-year low against the Australian dollar, and
  • hit a 15-year low against the Japanese yen.

The driver seems to be the anticipation that the Fed will, yet again, pump (make-believe) money into the system to strengthen (in a short term way) the U.S. financial markets.  Investors, who had begun rallying to the dollar recently, have begun fleeing, according to the WSJ, into the euro (hitting an eight-month high) and other currencies.  Of note: It is not necessarily that these other currencies are seen as inherently stronger, just that the financial desperation/recklessness/ignorance/all-of-the-above  of the Fed is becoming more and more obvious to investors.

While some have begun talking of a “currency war” among nations, the WSJ notes that Guido Mantega, Finance Minister of Brazil, says it’s not really a war, but “more of a police action. But it has the potential for getting completely out of control.”

Some speculate that it will be necessary to form an “agreement by governments around the world to manage the dollar’s decline.”  Speculation, mind you, but heady stuff to be sure.

To this, you may want to add the 9/27/2010 CNBC article I read during the Feast but did not have time to blog about: “US Is ‘Practically Owned’ by China: Analyst” (sorry: it’s a mobile link).

The “Analyst” in the title is Tom Winnifrith, CEO of Riverton Street Holdings.  He also says, point out how quickly the British sterling fell, “America is doing what Britain did… America spends much more than it can afford and it’s not addressing the issue.”  Later, in the same (brief) article, he says, “The 200 years when Britain and the US were the top two economies were an aberration and that will change… The decline of empires has happened much faster than folks think. I believe that gold will be a far better bet in 20 years than the dollar.”

The fact is that America is spending like a drunken sailor (my apologies to drunken sailors out there who may be understandably offended by the comparison) and Bible prophecy predicts that America will become onerously indebted to foreign nations, including enemies, having lost many of God’s blessings due to national sin.

We read in Deuteronomy 28:43-44, “The alien who is among you shall rise higher and higher above you, and you shall come down lower and lower. He shall lend to you, but you shall not lend to him; he shall be the head, and you shall be the tail.”  Later in vv.47-48, this fate is tied in with a lack of grateful obedience to God for the “abundance” that we have enjoyed, “Because you did not serve the LORD your God with joy and gladness of heart, for the abundance of everything, therefore you shall serve your enemies, whom the LORD will send against you, in hunger, in thirst, in nakedness, and in need of everything; and He will put a yoke of iron on your neck until He has destroyed you.”  And, no, giving credit to our “ingenious” forms of government and commerce is not the same as grateful obedience.  Neither a return to the ideals of the Adam Smith and the Founding Fathers nor throwing ourselves into the arms of Keynesian economics and “Third Way” Socialism will save this nation.  Ultimately it must be about turning from sin.  Nothing else will do.

The Bible gives principles that speak of the dangers of being in debt.  Proverbs 22:7 points out to all of us that “the borrower is the slave of the lender” (ESV).

And we can learn from Bible prophecy, even if it is about other nations (as we should learn from all of Scripture, Matt. 4:4).  As we teach in the Living Church of God and in Living University, Habakkuk 2 is about ancient Babylon and the Chaldean people and not at all a prophecy directly about the United States (regardless of what some say in the Protestant world, the U.S. and New York are not Babylon).  But as God explains to Habakkuk that the rapaciousness that moved the Babylonians to conquer and take the goods of others will come back upon them (as it did, and as it will to the future Babylon forming in Europe), he uses the language of indebtedness to communicate that idea, and its harsh words should chill the heart of any nation thinking of heading down the road of “success through debt.”  Dr. Winnail puts it better than I could in his article “Debt, Disobedience and Demise of Nations”:

“Modern financial analysts realize this [the demise of the U.S.] could happen if the nations lending to America decide to dump the dollar and call their loans. The prophet Habakkuk’s warning to the ancient Babylonians, ‘Will not your creditors rise up suddenly?’ (Habakkuk 2:7)—may also ring true for debt-plagued nations like America and its Israelite cousins. Prophetic scripture contains a sobering message: debt and disobedience lead to the demise of nations!”

Like the analyst in the CNBC article mentioned, “The decline of empires has happened much faster than folks think.”  America’s disobedience to God will teach it this sad truth in the years ahead unless it begins to look to the one who made it great: not Adam Smith, or George Washington, or Franklin D. Roosevelt, or John F. Kennedy, or Ronald Reagan — but God Almighty.  And without recognizing that and repenting, there is no “ism” — Captialism, Socialism, or what-have-you — that will fully turn us from the sad destination ahead.

3 thoughts on “WSJ: “Dollar’s Fall Roils World” & CNBC: “US Owned by China”

  1. Hello Mr. Smith,

    Thanks for helping to keep us up to date on these things. It’s so easy to get distracted, and time goes by so fast…

    Hope you and the family had a great Feast!


  2. Steve

    Actually, I was wondering if China might own the world someday. Thinking about investments, I’ve been reading a lot stuff on financial websites about “rare earth minerals.” China produces about 95% of the world’s rare earth minerals.

    How important are rare earth minerals? You can’t have modern technology without it. Everything from jet fighter planes to satellites. If you carry a cell phone, then you have a piece of rare earth mineral in your pocket.

    Virtual control of the world’s supply gives China a major geopolitical card. They made Japan back down in a territorial dispute by threatening an embargo of the stuff.

    The subject is a big deal, but it goes pretty much unnoticed in the mainstream press.

    China has a major geopolitical card over the rest of the world.

  3. Steve

    Sorry to pile on… but one more thing…

    Sometime this past Summer, China announced that it was going to keep more of the rare earth elements to themselves. They want to protect their growing economy. Other countries better start looking for other sources.

    Well, this set off a big scramble. A lot of investment money has been flowing into alternative sites, like Canada, the western U.S., and so on. Europe is looking hard at Greenland.

    A lot of people don’t believe that China will give up its dominance, however. They might keep more of the stuff to themselves, to support their growing economy, but they won’t give up their dominance. It provides them with too much influence.

    So… the long and short is… the game is afoot.

What are you thinking?

Fill in your details below or click an icon to log in: Logo

You are commenting using your 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 )

Google+ photo

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

Connecting to %s