A couple of trusted friends – one a preacher and another an economist – have taken issue with some of my economic statements in the last blog post, “How Human Engineering Interrupts Natural Life Cycles… With Disastrous Results.” Both of them pointed out that man was given a mandate to subdue the earth and have dominion over every living thing (Gen. 1:28), which requires a certain amount of intervention in the natural order. I appreciate their feedback. “Iron sharpens iron,” and some clarifications are in order.
First, I was only attempting to state what appears obvious to me about our economy being in trouble, with an added Biblical perspective. I do not have specific economic training – only an appreciation of history, Biblical principles, and a degree of common sense (although the last commodity is sometimes questionable). I certainly do a lot of reading, including a fair amount on economic matters.
As I stated in a Facebook discussion of this, “I’m not arguing at all for absolute non-intervention of natural resources, libertarian government, or magically ‘leaving everything alone’ – only against ‘an interruption in the natural order of things’… There is room for honest disagreement about public policy, but I believe that human efforts to ‘control’ natural economic cycles through obscene levels of debt and credit expansion have brought us to the brink of a whole lot of economic pain. Time will tell if this analysis is on target.”
What I was trying to say, however imperfectly, is perhaps better communicated (from a purely secular perspective) in the following recent Zero Hedge headlines (with brief descriptions of content):
It’s requiring more borrowed yen/yuan/dollars/euros just to keep the global economy from collapsing in a heap of impaired debt. The costs of waste, fraud and mal-investment are finally coming home to roost, and while near-zero interest rates serve to mask the future costs, near-zero rates cannot stem the rising tide of mal-investment.
Rather, near-zero rates have fueled mal-investment, waste and unproductive spending. The diminishing returns on that strategy of “growth” are inescapable.
In perhaps the most shocking of mea culpas seen in modern financial history, former Dallas Fed head Richard Fisher unleashed some seriously uncomfortable truthiness during a 5-minute confessional interview on CNBC. While talking heads attempt to blame China for recent US market volatility, Fisher explains “It is not China,” it is the Fed that is at fault: “What The Fed did, and I was part of it, was front-loaded an enormous rally market rally in order to create a wealth effect… and an uncomfortable digestive period is likely now.” Simply put he concludes, there can’t be much more accommodation: “The Fed is a giant weapon that has no ammunition left.”
Must watch, when a shocked Simon Hobbs (at 5:10) is unforgettable: “Will The Fed come on and say ‘we’re sorry, we over-inflated the market’ when it crashes?” We doubt it.
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It occurred to me while thinking about all this from a Biblical point of view that there’s “ebb and flow” to just about everything in life. Human beings can build an airplane that stays airborne for a time, but eventually, if it remains in the earth’s orbit, the law of gravity and other considerations dictate that what goes up must come down. Another law – sowing and reaping – suggests that really bad investments of capital should meet with a day of reckoning, and not be “bailed out” with little long-term consequence for the perpetrators.
Yet, in an effort to avoid a catastrophe that was arguably caused by too much debt, our central planners have resorted to bank bailouts, QE1, QE2, QE3, near-zero interest rates, and trillions of dollars in additional debt. Lawmakers refuse to pass a balanced budget, preferring to kick the can down the road. Our system is awash in debt – national, corporate, and individual – and if interest rates ever revert to the mean, there won’t be the wherewithal to even service the interest on it. We may end up like another Greece… on steroids! One day this is going to come back and bite us, with a vengeance.
Using debt as a path to wealth is a recipe for disaster. Habakkuk 2:6-7 says, “Woe to him who heaps up what is not his own – for how long? – and loads himself with pledges! Will not your debtors suddenly arise, and those awake who will make you tremble? Then you will be spoil for them.”
I am not a prophet nor the son of a prophet, but I predict that difficult times are coming. On the other hand, I believe that adversity always presents an opportunity for the people of God to shine.