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Understanding The Economy: Part 4: The Global Financial Crisis and Collapse of the Dollar

By: Steve Johnson

2/5/2009 - 154 Comments

This is a summary of part 4 of a six-part class that I’m teaching at my local church.

As mentioned in my 2009 goals, I’m going to begin public speaking and have decided to start by teaching a six-part class at my local church titled “Understanding the Economy”.

The class is on Monday nights. To share this class with my readers, I’m writing an article after each class to summarizing the class.  

Introduction 

This six-part class is not just about the economy from an economist’s point of view, but from a Christian worldview with a prophetic understanding that we are living in the last days before the return of Jesus.

The primary theme of this class is to help people understand that the global economic crisis is part of Gods plan and He is in complete control. He will sustain us. We shouldn’t panic, and instead should get ready to help many people - the Church will need a tremendous response.

The title of this class was; Part 4: “The global financial crisis and collapse of the dollar (economist)”

The Class

In this class, I talked about three economists that accurately predicted the market collapse and what they are saying about the future of our economy.  Many of the leading economists were wrong about and are still wrong today, so I’m not going to sight them because they have lost their credible authority.

A credible economist is hard to find these days.  Yet, they do exist and I think they should be given more authority rather than keeping the economists that were wrong in positions of authority.

The other day I saw an interview with Dick Cheney and when asked about the market collapse, he said “No one saw this coming” - a classic political response, but not true. Many people saw the housing bubble forming, just like they saw the tech bubble forming in 2000, but no one wanted to listen to them.  The politicians rely on relationships with other leaders that agree with their ideas and squeeze out all naysayers, which put them in a position of missing very obvious market bubbles. 

So far in the Obama administration, nothing has changed.  They are still surrounding themselves with yes-men who are willing to ignore the realities of the economic crisis that we face – and they continue to spend money without regard for the long-term risks to the value of the dollar.

These three economist have all wrote books about the economic crisis that we now face many years before the crash started in 2008.

  • Larry Burkett – The Coming Economic Earthquake - 1994
  • Peter Schiff – Crash Proof - 2007
  • Robert Kiyosaky – Why We Want You to Become Rich - 2006

With 2.6 million jobs lost in 2008, the bleeding is long over do and it’s time to look at what these guys have been saying.

Larry Burkett

Larry’s 1994 book – “The Coming Economic Earthquake” predicted an economic collapse like that one we face today.  After several years, many discredited Larry because the collapse never happen.

Larry said, “All attempts to establish a time is purely guesswork. … Only when we get within one year of a major economic collapse will the indicators be clear.  .. It should be noted here that the printing of money to pay the government’s bills will be one of the last, and certainly the most desperate, measures because of the potential severity of the consequences.”

This is exactly what the government is doing today with its $900 billion bailout, which means we are within one year of a major economic collapse.

Based on Larry’s statistical data, a major economic collapse will start around the year 2000 with a margin of 7 years – putting it at 2007.  Larry was right!

Peter Schiff

Peter is an investor with 20 years experience and the owner of Euro Pacific Capital – an investment firm.  Peter understands the fundamental problems with the US debt driven economy – just as Larry Burkett did.

In 2007 Peter wrote a book, ”Crash Proof - How to profit from the coming economic collapse”
Peter said,  “Make no mistake; extremely difficult times lie ahead. Our nation’s character will be tested like never before”

“Your dollar-denominated assets are going to collapse in value and your standard of living will be painfully lowered. I can’t pinpoint the date this will happen-the government has been successful in hiding the problem and buying time– but there is going to be a day of reckoning and it’s already overdue. “

Recently Peter said,

"People seem to equate lack of risk with dollars, but when economies around the world recover, people will find there is no intrinsic value in holding dollars. They will rush to get rid of them, and the dollar's value will crash.

That, in turn, will cause oil and other commodity prices to shoot upward. Food, energy, clothing and medical -- those prices will rise fast."

Robert Kiyosaky

Robert is famous for his “Rich Dad Poor Dad” book, but in 2006 he wrote a book called “Why We Want You to Become Rich”

In which he said, “blame the lack of financial education for the US having gone from the richest country in the world to the biggest debtor nation in history.”

“we sincerely believe America is in trouble… and if America is in trouble, the world is in trouble. .. We are very concerned that America and people all over the world are in for turbulent financial times ahead.”

Recently Robert said,

“Our dollar is dropping in value simple because our government is printing more money to solve their problems.”
“As long as we were growing, other nations were willing to lend us money. .. If and when the economy begins to contract, the people we have been borrowing from may be hesitant to accept more of our debt.“

“We're on the eve of financial destruction”

In Summary

Globalization has run its course and the financial benefits have been consumed as noted in Part 2 of this article series.  US bailouts will not help, because we have to borrow or print the money.  US is broke, Europe and Asia are in much better financial shape than we are.

Dec. 1st, 2008 - UN warned of the possible crash of the dollar, which will send the world into financial chaos.
“The current strength of the dollar is temporary and the US currency risks a hard landing in 2009, according to a team of United Nations economists who foresaw a year ago that a US downturn would bring the global economy to a near standstill."

Oil relationship to the Dollar has been a huge advantage

Under an OPEC agreement, all oil has been traded in US dollars since 1971 (after the dropping of the gold standard) which made the US dollar the de facto major international trading currency. 

All nations have to hoard dollars to buy oil. This fact has given America a huge trading advantage and helped make it the dominant economy in the world.

In 1999 the EU introduced the common currency, the euro to compete with the dollar.

It’s going to take more and more money to continue to support the dollar as the US budget deficit is expected to grow to $1 trillion in 2009 and the Obama administration is planning to stimulate the economy with another trillion.
Bailing out the US economy from this recession will take the support of the entire world.  It will take the combined effort of all wealthy nations acting together to support the dollar through this recession.

This unilateral support for the dollar, in the midst of a global financial meltdown is unlikely to hold up and eventually the dollar will sink.

The fall of the dollar will create the largest financial crisis in the world, which will force a replacement for the dollar as the Reserve Currency of the world. 

The dollar could lose 80-90% of its value – devastating the US economy.  It is unlikely that America will recover to its prosperity of the past any time soon from the global financial crisis that is underway.

Previous article: Part 3: America Must Fade from prominence as a superpower (Prophetic)

Next article: Part 5: Become a money saving Expert (Response)

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