Archive for the ‘Credit Derivatives’ Category

God’s Judgment in One Hour

March 19, 2020
BookCoverPreview.Revelation 18.front

Revelation 18 and the fate of America

(Excerpted from Revelation 18 and the fate of America.)

Therefore her plagues will come in one day—death and mourning and famine. And she will be utterly burned with fire, for strong is the Lord God who judges her. . . .

. . . standing at a distance for fear of her torment, saying, ‘Alas, alas, that great city Babylon, that mighty city! For in one hour your judgment has come.’

Revelation 18:8, 10

In Revelation 18 it is stated that Babylon’s judgment will come swiftly—“in one hour”—and is mentioned twice in verses 8, 10 and 17. But is that possible in this day and age? The simple, direct answer is, yes, but first let us take a look at America’s financial foundation and the financial stability of the world before reaching any conclusions.

United States of America’s National Debt. On October 18, 2013 America’s National Debt was rapidly advancing past $17 trillion or 107 percent of GDP (Gross Domestic Product). To gain a perspective on the significance of America’s debt one should look at the history of America’s indebtedness as well as compare the current national debt to that of some other countries.

At the end of 1929 America had just suffered a major financial collapse. The national debt was a mere (by today’s standards) $17 billion or 16 percent of GDP. By the end of 1933 and with advent of President Franklin Delano Roosevelt’s “New Deal” Great Depression recovery plan, the United States was $23 billion in debt or 40 percent of GDP. At the end of 1941 and just after the country entered into World War II against both Germany (and the Axis powers) and Japan, the national debt stood at a manageable $49 billion or 39 percent of GDP.

The same prudence which in private life would forbid our paying our own money for  unexplained projects, forbids it in the dispensation of the public moneys. Thomas Jefferson, Letter to Shelton Gilliam, June 19, 1808

When World War II ended in 1945 at a cost of $296 billion for the United States, by the end of 1946 America’s national debt had soared to $269 billion and a historical high of 121 percent of GDP. During the post-war recovery the debt remained relatively stable from 1946 to 1960, ranging from $252 billion in 1946 to $286 billion in 1960. During the same period the debt to GDP ratio steadily declined from 121 percent to 54 percent. During the decades of the 1960s and 1970s the debt grew steadily, but the GDP growth rate exceeded the debt growth rate so that the debt to GDP ratio dropped further to a post-World War II low of 31 percent by the end of 1981 but just before the recession of 1982 hit.

We must not let our rulers load us with perpetual debt. Thomas Jefferson, Letter to Samuel Kercheval, July 12, 1816.

Just before the start of Ronald Reagan’s first presidential term, the national debt had risen to just under one trillion dollars—$908 billion or 33 percent of GDP by the end of 1980. During the Reagan presidency of two terms the national debt more than doubled to $2.6 trillion or 51 percent of GDP by the end of 1988.

During the two presidential terms of William Clinton the debt grew modestly from $4.4 trillion to $5.674 trillion while the debt to GDP ratio fell from 66 percent to 57 percent. From 2001 to the end of 2008 (the George W. Bush presidential years) the debt climbed significantly to a little over $10 trillion or 70 percent of GDP. Although this increase in indebtedness was dramatic, America was about to become shell-shocked.

With the election of Barack Hussein Obama in 2008 as the country’s president, America would witness the reality of a big-spending government behemoth like never before. By July 4, 2013, less than six months into his second presidential term, President Obama has overseen the growth of the country’s debt to $16.9 trillion or 107 percent of GDP. By the end of his second term (if the taxpayers allow him to get there), the national debt could well exceed $20 trillion. If so, he will have accumulated more debt than all 43 presidents before him and the United States will be on the verge of financial ruin (if not before then).

Everett Dirksen, the former Republican who represented the state of Illinois in the U.S. Senate from 1951 until his death in 1969, when reflecting on the national debt in 1965 (which was $317 billion), told this humorous story, which he labeled “cat in the well”:

One time in the House of Representatives (a colleague) told me a story about a proposition that a teacher put to a boy. He said, ‘Johnny, a cat fell in a well 100 feet deep. Suppose that cat climbed up 1 foot and then fell back 2 feet. How long would it take the cat to get out of the well?’

Johnny worked assiduously with his slate and slate pencil for quite a while, and then when the teacher came down and said, ‘How are you getting along?’

Johnny said, ‘Teacher, if you give me another slate and a couple of slate pencils, I am pretty sure that in the next 30 minutes I can land that cat in hell.’

If some people get any cheer out of a $328 billion debt ceiling, I do not find much to cheer about concerning it. (Congressional Record, June 16, 1965, p. 13884).

In the world of American politics and financial mismanagement, the way to deal with the ever skyrocketing debt is not to restrain spending but just to raise the level of the amount one is allowed to spend. A similar philosophy followed by the American taxpayer would soon land them in prison.

Debt to GDP Ratios Around the World. The one most commonly used measure of a country’s economic health is the Public Debt to GDP (Gross Domestic Product) ratio or percent of public debt a country owes compared to their GDP. Public Debt is the amount of money the federal government owes itself and other creditors.

With America’s debt to GDP ratio at 107 percent and rising daily, how does the country measure up to other developed countries, as well as third world or undeveloped countries? Global Finance reported on the Public Debt to GDP projections for 2014 for OECD (Organization for Economic Co-operation and Development) countries. The OECD includes just about every developed and developing country in the world. The debt to GDP for all OECD countries is projected to be 113 percent.

The worst country by far is Japan at 246 percent. Japan is followed by the European Union countries of Greece (200%), Portugal (135%), Italy (131%), Ireland (128%), United Kingdom (114%), France (110%) and Spain (105%). All of these Euro countries are in significant financial trouble and turmoil. The United States is projected to be at 114 percent debt to GDP, the same as the UK.

Other European Union countries, such as, Switzerland (39%), Germany (85%), Sweden (47%), Norway (43%), Finland (54%), Denmark (48%) and the Netherlands (72%) are looking much better.

By comparison, how do some of our non-European allies and adversaries look financially? Of the United States’ clear allies, Canada appears to be in the worst shape but still healthier than the U.S. Canada’s projected 2014 debt to GDP is 86 percent. Australia, a long term U.S. ally, on the other hand, is far healthier with only a 28 percent debt to GDP. However, two of America’s long term antagonists and adversaries are also very healthy financially. China has a 2014 projected meager debt to GDP of only 17.3 percent and its neighbor to the north, Russia, at merely 10.8 percent. Ironically, the United States has not been near that level of debt to GDP since the financial crash of 1929 when debt to GDP was at 16 percent.

Clearly, the majority of America’s long-standing allies in Europe are battling tremendous financial pressure, while its two largest and most bellicose decades-long enemies are financially strong and in a much better position to threaten the United States at every level of diplomacy or future military confrontation.

I wish it were possible to obtain a single amendment to our Constitution. I would be willing to  depend on that alone for their reduction of the administration of our government to the genuine  principles of its Constitution; I mean an additional article, taking from the federal government  the power of borrowing. Thomas Jefferson. Source: letter to John Taylor, November 26, 1798

Even Mexico is fairing far better than its northern neighbor with a debt to GDP of 43 percent. In South America, even Venezuela with a ravaged economy for over a decade has a debt to GDP of 62 percent. South America as a whole is looking relatively strong compared to the U.S. when using the 2014 projected debt to GDP index. Brazil (59%), Argentina (42.5%), Bolivia (32.6%), Columbia (30%), Peru (17.6%), Chile (12.6%) and Paraguay (11.8%) are projected to hold on to healthy debt to GDP ratios. Even tiny Ecuador—the size of the state of Nevada—is very healthy with an 18 percent debt to GDP.

When it comes to Islamic countries that include current or potential enemies of the United States, the majority are financially healthy, at least when measuring debt to GDP. Egypt is one of the worst but far lower than the U.S. with a debt to GDP at 78.5 percent. Egypt is followed by Pakistan (61.6%), Turkey (36%), Indonesia (21%), Iraq (20%), Nigeria (16%), Iran (8%) and Saudi Arabia (5.2%).

America’s Total Indebtedness. America’s national debt is only a hairline crack in the window of indebtedness and overall view of the financial problem for the United States. Although the national debt seems insurmountable in terms of ever being paid off or even reduced ever again, the real financial issues defy comprehension.

The principle of spending money to be paid by posterity, under the name of funding, is but  swindling futurity on a large scale.  Thomas Jefferson, letter to John Taylor, May 28, 1816.

The total debt (total debt of households, businesses, state and local governments, financial institutions and the federal government) of the United States of America was estimated to be $59.577 trillion on July 4, 2013, the 237th anniversary of the country’s Declaration of Independence. As bad as the total debt sounds and looks, it is the obligation of the United States government for Unfunded Liabilities—present and future—that is truly mind-boggling. On Independence Day, 2013, the American government’s “promise to pay” but unfunded liabilities for Social Security ($16.438 trillion), Prescription Drug ($21.748 trillion) and Medicare ($86.490 trillion) was at a hefty $124.677 trillion or $1,094,701 per taxpayer. To add to this financial debacle and impossible to mitigate financial debt heap, we will be adding another financial behemoth of government largesse and theft of taxpayer monies, the Patient Protection and Affordable Care Act or “Obamacare” that will further plunge the country into that ever downward spiraling cesspool of public debt.

George Washington, the first president of the United States of America foresaw the danger of the federal government taking on too much debt without a quick resolution and commitment to repaying it. In his address to the House of Representatives on December 3, 1793, he stated: “No pecuniary consideration is more urgent, than the regular redemption and discharge of the public debt: on none can delay be more injurious, or an economy of time more valuable.”

In a letter to John Taylor on November 26, 1798, Founding Father and third president of the United States, Thomas Jefferson, also expressed concern about the federal government’s uncontrolled ability to borrow money. “I wish it were possible to obtain a single amendment to our Constitution” Jefferson wrote. “I would be willing to depend on that alone for their reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing.”

Washington and Jefferson, as well as the rest of the Founding Fathers, would be aghast at what has transpired so recklessly at the hands of unrestrained politicians and presidential leaders during the “modern era.” They would likely waffle between absolute disbelief and their restraint from saying: We told you this would happen.

The Harbinger of Financial Catastrophe: Debt to Government Revenue.   As interesting and informative as the Public Debt to GDP ratio is in helping to get a financial picture of a country, other financial experts argue that it is an inaccurate and perhaps misleading measure of a country’s true economic health. Among them, investment banking firm, Morgan Stanley, advocate the use of the Debt to Government Revenue ratio, that is, the government’s ability to pay its debt from its annual revenue or tax receipts. On that basis the outcome for the United States is quite sobering if not downright petrifying.

Federal Budget: The multiplication of public offices, increase of expense beyond income, growth and entailment of a public debt, are indications soliciting the employment of the pruning knife. Thomas Jefferson, Letter to Spencer Roane, March 9, 1821.

Ever since the real estate and financial crisis of 2008 (and beyond), the news fluttering out of the Eurozone countries has not painted a pretty financial picture. The headlines and newscasters worldwide have reported almost daily on the financial gloom that had descended upon countries like Ireland, Greece, Portugal, Spain, France, Italy and the United Kingdom. Greece, which perhaps has been in the financial headlines the most frequently, suffered from a debt to revenue ratio of 351% in 2012. It was followed by Ireland (340%), Portugal (302%), United Kingdom (212%) and Germany (181%). The Scandinavian countries of Denmark (82%), Finland (99%) and Sweden (75%) had the lowest debt to revenue ratios.

So, how does the (once) great United States of America compare? On Independence Day, 2013, debt to revenue ratio for the U.S. stood at a whopping 656 percent (you read it right). At the end of President Ronald Reagan’s second presidential term in 1988, the ratio was an unimpressive, but much lower 260 percent. When President Barack Obama took office just after the end of 2008, the ratio was 397 percent.

As bad as the financial picture continued to look for the Eurozone countries, the average revenue to total GDP ratio for all 27 countries was a respectable 40 percent. By contrast, on July 4, 2013, the revenue to GDP of the United States was a mere 16.3 percent.

The Derivative Financial Volcano. Men around the globe in general and Americans in particular, in their greedy quest for wealth and more wealth, have been led and known to do some very foolish things. It was greed that led, in part, to the “Crash of ‘29” and the ensuing “Great Depression”. It was greed that led to the real estate and banking collapse in 2008. The only question is not if another financial collapse will come, but how soon?

In the Bible there is a stark warning to all those who make money their god. In his first letter to his disciple, Timothy, the Apostle Paul wrote: “But those who desire to be rich fall into temptation and a snare, and into many foolish and harmful lusts which drown men in destruction and perdition” (1 Timothy 6:9; author’s emphasis). Paul knew human nature and that the temptation to be rich was more than most men could deny. “For the love of money is a root of all kinds of evil,” Paul continued, “for which some have strayed from the faith in their greediness, and pierced themselves through with many sorrows” (verse 10; author’s emphasis).

It is not money that destroys men’s lives—we all need a form of money to live—it is the love of money that draws men to do all kinds of evil. “But you, O man of God,” Paul warned, “flee these things and pursue righteousness, godliness, faith, love, patience, gentleness” (1 Timothy 6:11).

Because of modern man’s lust for money and more and more of it, there is one foolish financial move over the decades that could come back to haunt him and financially destroy the big and small fortunes of millions of people and the hopes and dreams of current and future generations for years to come.

So, what exactly is a derivative? They were at the center of the 2008 real estate and banking collapse. A derivative is a type of options contract—a gamble that some underlying investment will go up or down in the future. Derivatives are largely “imaginary” investments with little or no intrinsic value. In essence, rather than a true tangible investment, they represent more of a “crap-shoot”—a horrific gamble by men driven by an insatiable appetite for wealth and more of it. The future impact, when the derivative market unravels, will be catastrophic and unfathomable.

Steve Denning, in an article for Forbes, in an explanation for the financial collapse of 2008, wrote “the warning signs were everywhere: too much borrowing, foolish investments, greedy banks, regulators asleep at the wheel, politicians eager to promote home-ownership for those who couldn’t afford it, and distinguished analysts openly predicting this could only end badly.

The worldwide derivative estimate: $600 trillion to $1.5 quadrillion (that is $1,500 trillion or 1.5  followed by 15 zeroes). At the upper estimate, the financial risk is 20 times the entire global  GDP, which was estimated to be around $75 trillion in 2012.

[UPDATE: According to the Bank of International Settlements (BIS), as of March 1, 2020, the Global exposure of the world’s nations to derivatives was $640.44 Trillion or 7x the world GDP of $90.52 Trillion (Statistics Times, February 20, 2020). On April 1, 2019, Wall Street on Parade    reported that just five of America’s mega banks held $201.2 Trillion in notional (face value) derivative exposure. They are: JP Morgan Chase ($48.2 T), Citigroup ($47 T), Bank of America ($31.7 T), Goldman Sachs Bank USA ($42.3 T) and Morgan Stanley ($32 T).]

“. . . The root cause wasn’t just the reckless lending and the excessive risk taking,” Denning explained. “The problem at the core was a lack of transparency” [among financial institutions].

The worldwide exposure to derivatives is anyone’s guess. Estimates range from $600 trillion to $1.5 quadrillion (that is $1,500 trillion or 1.5 followed by 15 zeroes). At the upper estimate, the financial risk is 20 times the entire global GDP, which was estimated to be around $75 trillion in 2012. No one really knows what the world financial markets exposure is to these worthless financial “investments”.

The Current Problem: Many financial analysts and financial writers like Denning are warning that the next financial crisis, which they see as imminent, will make the burst of the financial bubble of 2008 look like a blip on the financial radar screen.

Denning points out that one financial institution alone, JPMorgan, at the end of the third quarter of 2012, had a “notional” (that is, “imaginary” or “speculative”) exposure to derivatives of $72 trillion or about five times the world economy at that time. According to the United States Controller of the Currency office, at the end of 2012, American banks held an astounding $223 trillion in “notional” derivatives with only four of the nation’s largest banks holding 93 percent of the total.

The Flash Crash and Electronic Meltdown—In One Hour. So, is it possible, in this day and age, for America’s financial system and that of the world to collapse in one hour? Absolutely! Not only in one hour, but perhaps in a matter of seconds. With absolutely everything tied together by computer systems, electricity and electronics it would not take much to create havoc with a nation’s or the world’s financial system and life in general.

On July 29, 2013 a panel of experts convened in Washington, DC to consider the level of the threat on the U.S. infrastructure via an electromagnetic pulse (EMP) attack, whether naturally occurring or via terrorists or a nation-state. The panel included R. James Woolsey, former Director of Central Intelligence under President Bill Clinton; former Speaker of the House, Newt Gingrich; Ambassador Henry Cooper, former Director of the Strategic Defense Initiative Organization under President George H. W. Bush and Dr. Peter Vincent Pry who served on the Congressional EMP Threat Commission.

They assessed America’s vulnerability to a natural or enemy attack by means of an electromagnetic pulse coming from the sun or a nuclear device. They concluded that the U.S. is extremely susceptible to EMP disruptions whether natural or from a lone terrorist or a rogue government.

On a smaller, local scale, many people have had the experience of a temporary interruption in electrical power or use of electronic devices due to a powerful thunder (electrical) storm. On a grander scale, such interruptions can be caused by the electromagnetic pulses sent from the sun as a result of solar flares or solar storms. Such natural EMP events can be regional or wide spread; can be minor inconveniences or devastating.

Mr. Woolsey pointed out that an EMP event originating from the sun struck the electrical grid in Quebec, Canada on March 13, 1989. The solar geomagnetic storm resulted in the blackout of eastern Canada and billions of dollars in economic losses. Within two minutes the entire Quebec power grid was shut down and millions thrown into darkness and winter cold. Schools, businesses and transportation hubs were closed. The impact affected some northeastern U.S. power grids as well. The energy released during the event was estimated to be like thousands of nuclear bombs exploding. The geomagnetic storm that it created resulted in spectacular “northern lights” being seen as far south as Florida and Cuba. Over 200 power grids from coast to coast in the United States experienced disruptions.   Even some satellites were affected, tumbling out of control for several hours.

Although such solar geomagnetic events are relatively rare, Mr. Woolsey warned that if the Quebec event had occurred on the east coast of the U.S., 20-40 million Americans might have been thrown into darkness for up to two years.

The most recent mega solar storm occurred on August 28 through September 2, 1859 and is known as the “Carrington Event” after amateur British astrologer, Richard Carrington. On the morning of September 1, on his estate just outside London, Carrington observed “two patches of intensely bright and white light” erupting from the sunspots. Within hours, the powerful geomagnetic pulses produced impacted the entire earth, damaging telegraph machines and disrupting communications worldwide.

Around the entire globe bright, colorful auroras of light exploded like 10 billion nuclear bombs. Although in some parts of the world it was still the middle of the night, the light display was so bright that men were going to work thinking it was daylight. Although the initial impact was felt three days earlier, the biggest impact occurred on September 1-2.

The South Carolina newspaper, Charleston Mercury, recorded the observation of a woman on Sullivan’s Island, just east of Charleston Harbor. “The eastern sky appeared of a blood red color. It seemed brightest exactly in the east, as though the full moon, or rather the sun, were about to rise. It extended almost to the zenith. The whole island was illuminated. The sea reflected the phenomenon, and no one could look at it without thinking of the passage in the Bible which says, ‘the sea was turned to blood.’ The shells on the beach, reflecting light, resembled coals of fire.”

If such a solar event of the Carrington magnitude happened today, it would destroy electrical grids and critical life-supporting infrastructures worldwide and put the lives of billions of people in peril.

What would people do without electricity for months or even years; no computers; no cell phones or other communication devices; no transportation (due to vehicle computer systems shut down); no refrigeration; no heat; nothing that mankind depends on for daily life working. It would be catastrophic and many would suffer and die, but not before their fortunes and life savings were wiped out.

According to the Center for Security Policy, scientists believe that the earth is overdue for such a geomagnetic incident on the scale of the Carrington Event. Ambassador Cooper believes, that because of America’s unpreparedness, a solar event like Carrington or a terrorist EMP attack would be devastating and as many as 285 million or 90 percent of the U.S. population would perish due to disease, starvation or the collapse of society. Cooper also remarked that the earth narrowly missed a solar EMP in mid-July, 2013 when a mammoth Carrington-type solar emission of ionized gas crossed the planet’s orbit.

While preventing a solar EMP event is impossible, the panel expressed grave concern that an EMP attack from terrorists or a rogue state could be imminent. Dr. Pry warned that there have been a disturbing high number of cyber attacks on U.S. computer systems (government. military and infrastructure) with viruses and hacking, that are probing America’s critical systems and looking for weaknesses. In addition, Dr. Pry noted, that the military doctrines of four of America’s enemies (China, Iran, North Korea and Russia) include EMP attack plans.

To emphasize his point, Dr. Pry pointed out that in the early morning hours of April 16, 2013 the San Jose (California) PG&E experienced a sabotage attack when cables were cut and transformers were shot at, causing significant damage. In “connecting the dots” of cyber attacks, sabotage and the recent discovery of a North Korean freighter in the Caribbean carrying nuclear capable missiles, Dr. Pry warned that the U.S. is extremely vulnerable and a defense of the nation’s power grid should be of utmost importance.

Woolsey noted that a single EMP attack from a nuclear device detonated at high altitude over the U.S. would destroy America’s electrical grid, as well as critical infrastructure and put millions of lives at risk. America’s power utilities, Woolsey stated, are ill prepared to protect themselves against such an attack. To complicate matters, the U.S. has no ballistic missile early warning (BMEW) systems facing south, thus making the country extremely susceptible to any attack from the south.

For in one hour your judgment has come.  Revelation 18:10

Update: As of March 19, 2020, derivative exposure has risen to $673 Trillion. U.S. National Debt is approaching $23.6 Trillion and Unfunded Liabilities nearly $132 Trillion, a liability of $408,000 per U.S. citizen. U.S. Federal Budget Deficit has mushroomed to over $1.6 Trillion (with the Federal response and cost of COVID-19, this deficit is likely to climb.

Revelation 18 and the fate of America is available on Amazon and other online bookstores.

 

 

God’s Judgment in One Hour (excerpted from Revelation 18, Chapter 13)

August 24, 2015

Therefore her plagues will come in one day—death and mourning and famine. And she will be utterly burned with fire, for strong is the Lord God who judges her. . . .

. . . standing at a distance for fear of her torment, saying, ‘Alas, alas, that great city Babylon, that mighty city! For in one hour your judgment has come.’

Revelation 18:8, 10

In Revelation 18 it is stated that Babylon’s judgment will come swiftly—“in one hour”—and is mentioned twice in verses 8, 10 and 17.  But is that possible in this day and age?  The simple, direct answer is, yes, but first let us take a look at America’s financial foundation and the financial stability of the world before reaching any conclusions. 

United States of America’s National Debt.  On October 18, 2013 America’s National Debt was rapidly advancing past $17 trillion or 107 percent of GDP (Gross Domestic Product).  To gain a perspective on the significance of America’s debt one should look at the history of America’s indebtedness as well as compare the current national debt to that of some other countries.

At the end of 1929 America had just suffered a major financial collapse.  The national debt was a mere (by today’s standards) $17 billion or 16 percent of GDP.  By the end of 1933 and with advent of President Franklin Delano Roosevelt’s “New Deal” Great Depression recovery plan, the United States was $23 billion in debt or 40 percent of GDP.  At the end of 1941 and just after the country entered into World War II against both Germany (and the Axis powers) and Japan, the national debt stood at a manageable $49 billion or 39 percent of GDP.

The same prudence which in private life would forbid our paying our own money for unexplained projects, forbids it in the dispensation of the public moneys.

Thomas Jefferson, Letter to Shelton Gilliam, June 19, 1808

When World War II ended in 1945 at a cost of $296 billion for the United States, by the end of 1946 America’s national debt had soared to $269 billion and a historical high of 121 percent of GDP.  During the post-war recovery the debt remained relatively stable from 1946 to 1960, ranging from $252 billion in 1946 to $286 billion in 1960.  During the same period the debt to GDP ratio steadily declined from 121 percent to 54 percent.  During the decades of the 1960s and 1970s the debt grew steadily, but the GDP growth rate exceeded the debt growth rate so that the debt to GDP ratio dropped further to a post-World War II low of 31 percent by the end of 1981 but just before the recession of 1982 hit.

We must not let our rulers load us with perpetual debt.

Thomas Jefferson, Letter to Samuel Kercheval, July 12, 1816

Just before the start of Ronald Reagan’s first presidential term, the national debt had risen to just under one trillion dollars—$908 billion or 33 percent of GDP by the end of 1980.  During the Reagan presidency of two terms the national debt more than doubled to $2.6 trillion or 51 percent of GDP by the end of 1988.

During the two presidential terms of William Clinton the debt grew modestly from $4.4 trillion to $5.674 trillion while the debt to GDP ratio fell from 66 percent to 57 percent.  From 2001 to the end of 2008 (the George W. Bush presidential years) the debt climbed significantly to a little over $10 trillion or 70 percent of GDP.  Although this increase in indebtedness was dramatic, America was about to become shell-shocked.

With the election of Barack Hussein Obama in 2008 as the country’s president, America would witness the reality of a big-spending government behemoth like never before.  By July 4, 2013, less than six months into his second presidential term, President Obama has overseen the growth of the country’s debt to $16.9 trillion or 107 percent of GDP.  By the end of his second term (if the taxpayers allow him to get there), the national debt could well exceed $20 trillion.  If so, he will have accumulated more debt than all 43 presidents before him and the United States will be on the verge of financial ruin (if not before then).

Everett Dirksen, the former Republican who represented the state of Illinois in the U.S. Senate from 1951 until his death in 1969, when reflecting on the national debt in 1965 (which was $317 billion), told this humorous story, which he labeled “cat in the well”:

One time in the House of Representatives (a colleague) told me a story about a proposition that a teacher put to a boy. He said, ‘Johnny, a cat fell in a well 100 feet deep. Suppose that cat climbed up 1 foot and then fell back 2 feet. How long would it take the cat to get out of the well?’

Johnny worked assiduously with his slate and slate pencil for quite a while, and then when the teacher came down and said, ‘How are you getting along?’

Johnny said, ‘Teacher, if you give me another slate and a couple of slate pencils, I am pretty sure that in the next 30 minutes I can land that cat in hell.’

If some people get any cheer out of a $328 billion debt ceiling, I do not find much to cheer about concerning it. (Congressional Record, June 16, 1965, p. 13884).

In the world of American politics and financial mismanagement, the way to deal with the ever skyrocketing debt is not to restrain spending but just to raise the level of the amount one is allowed to spend.  A similar philosophy followed by the American taxpayer would soon land them in prison.

Debt to GDP Ratios Around the World.  The one most commonly used measure of a country’s economic health is the Public Debt to GDP (Gross Domestic Product) ratio or percent of public debt a country owes compared to their GDP.  Public Debt is the amount of money the federal government owes itself and other creditors.

With America’s debt to GDP ratio at 107 percent and rising daily, how does the country measure up to other developed countries, as well as third world or undeveloped countries? Global Finance reported on the Public Debt to GDP projections for 2014 for OECD (Organization for Economic Co-operation and Development) countries.  The OECD includes just about every developed and developing country in the world.  The debt to GDP for all OECD countries is projected to be 113 percent.

The worst country by far is Japan at 246 percent.  Japan is followed by the European Union countries of Greece (200%), Portugal (135%), Italy (131%), Ireland (128%), United Kingdom (114%), France (110%) and Spain (105%).  All of these Euro countries are in significant financial trouble and turmoil.  The United States is projected to be at 114 percent debt to GDP, the same as the UK.

Other European Union countries, such as, Switzerland (39%), Germany (85%), Sweden (47%), Norway (43%), Finland (54%), Denmark (48%) and the Netherlands (72%) are looking much better.

By comparison, how do some of our non-European allies and adversaries look financially?  Of the United States’ clear allies, Canada appears to be in the worst shape but still healthier than the U.S.  Canada’s projected 2014 debt to GDP is 86 percent.  Australia, a long term U.S. ally, on the other hand, is far healthier with only a 28 percent debt to GDP.  However, two of America’s long term antagonists and adversaries are also very healthy financially.  China has a 2014 projected meager debt to GDP of only 17.3 percent and its neighbor to the north, Russia, at merely 10.8 percent.  Ironically, the United States has not been near that level of debt to GDP since the financial crash of 1929 when debt to GDP was at 16 percent.

Clearly, the majority of America’s long-standing allies in Europe are battling tremendous financial pressure, while its two largest and most bellicose decades-long enemies are financially strong and in a much better position to threaten the United States at every level of diplomacy or future military confrontation. . . .

The Derivative Financial Volcano.   Men around the globe in general and Americans in particular, in their greedy quest for wealth and more wealth, have been led and known to do some very foolish things.  It was greed that led, in part, to the “Crash of ‘29” and the ensuing “Great Depression”.  It was greed that led to the real estate and banking collapse in 2008.  The only question is not if another financial collapse will come, but how soon?

In the Bible there is a stark warning to all those who make money their god.  In his first letter to his disciple, Timothy, the Apostle Paul wrote: “But those who desire to be rich fall into temptation and a snare, and into many foolish and harmful lusts which drown men in destruction and perdition” (1 Timothy 6:9; author’s emphasis). Paul knew human nature and that the temptation to be rich was more than most men could deny. “For the love of money is a root of all kinds of evil,” Paul continued, “for which some have strayed from the faith in their greediness, and pierced themselves through with many sorrows” (verse 10; author’s emphasis).

It is not money that destroys men’s lives—we all need a form of money to live—it is the love of money that draws men to do all kinds of evil.  “But you, O man of God,” Paul warned, “flee these things and pursue righteousness, godliness, faith, love, patience, gentleness” (1 Timothy 6:11).

Because of modern man’s lust for money and more and more of it, there is one foolish financial move over the decades that could come back to haunt him and financially destroy the big and small fortunes of millions of people and the hopes and dreams of current and future generations for years to come.

So, what exactly is a derivative?  They were at the center of the 2008 real estate and banking collapse. A derivative is a type of options contract—a gamble that some underlying investment will go up or down in the future. Derivatives are largely “imaginary” investments with little or no intrinsic value.  In essence, rather than a true tangible investment, they represent more of a “crap-shoot”—a horrific gamble by men driven by an insatiable appetite for wealth and more of it.  The future impact, when the derivative market unravels, will be catastrophic and unfathomable.

Steve Denning, in an article for Forbes, in an explanation for the financial collapse of 2008, wrote “the warning signs were everywhere: too much borrowing, foolish investments, greedy banks, regulators asleep at the wheel, politicians eager to promote home-ownership for those who couldn’t afford it, and distinguished analysts openly predicting this could only end badly.

The worldwide derivative estimate: $600 trillion to $1.5 quadrillion (that is $1,500 trillion or 1.5 followed by 15 zeroes). At the upper estimate, the financial risk is 20 times the entire global GDP, which was estimated to be around $75 trillion in 2012.

“. . . The root cause wasn’t just the reckless lending and the excessive risk taking,” Denning explained. “The problem at the core was a lack of transparency” [among financial institutions].

The worldwide exposure to derivatives is anyone’s guess.  Estimates range from $600 trillion to $1.5 quadrillion (that is $1,500 trillion or 1.5 followed by 15 zeroes).  At the upper estimate, the financial risk is 20 times the entire global GDP, which was estimated to be around $75 trillion in 2012.  No one really knows what the world financial markets exposure is to these worthless financial “investments”.

The Current Problem:  Many financial analysts and financial writers like Denning are warning that the next financial crisis, which they see as imminent, will make the burst of the financial bubble of 2008 look like a blip on the financial radar screen.

Denning points out that one financial institution alone, JPMorgan, at the end of the third quarter of 2012, had a “notional” (that is, “imaginary” or “speculative”) exposure to derivatives of $72 trillion or about five times the world economy at that time.  According to the United States Controller of the Currency office, at the end of 2012, American banks held an astounding $223 trillion in “notional” derivatives with only four of the nation’s largest banks holding 93 percent of the total.

The Flash Crash and Electronic Meltdown—In One Hour.  So, is it possible, in this day and age, for America’s financial system and that of the world to collapse in one hour?  Absolutely!  Not only in one hour, but perhaps in a matter of seconds. With absolutely everything tied together by computer systems, electricity and electronics it would not take much to create havoc with a nation’s or the world’s financial system and life in general.

On July 29, 2013 a panel of experts convened in Washington, DC to consider the level of the threat on the U.S. infrastructure via an electromagnetic pulse (EMP) attack, whether naturally occurring or via terrorists or a nation-state.  The panel included R. James Woolsey, former Director of Central Intelligence under President Bill Clinton; former Speaker of the House, Newt Gingrich; Ambassador Henry Cooper, former Director of the Strategic Defense Initiative Organization under President George H. W. Bush and Dr. Peter Vincent Pry who served on the Congressional EMP Threat Commission.

They assessed America’s vulnerability to a natural or enemy attack by means of an electromagnetic pulse coming from the sun or a nuclear device.  They concluded that the U.S. is extremely susceptible to EMP disruptions whether natural or from a lone terrorist or a rogue government.

On a smaller, local scale, many people have had the experience of a temporary interruption in electrical power or use of electronic devices due to a powerful thunder (electrical) storm.  On a grander scale, such interruptions can be caused by the electromagnetic pulses sent from the sun as a result of solar flares or solar storms.  Such natural EMP events can be regional or wide spread; can be minor inconveniences or devastating.

Mr. Woolsey pointed out that an EMP event originating from the sun struck the electrical grid in Quebec, Canada on March 13, 1989.  The solar geomagnetic storm resulted in the blackout of eastern Canada and billions of dollars in economic losses.  Within two minutes the entire Quebec power grid was shut down and millions thrown into darkness and winter cold.  Schools, businesses and transportation hubs were closed.  The impact affected some northeastern U.S. power grids as well.  The energy released during the event was estimated to be like thousands of nuclear bombs exploding.  The geomagnetic storm that it created resulted in spectacular “northern lights” being seen as far south as Florida and Cuba.  Over 200 power grids from coast to coast in the United States experienced disruptions.   Even some satellites were affected, tumbling out of control for several hours.

Although such solar geomagnetic events are relatively rare, Mr. Woolsey warned . . .

For more on America’s financial crisis, read Revelation 18 and the fate of America.

America’s National Debt—an Economic Gut Buster

June 20, 2015

Government debt threatens to send U.S. economy into death spiral, CBO warns

Washington Times, June 16, 2015

Budget office: U.S. debt picture has “worsened dramatically”

Washington Examiner, June 16, 2015

The United States of America hit its debt limit of $18.113 trillion (the amount of borrowing authorized by Congress) on March 15, 2015.  Since 1960, Congress has permanently raised, temporarily revised or extended the debt limit 78 times.  However, this time, three months after the deadline, Congress has failed to act and approve a new debt limit.

The long-term outlook for the federal budget has worsened dramatically over the past several years, in the wake of the 2007–2009 recession and slow recovery. Between 2008 and 2012, financial turmoil and a severe drop in economic activity, combined with various policies implemented in response to those conditions, sharply reduced federal revenues and increased spending. As a result, budget deficits rose: They totaled $5.6 trillion in those five years, and in four of the five years, they were larger relative to the size of the economy than they had been in any year since 1946. Because of the large deficits, federal debt held by the public soared, nearly doubling during the period. It is now equivalent to about 74 percent of the economy’s annual output, or gross domestic product (GDP)—a higher percentage than at any point in U.S. history except a seven-year period around World War II (Congressional Budget Office report, June 16, 2015).

America’s financial condition is so dire that it led to Bill O’Reilly of Fox News to opine on his June 17 Talking Points that perhaps it was time for Americans to flee America.

The National Debt—which now stands at $18.271 trillion as of June 18 or 30% of the total $61 trillion in debt the world’s countries hold—as bad as it is, it is only the tip of the financial iceberg.  Although the ND now exceeds America’s Gross Domestic Product (GDP) by 102.74%, it pales in comparison to the real total liability of America for what is referred to as “Unfunded Liabilities” such as Medicare, Social Security, Medicaid, Obamacare, et al.  That debt liability is nearing $97 trillion.

The interest on the base National Debt of $18+ trillion in 2015 is estimated to be between $229 to $245 billion and skyrocket to about $808 billion by 2025.  All this mountain of debt along with Obama’s regulation-happy administration is strangling the economy, which actually shrunk by 0.7% in the first quarter of this year.  Prospects for growth in the second quarter are not that rosy either.

However, the “unfunded liability” debt may also be under-reported.  In a recent study released by economics professor, Laurence Kotikoff of Boston University and Adam Michel of the Mercatus Center at George Mason University, they calculated that the true national debt of the United States is $210 trillion or 12 times America’s GDP.  This is truly an insurmountable level of debt that will burden the U.S. economy for decades to come.  With the unwillingness of Congress or the American people, in general, to tighten spending, reduce the standard of living or dramatically increase taxes, the American economy will continue to spiral downward.

Currency & Credit Derivatives.  The United States’ stake in derivatives or “Credit Default Swaps” (CDS) is up 553% since 2000 to $592.57 trillion.  Worldwide, the derivative mess has been reported to be about $1.5 quadrillion (that’s $1,500 trillion or 1.5 followed by 15 zeros) or 20 times the gross domestic product of the entire world.  This is a financial powder keg waiting to explode.

What is a derivative?

They were at the center of the 2008 real estate and banking collapse. A derivative is a type of options contract—a gamble that some underlying investment will go up or down in the future. Derivatives are largely “imaginary” investments with little or no intrinsic value.  In essence, rather than a true tangible investment, they represent more of a “crap-shoot”—a horrific gamble by men driven by an insatiable appetite for wealth and more of it.  The future impact, when the derivative market unravels, will be catastrophic and unfathomable (Revelation 18 and the fate of America, p.240).

The World at a Glance.  The reality is that there is not one country of significance that is not carrying a national debt.  Even much ballyhooed Chinese are holding $5.25 trillion in debt, or 64% of their GDP.  Russia’s debt is considerably smaller at $241.6 billion or only 11% of their GDP.  Japan is in a real fix with $10.14 trillion in debt or 200% of GDP.

America and the world did not get here over night.  It has been a decades’ long slide of financial miss-management of mammoth proportions.  As far as America is concerned, the financial slippery slope has been so well and thoroughly greased that any upward climb will be impossible without draconian financial measures that no one even wants to think about, much less implement.

With much of America’s manufacturing gutted since the Clinton administration, and others that followed, by foolish trade agreements that sent thousands of businesses abroad, along with millions of American jobs, America’s economic recovery will be extremely difficult if not absolutely impossible.

While the generation that built the world’s greatest economy is on the way out, the users and abusers of it are growing.