Zakaria - “Every golden age comes to a close. The more glittering the era, the more fiery the end. The crash of 2008 was the world’s worst financial collapse since the Great Depression. Within just a few months this past year we have seen before our very eyes the unprecedented destruction of $50 Trillion in assets world wide; the nationalization of America’s largest mortgage lenders; the largest bankruptcy in history (Lehman Brothers); the disappearance of the investment bank; bailouts and stimulus packages around the world adding up to trillions of dollars. Certainly it eclipses the losses of the Great Depression many times over.How did we get here? I would argue that, ironically, the fundamental cause for this collapse has been one – success. The size of the global economy doubled every ten years or so going from $31 trillion in 1999 to $62 trillion in 2008 and inflation stayed low. But the major side effect of this success -- low inflation, global growth, swift technological advancement -- was arrogance. Business men believed that levels of debt that were once considered dangerous were now manageable given what they assumed were permanently changed conditions. As a result investors piled into what would normally be considered dangerous investments, all for the promise of relatively little reward.The world economy had become equivalent of a race car -- expensive, with incredible range, and capable of performing at breathtaking speed. Over the past ten years, the global economy had become something no one had ever seen -- an integrated system of about 125 countries, all participating and all going at unheard of speeds. It was as if that race car was being driven by 125 different drivers -- and no one remembered to buy shock absorbers.At some level, debt is at the heart of the whole story. Since the early 1980’s American’s have consumed more than they have produced---and they have made up the difference by borrowing. This happened at every level of society.”
The book that President Obama took with him to read on vacation is entitled The Post-American World by Fareed Zakaria. Zakaria is a Moslem American who grew up in India, and is Editor of Newsweek International and the host of CNN’s Fareed Zakaria GPS, who not surprisingly supported Obama for President. However his book, in my opinion, is well written and should be read by everyone who has an interest in current events and Bible prophecy, especially preachers and political activists. Since the old adage may very well be true that, “We are basically the people we meet and the books we read,” let’s see if we can get into the mind of Mr. Obama by letting our eyes rest on what his eyes and mind may have contemplated while on vacation recently as he read Fareed’s work.
Following is an overview of the Preface of Zakaria’s intriguing book that tells us from his perspective where he thinks the world, and especially America and the West, is heading in the next few years, which I might say, from his perspective, is not good.
Preface to Post-American World – The Fastest Race Car in the World
Zakaria pointed out that in just 34 years, from 1974 to 2008, household debt rose from $680 billion to $14 trillion. In the last seven years, it doubled again to $21 trillion. The average home now has thirteen credit cards and owes $120,000 on a mortgage. According to Zakaria, we householders are “pinnacles of thrift” in comparison to the politicians. In 1990, the national debt was $3 trillion; at the present time, it is over $11 trillion. The famous National Debt Clock in New York City has run out of space to display all the figures.
Zakaria says that the U.S. could have never arrived at this position if there had not been nations willing to lend us the money. “That’s where the economic and political empowerment of the developing world -- the ‘rise of the rest,’ as I call it -- comes in, and its best symbolized by the rise of China.”
Zakaria continues to explain that Chinese households and corporations bank around half of their earnings. This makes Chinese goods cheap and attractive to the Western consumer. The Chinese oversaves while the Americans overconsumes. And it isn’t just China. Eight other emerging countries are sitting on $100 billion war chests or more. However, China alone sits on foreign currency reserves of $2 trillion, most of it in dollars. China is now America’s largest foreign creditor. It holds the largest IOU slip and it carries the signature of Uncle Sam.
President Obama has warned of the prospect of “trillion-dollar deficits for years to come,” as his administration boosts spending on everything from green technology to health care to reinflate our sagging economy. Most of that money will have to be borrowed from China. We are in effect asking China to simultaneously finance the two largest fiscal expansions in human history: ours and theirs.
Zakaria continues by saying that the crisis of 2008 is different than other panics of the past because it did not originate in some developing-world backwater; it emerged from the heart of global capitalism, the United States, and coursed its way through the arteries of international finance. It does not mean the end of capitalism but it might well mean the end of a certain kind of global dominance for the United States. The current economic upheaval will only hasten the move to a Post-American World”. If the Iraq War and George W. Bush’s foreign policy had the effect of deligitimizing America’s military-political power in the eyes of the world, the financial crisis has had the effect of deligitimizing America’s economic power.
America once pointed the world to Christ as we sent missionaries as our unofficial ambassadors to penetrate the darkest recesses of the earth. But now according to Zakaria, as Brad Setser, a Fellow at the Council on Foreign Relations has noted, after World War II, globalization and Americanization is almost synonomous. Setser writes, “Foreign borrowers looking to raise funds tended to issue bonds denominated in dollars, made use of New York law, and met the Securities and Exchange Commission’s Standards for disclosures.”
Zakaria explains that this activity caused American ideas and institutions to prosper since the fifties, and the world then rode that highway of success higher and higher with us until their own stock markets collapsed with ours.
To sum it all up, Zakaria has written a 280 page book to say what God’s word has said in fourteen words. The rich ruleth over the poor, and the borrower is servant to the lender [Proverbs 22:7].
We also see that the Federal Reserve that was established in 1913, which is neither Federal or a “Reserve” of funds for the American people, has been a dismal failure for the purpose that it was supposed to be established. When the Federal Reserve Act was passed into law by Congress, it was sold on the basis that it would maintain a steady economy and ward off booms and busts such as the panic of 1907. Obviously it hasn’t worked. The Fed has never been audited, and we agree with Ron Paul that their time has come. But in our opinion, it should not stop there until this monster is totally abolished forever and we return to a sound money system.
However, there is another question that must be answered: if $50 trillion dollars has been lost world wide, where did it go, who got it and why is Bernie Madoff the only one who is in jail? Obviously Bernie was the scapegoat for the biggest bank robbery in the history of the world.
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