"Countries don't go out of business. . . . The infrastructure doesn't go away, the productivitity of hte people doesn't go away, the natural resources don't go away. And so their assets always exceed their liabilties, which is the technical reason for bankruptcy. And that's very different from a company." —Walter Wriston, former Citicorp chairman.
Countries don’t go out of business.” Most of the time, citizens of all walks of life, whether rich or poor, whether investors or hourly workers, whether mortgage holders or mortgage lenders, can take that statement for granted. But recent developments in a number of countries around the world, including several that make up the European Union, have exposed the fallacy in such thinking. And Greece has become the poster child for the problems.
For decades, Greek governments have spent more money than their economic output has produced. Greek citizens enjoy generous pensions, short workweeks, lengthy vacations, and, in general, a lifestyle their productivity does not support, and has not supported for many years. Until recently, these policies remained wildly popular. As George Bernard Shaw famously observed, “A government which robs Peter to pay Paul can always depend on the support of Paul.”
All of this was based on the notion that “countries don’t go out of business.” But countries are not identical to governments. Countries don’t issue currency, sell bonds, or manage economies. Governments do. And governments can go bankrupt.
The case of Greece, however, is at once easier and more difficult. Greece no longer issues its own currency. Instead, it uses the euro, a currency issued by the “eurozone,” which is made up of 17 of the 27 member states of the European Union. The other eurozone countries have decided to bail out the Greek economy—offering the Greek government loans and other help—in return for significant reductions in spending. So far, the bailout has protected the value of the euro, but Greek government bonds have reached “junk bond” status. Private lenders are demanding 20 percent or more in interest.
This is bad enough, but four other eurozone countries—Portugal, Italy, Ireland, and Spain—are experiencing similar, though less severe, debt problems of their own. This could imperil the entire eurozone, and the global consequences of 17 economies failing would be catastrophic.
“sound as the dollar”
In the past, even with such widespread economic worries—and we haven’t even discussed Iceland’s ongoing bankruptcy or Britain’s problems— investors could always fall back on the world’s safest currency—the United States dollar. But recently, major credit rating services, such as Moody’s, Standard & Poor’s, and others, have warned that the rising American debt may reflect negatively on U.S. Treasury bonds, threatening the nation’s standing as the world’s leading economic engine. Because so many investors hold U.S. Treasury bonds as security—including other countries, for example, China—the effects of a U.S. default would be immediate and global.
The United States, as Walter Wriston indicated, would still exist, along with its people, resources, workforce, and industry. But even though all these continued to exist, the U.S. would have lost the single most important support of its currency and its economy: trust. People seek places to put their money that they can trust. They want to know that what they’ve labored to earn is secure. That’s why we call financial instruments securities.
And historically, saying that U.S. debt was backed by “the full faith and credit of the United States government” made U.S. bonds valuable because everyone on the globe trusted that the American government would repay its debts. But, just like any other country, debt that grows too large in comparison with national income, shakes that trust. And when investors fear they will lose the wealth invested in U.S. bonds, they will move it, and quickly.
Revelation 18
Our current situation sounds eerily similar to Revelation 18, where Babylon falls, and with it world commerce: “[The kings of the earth] will stand far off and cry:
“ ‘Woe! Woe, O great city, O Babylon, city of power! In one hour your doom has come!’
“The merchants of the earth will weep and mourn over her because no one buys their cargoes anymore— cargoes of gold, silver, precious stones and pearls; fine linen, purple, silk and scarlet cloth; every sort of citron wood, and articles of every kind made of ivory, costly wood, bronze iron and marble; cargoes of cinnamon and spice, of incense, myrrh and frankincense, of wine and olive oil, of fine flour and wheat; cattle and sheep; horses and carriages; and bodies and souls of men. . . .
“ ‘Woe! Woe, O great city. . . . In one hour such great wealth has been brought to ruin!’ ” (Revelation 18:10–13, 16, 17).
In one hour?
Perhaps in previous years, it would have been reasonable to question whether such complete economic ruin could take place so quickly. But recent history offers plenty of examples.
On October 19, 1987, stock markets around the world crashed dramatically. Starting in Hong Kong, the crash spread rapidly as markets opened throughout the day. The U.S. stock exchanges fell by more than 20 percent in a single day. And the global economy did not rapidly recover. By the end of the month, less than two weeks later, the Hong Kong market had lost 45 percent of its value, Australia 42 percent, Spain 31 percent, the United Kingdom 26 percent, the United States 23 percent, Canada 22.5 percent, and New Zealand’s market fell nearly 60 percent from its 1987 high point.
In September of 2008, the “credit crunch” or the “global financial crisis” nearly brought the world financial system to a halt. And trust formed the very center of this crisis.
At its essence, it came down to this: too many risky home mortgage loans had been made, and debtors began defaulting on these mortgages. This would have been bad enough, but many of these risky loans had been bundled in with other—often many other—more reliable loans, and these bundled mortgages were then sold as a single unit. Unfortunately, investors no longer knew which bundles were good investments and which ones were poisoned with sure losers: they didn’t know which ones to trust. That’s what caused the credit crunch.
Then came 2011. As the summer wore on, signs of a potential world financial collapse became ominous. Governments in charge of some of the world’s largest economies wrestled with growing debt and popular resistance to austerity measures designed to slow the increase or scale back that debt. When credit service Standard & Poor’s downgraded U.S. Treasury bonds for the first time in history, stock markets around the world plunged, surged, and plunged again, bleeding trillions of dollars in value, and generally frightening investors of all stripes. In spite of the credit downgrade, U.S. Treasury bonds actually gained value, because investors feared the chaos in European markets even more. Despite efforts of finance ministers to calm the markets, increasing numbers of investors could see “no bottom” to the market.
Not the Revelation 18 collapse
So, do these continuing financial crises represent a fulfillment of Revelation 18? Probably not. The book of Revelation contains predictions of other events, such as the rise of the antichrist and its mark of the beast, that must occur prior to the events described in chapter 18. Recent events demonstrate that the sudden collapse of world commerce as depicted in Revelation 18 could easily come to pass. Financial markets linked electronically around the globe now react almost instantly to world events. I wish I could recommend a place where your life’s savings will be absolutely safe. I know of only one.
In the Sermon on the Mount, Jesus said, “Do not store up for yourselves treasures on earth, where moth and rust destroy, and where thieves break in and steal. But store up for yourselves treasures in heaven, where moth and rust do not destroy, and where thieves do not break in and steal” (Matthew 6:19, 20).
Ultimately, there is no security on this earth. Eventually, the events portrayed in Revelation 18 will take place. But even before then, as we have seen, the notion of earthly security is illusory.
Does this mean we should withdraw our savings and send them all to some charity? Jesus did approve of saving and investing in one notable case (Matthew 25:14–30). We have a duty to be faithful stewards of the wealth God gives us, and He expects faithful servants to invest wisely. It is not money that is the root of all evil, but loving money; it is not riches that are evil, it is trusting in them (see 1 Timothy 6:10; Psalms 49:6; 52:7; 62:10; Proverbs 11:28).
Perhaps never in earth’s history have so many enjoyed such material wealth. But it’s ironic to realize that our wealth grows less and less material.
In John’s day, wealth consisted of “things”—gold, silver, wool, silk—and 17 other items that he lists in Revelation 18:12. Moth and rust might indeed degrade these commodities.
Today’s “treasures” exist primarily as magnetic digits in banks or on stock broker’s computers. They can be electronically transmitted in a fraction of a second anywhere in the world, or to multiple places at once. Neither moth nor rust can touch them. But now they are vulnerable to riots half a globe away, decisions made by foreign bankers, or even the choices made by politicians perhaps a decade ago.
Countries don’t go out of business, but they can’t provide security, either.
Only God can.
