Wall Street in Crisis

by Gary Kah

On September 15th, Lehman Brothers, one of this nation’s oldest and most prestigious banking firms filed for Chapter 11 bankruptcy. This represents the largest financial failure in U.S. history and will produce enormous ripple effects. It will impact our economy and markets more than any of the other negative financial developments of the past year. Why? Lehman owed its creditors a staggering $613 billion. Those parties will now be unable to regain their funds, nor spend or invest them elsewhere in the economy. The money has evaporated!

   The Feds balked at rescuing the financial giant. They didn’t have the funds available. They had just bailed out Fannie Mae and Freddie Mac to the tune of $200 billion the week before. Our government has also stepped in with $85 billion to save AIG (American International Group) – America’s largest insurer – which was nearing bankruptcy. After helping AIG the Feds may have few resources left to channel elsewhere. The pot is drying up!

   The government only has three options. It could raise our taxes in order to pay for these bailouts, which would extract money from the economy at a time when it needs more. It could print more currency, which would lead to hyper-inflation and an eventual collapse. Or, it could borrow even more from foreign entities – if they are willing to loan us the money. This last option would further increase our colossal debt (currently over $10 trillion) and lead to our government’s eventual bankruptcy.

   The fact is our government is almost as broke as the institutions it is trying to assist. It is in no position to help. The obvious next question is, “Who will bail out the U.S. Government when it goes broke?”

   Once the current system has become completely undone, I believe a new system will be proposed as the solution. It will include some form of global government based on regional economic arrangements, similar to the European Union and the proposed North American Union. Global planners have long understood there can’t be a new one-world system until the old order has failed. Developments in the U.S. will most certainly impact the entire world.

   Make no mistake, the current situation is very serious and will get worse. Former Federal Reserve Chairman Alan Greenspan today warned, “This is a once-in-a-century crisis.”[1] The only “good” news this week has been that Bank of America agreed to buy out financially troubled Merrill-Lynch so that it would not have to declare bankruptcy. The price tag: $50 billion (an all stock trade).

   At present, I am only aware of a few major national banks that are still relatively sound: JPMorgan Chase, Bank of America, Wells Fargo, Goldman Sachs and possibly Citigroup. The impact of our banking crisis is already being widely felt, as it has created a significant credit shortage. Businesses rely on credit to fund inventory and expansions. No credit, no economic growth, no way to overcome the downward-trending recession!

   This summer, small business optimism fell to 88.2 (1986=100), establishing one of the longest strings of recession-level readings in the history of the survey.[2] The credit crunch has been affecting these businesses most severely. A long-time friend and supporter recently wrote:

   We are trying to sell the business. This past year I realized that even though we had paid down our original start up debt to half of what it was, the banks still aren’t going to loan any more money. Everything is unsecured because the banks are so gigantic. Therefore they only will loan half the money you should be getting. Everyone with a small business I know of says the same thing.

   What happens is, when my company grows, it gets pulled back down because there is no operating capital…The banks will only loan us $100,000. That’s a joke.

   Every small business today should be on notice…The giant centralization going on could eventually swallow us up and make our business worthless…Everything is slowly forcing small businesses to sell out to larger ones, or wealthy individuals.

   Consumers have begun to feel the crunch as well, as consumer credit is dwindling. Credit card companies, affected by the impending financial crisis, are drastically increasing their lending rates – sometimes with little or no advance notice. Suddenly a growing number of consumers are paying substantially more interest on their monthly payments. With less money to spend, what will move our consumer-driven economy forward?

   Then, there are the oil prices, remaining stubbornly high at the pump in spite of temporarily lower prices in global markets. Here in the U.S. the high prices are due in part to the damage caused to oilrigs and refineries by Hurricane Ike. Early estimates have the storm damage in the Texas/Louisiana area exceeding $15 billion – another drain on an already strained insurance industry. The U.S. has now been hit by every sort of natural disaster in 2008, except for a major earthquake/eruption/tsunami. All of this is taking a toll on the economy, forcing us into a deeper recession.

   As people increasingly feel the pinch in their pocketbooks they will look for someone to blame for their hard times. So far, the federal government is getting the most heat. The Federal Reserve, which is responsible for many of our economic policy decisions, is especially feeling the pressure. The last two Fed Chairmen have been Alan Greenspan and Ben Bernanke – both Jews. And some of the individuals overseeing our largest remaining banks are also Jewish. One can see the “handwriting on the wall.”

   I fear that with 8 million Muslims now in America, outnumbering the 5.7 million Jews, and with anti-semitism on the rise among the general public, the Jewish people could once again become the scapegoat. History has a way of repeating itself. What is happening in America today is very reminiscent of what happened in Germany preceding the rise of Hitler. I believe it may be just a matter of time before Jews are persecuted and forced to return to Israel. The persecution of true Christians could follow on the heels.

   From a financial standpoint, I have two recommendations: Get out of debt; and stay out of debt! If this means selling off some of your investments in order to pay down debt, you are urged to do so. Purchasing at least some gold and silver or other precious metals is recommended as it could provide a short-term hedge. Keeping some cash on hand is also strongly advisable. Your goal should be to prepare for the worst, even while hoping for the best. Always, before doing anything, seek the Lord for guidance; then do as He leads.

   From a spiritual standpoint, draw near to Christ and get on His agenda. Being in step with Jesus and serving Him faithfully is all that will ultimately matter. Love Him wholeheartedly and serve Him with integrity – living blamelessly among those around you.

   Remember that God is still in control and is aware of all your needs. Pursue Him, work hard, plan wisely – leave the rest in His hands. Expect Him to do great things even under difficult circumstances.

By Gary Kah Click here for bio and archived articles