Dr. Rob Congdon
Wednesday, February 8, 2012
The Greece Financial Crisis and the E.U. – A Biblical Perspective
Following today's radio interview with Jimmy DeYoung's Prophecy Today, I thought I would send out a CNBC to expand on my comments on the Greek Crisis. This is not an in depth study, just quick thoughts to help you understand what is happening. Unlike most of my CNBC, this will only cover that subject. So if you are not interested in the coming global empire of Daniel 7, the EU, single world currency, and the Greek financial crisis, you may wish to skip this newsletter.
Many have enquired as to my thoughts about Greece and its financial difficulties in the European Union. I would begin by pointing out that the current financial problem of Greece is a result of massive past spending and social programs in the country. Greece's total debt as a percent of its Gross Domestic Product (ability to produce) is at 115.1%. That means that technically, Greece can never fully repay its debt without some adjustment of the amounts owed.
Added to this problem is the fact that its annual budget has a deficit of 13.6%. This far exceeds the Eurozone maximum of 3%. (The Eurozone consists of the 16 EU nations using the euro for its currency.) Again, this means simply that not only has Greece spent too much in the past, but just paying the interest, prevents them from ever getting ahead.
Normally a government tries to borrow money by selling bonds; to pay its current debts while reducing spending. Unfortunately for Greece, no one wants to buy the bonds unless Greece offers a very high rate of return to the investor. In other words, they want a big payback if they are going to risk investing in Greece. But various investment advisories now indicate that Greek bonds are junk and as a result has led to the fear that investors will lose money.
Both the European Union's Eurozone countries and the International Monetary Fund have offered to help bailout Greece. The IMF is an international organization that oversees the global financial system. It is headquartered in Washington and consists of 186 countries, including the United States. It is a result of the Benton Woods Agreement of 1944 (see CMI Whitepaper 1 -Gearing up the Economy for the Tribulation?).
Were Greece the only country seeking a bailout, the problem would be handled relatively easily. But many more countries are following a similar financial road, including the United States. The result is a fear of a domino effect within the Eurozone; specifically Portugal, Italy, Ireland, and Spain. The true danger is if Spain defaults. Spain's economy is so large (5x that of Greece) that it failure could impact the financial world of the entire European Union and ultimately across the globe. Bailout appears prohibitive because of the size of Spain's potential failure.
The Current Situation
The EU (basically Germany and France) and the IMF are working on the final agreement to help Greece. In addition, the Greek government recently has initiated many cost reduction programs. As a result tens of thousands (mostly government workers and unions) have gathered in Athens to protest the government cutbacks. The tensions have made the government leery of further cost cutting reforms. Suggesting a possible domino effect, Portugal's credit rating has just been lowered, along with Spain's rating (lowered from AA+ to AA).
1. Best case scenario: a $59.4 bn bailout for Greece that is united with Greek government cutbacks. The result - it would give Greece some "wiggleroom" to work on long-term solutions.
2. Debt restructuring: telling the creditors that they will get some of their money back. It is estimated that they could lose 20 to 50% on their investment. The result - the euro would loss some value, which would hurt all Eurozone countries; for fewer people would want the euro and less investment in EU countries using the euro.
3. Greece dropping the euro as its currency: A single Eurozone country cannot lower the value of their currency, so Greece can only do this by abandoning the euro as their currency and return to a devalued drachma. In all probability, this would be a "Eurozone holiday" with Greece eventually returning to the euro. The result - in the interim everything purchased from Greece would be cheaper and would boost the economy, united with higher taxes, debt would decline. But this would weaken the push for a single global currency and would suggest the euro is not the solution to the world's financial problems. The EU would avoid this at all costs.
4. Greece would default all debt: this would deeply affect the economies of Germany and France, holders of 70% of the debt. The result -this would cause a major recession throughout Europe and possibly the US.
5. Greece could cut their high labor costs and institute major tax reforms: their VAT (a form of national sales tax) could be raised to 25% on all purchases, including homes, cars, etc. Result - this would increase civil tensions in the country, particularly among civil government workers and union workers and would not solve the immediate debts owed in May.
All of these scenarios could have a severe impact upon the world economic situation. They would create much distrust of the euro and the European Union. Some of the scenarios could result in instability in the lands most affected; with strikes, domestic violence, shortages, and protests. Above all, it could result in the break-up of the EU, which the EU leaders cannot allow.
My scenario is really a product of my studying both the EU and Biblical prophecy. It is a GUESS ONLY.
I feel the EU "fits" the characteristics of the final reformed Roman Empire of Daniel 2 and 7. It may not be the final empire, but it is certainly setting the stage. I have covered my financial scenario of the Tribulation paper in my CMI Whitepaper, so I will not repeat it here. Based upon these inputs I suggest:
1. The EU will not break-up if it is, in fact, the embryo of fulfilled prophecy.
2. The founders of the EU has noted that the EU prospers best in crisis and particularly can use environmental and financial issues to gain ground in its goal of global governance. It has done this in the past and will in the future.
3. In order for the Tribulation finances to be achieved, a single currency is needed to bring about the Antichrist's control of buying and selling. The most logical choice is the euro or a descendant of the euro.
4. The concept of the single currency, the euro, cannot be allowed to fail by the leaders of the EU and those desiring global governance. Most teachers of global governance suggest that a single currency is an absolute necessity.
5. Since all major countries have far exceeded a position of easy debt removal, all are interdependent upon each other. Finances are now global and the economics of one country now affect economies of many countries, in other words, macro economics is global by nature. All countries in the EU and US are financially interconnected. When one declines, most others will follow to some degree.
6. The people of the US and Europe believe that a lack of governmental regulation of the financial industry has resulted in the global decline of the last two years (they ignore the fact that the governments set up conditions for the decline). Therefore, global regulation is a necessity and must be administered by a supranational organization.
7. The Eurozone countries depend upon the financial strength of Germany and France. Britain, while financially in debt has a proven track record of resolving debt problems through taxes and reforms. Thus, Britain is viewed as a positive, strong financial country. But Britain is not a Eurozone country. Its entry to the Eurozone could help other nations. Hence, the Eurozone needs to bring financially strong countries into the Eurozone. This means there are 11 potential countries (those part of the EU but not using the euro). This crisis could be the excuse for requiring the euro to be the currency of all EU nations.
8. For a supra-national government (the EU is the only one in history) to continue to develop, it must enlarge and ultimately, be the only government on the earth. Therefore, its inherent goal is global governance.
9. The EU's strength and ruling power comes through its regulatory powers. Financial control on a global scale would allow it to gain its global power without "firing a shot."
10. Strangely, the EU leaders have not been in the forefront of the efforts to help Greece. They have allowed Germany and France to lead. In fact, they have been strangely silent. They may be in fact, setting up both these countries to fail and allow the EU to come to the rescue. This would increase the EU's influence and power as a global problem solver.
When I consider all these factors, I believe the EU will wait for the right moment to suggest a strong, global, supranational regulatory power, primarily headed by itself. This will be a key to global governance. Interestingly, this is just what the President of the European Central Bank suggested in Forbes this week. He believes that only through global governance can the "resiliency of the global financial system can be assured." (Mia Saini. "Face to Face" Forbes http://blogs.forbes.com/face-to-face/2010/04/29/ecb-president-favors-globalgovernance.htm - 4/29/2010.)
Again these are just some observations and possible conclusions that may be drawn from them. They are presented strictly as an opinion in response to your emails.
In His service and yours, until He comes,
Dr. Rob Congdon
Dr. Rob Congdon