Now What's Next? By Randy Nettles In March of last year, I wrote an article…
A Geopolitical and Economic Crisis is on the Horizon
By Britt Gillette
If you listen to the mainstream media, you’ll hear a repeating narrative. You’ll hear we’re nearing the end of the pandemic. Just a few more “COVID jabs,” and restrictions will ease. Pent up demand will explode throughout the world, and the global economy will be off and running. Record high stock markets, a hot housing market, and positive government economic data prove the economy is now roaring. That’s the belief. The pandemic is ending. The economy is growing. Everything is wonderful, and soon we’ll return to “normal.” That’s what’s happening, right?
I wish it were so, but a sober look at the global economy reveals a rough road ahead. Furthermore, the odds of global war haven’t been as high as they are now in decades. To see this is the case, you only need to look past the agenda-driven news headlines and focus on what’s really happening in the world.
The Broken Global Supply Chain
A year ago, many people warned the COVID shutdowns would have serious and lasting repercussions. Our modern economy runs on a complex just-in-time inventory and delivery system you can’t simply turn on and off. Global trade is geared toward efficiency, not resiliency. And when you shut down one node in a supply chain, the entire supply chain breaks.
What the global economy experienced last year was a lot like a high-speed car crash. Sometimes, you can wreck your car, get out, and walk away without a single scratch. Every outward sign indicates you survived the crash unscathed. But your outward appearance masks terrible life-threatening injuries. This is what happened in 2020. The media narrative says the economy is in full recovery. But most of the damage is hidden by trillions of dollars in government spending.
If you take a closer look, you’ll see the truth. The global economy is on life support, and nothing indicates this more than the broken global supply chain. When governments around the world shut down their economies and ordered citizens to stay home, it sparked a tectonic shift in demand. This shift in demand took place at the same time many businesses were shut down, restricting supplies of the very goods and services many people demanded. For example, demand for consumer toilet paper exploded when everyone was forced to stay home. Demand for commercial toilet paper (at offices airports, restaurants, hotels, etc.) disappeared. Each type of toilet paper has a separate supply chain. Those chains weren’t created to be flexible. They couldn’t handle the unbalanced demand, and the result was easy to predict – widespread toilet paper shortages.
For similar reasons, we now see shortages of other products. For example, there’s now a global shortage of the semiconductor chips used in visual displays. This shortage is expected to last for the rest of the year, and the impact is widespread. Entire auto plants have grinded to a halt because they lack this one component. Soon the shortage will spill over into other consumer products, such as laptops, tablets, phones, televisions, and video game consoles. As shortages in those products take hold, what ripple effects will they produce in the global economy? Compounding the problem, the ongoing chip shortage is now impacting the production of chip-making equipment itself, making the chip shortage even worse.
It’s not only semiconductors facing these supply chain woes. Other items are in short supply, such as:
– Household Appliances
– Medical Supplies
– Internet Routers
– Auto Parts
– And even Ketchup packets
The global supply chain is broken, and new disruptions could occur at any moment and make it worse. For example, when the cargo ship Ever Given became lodged in the Suez Canal last month, it blocked all traffic for six days. It’s estimated around 10% of global trade, including 7% of the world’s oil, travels through the Suez Canal. This only made the current situation worse. The impact on global shipping and supply chains will be felt for months. It’s the perfect illustration of the fragility of global supply chains. But a broken global supply chain isn’t the only problem.
Central Banks Have Blown Another Financial Bubble
The central bank response to the COVID crisis was swift and aggressive. All around the world, central banks lowered interest rates and purchased billions in bonds, all to prop up troubled businesses and prevent a financial collapse. While these measures prevented an immediate financial collapse, they further distorted the free market, giving rise to two simultaneous financial bubbles that make the global financial system even more fragile:
1) A Second Housing Bubble – According to Zillow, the past year has been the hottest year in real estate since 2007, with median sale prices in dozens of areas experiencing double-digit price increases. The reason? A combination of low rates, a moratorium on evictions and foreclosures, and in some cases, urban flight to suburban and rural areas. All these factors combined to create both a surge in demand for new and existing homes as well as a dwindling supply of listings.
The result is a housing market euphoria reminiscent of the 2002-2007 housing bubble. For instance, in January of this year, a 2,834 SF home in Toronto sold for $2,610,000 after two days on the market and 17 offers. This was $612,000 over the asking price. In Los Angeles, more than half the homes sold last month sold for more than their listing price. According to Redfin, March 2021 was the hottest month in housing history with a record high 42% of homes selling above their list price. Does this sound like a healthy, well-adjusted housing market? Or another giant housing bubble?
2) Another Stock Market Bubble – Since the March 2020 lows, the Dow is up 78%, the S&P 500 is up 81%, and the NASDAQ is up 104%. The rise in stocks since the March low is the third largest in 100 years. The only two times where the market performed better were July 1933 and March 1936 – both in the midst of the Great Depression. Just how overvalued is the stock market? The Buffet Indicator says very overvalued. Named for famed investor Warren Buffet, it measures the total market value of stocks relative to the nation’s economic output. At over 200%, the Buffet Indicator is at an all-time high right now – far higher than in 1929 and far higher than before the dot-com bubble burst. Does this sound like the ideal time to invest in stocks? Or the peak of a market mania?
Global Markets are Fragile
All bubbles eventually pop. The only question is when they’ll pop and what event will pop them. Because of the government policy response to COVID, the stock market is particularly vulnerable to collapse. And its collapse threatens the entire global financial system. Just how fragile is the system? In January, trading in a single stock almost caused a financial panic. While all the headlines at the time focused on the little guy vs. Wall Street, the big headline should have been that GameStop’s explosive stock price almost caused a meltdown of the global financial system. Not only did it destroy the hedge fund Melvin Capital, which had a heavy short position in GameStop, but it exposed brokerages like Robinhood, TD Ameritrade, and Charles Schwab to billions in potential losses if their customers couldn’t cover their margin debt.
For those who aren’t familiar, trading on margin means buying stocks with borrowed money. This enhances investor returns when the market is going up, but it can wipe investors out if the market goes down. Margin debt was a major factor in the 1929 stock market collapse, and now margin debt is making a comeback. As a percentage of real disposable income, margin debt is now higher than it’s been in more than 60 years. It’s higher than the dot-com bubble, and it’s higher than it was before the 1929 crash.
In March, Bill Hwang of Archegos Capital Management lost $20 billion in two days when he defaulted on borrowed funds he used to speculate in the stock market. Like the GameStop episode, this too could have caused a systemic collapse of the global financial system. It’s estimated Goldman Sachs, Morgan Stanley, Credit Suisse, Nomura, and other Wall Street players lost at least $30 billion. Their losses could have triggered a crisis in the more than $2 quadrillion derivatives market, bankrupting banks all over the world, and destroying the global financial system. What’s most worrying is events like these are taking place when global markets are doing nothing but going straight up. What will happen when the market finally goes down?
Rumors of War Abound
Unfortunately, we’ve seen all this before. Shrinking global trade and collapsing markets were hallmarks of the 1930’s. And so were regional conflicts and the rise of imperial powers. Germany, Italy, and Japan invaded neighboring nations in the 1930’s. Totalitarianism swept across the globe. Like the 1930’s, we see similar developments today.
Today’s headlines tell of wars and rumors of war. For example, China recently flew more than 20 war planes over Taiwan’s airspace. They also threatened the Philippines, anchoring several hundred ships near a Philippine reef in the South China Sea. Meanwhile, the United States and Russia threaten to go to war over Ukraine, and Israel and Iran threaten to go to war over Iran’s nuclear program. Wars and violent conflict are nothing new. But frequent high stakes confrontations between nuclear powers are new to the post-Cold War era. Like the Cuban Missile Crisis and other Cold War moments of brinksmanship, any one of these situations could suddenly escalate into World War III.
These are Dangerous Times
Despite media attempts to assure us all is well, these are dangerous times. A single bankruptcy, and global markets could collapse like a house of cards. One wrong decision, and superpowers could unleash a global war. Like 1914 and 1939, the world is on the eve of a new world order. The stage is set for a global economic crisis. International land disputes could trigger all-out war at a moment’s notice. It’s not a matter of if these events will happen, it’s only a matter of when. When they happen and the dust of war settles, the world will look different. The global power structure will be nothing like what we see today.
None of this should surprise you. The Bible says these same conditions will be present just before the Antichrist comes to power. The Bible says World War III (Revelation 6:4) and economic collapse (Revelation 6:5-6) will precede the rise of the Antichrist’s global empire (Revelation 13:7). Reading today’s headlines, it’s clear we’re drawing closer and closer to the events of the Tribulation. We’re in the midst of a global pandemic (Luke 21:11). Israel is back in the land (Jeremiah 23:7-8). The Jewish people are back in Jerusalem (Luke 21:24-28). And the Gospel is being preached throughout the world (Matthew 24:14). The end times approach. This means the rapture also draws near. So don’t despair, Jesus is coming soon!
Britt Gillette is the founder of End Times Bible Prophecy and the author of Coming To Jesus and Signs Of The Second Coming. Receive his book 7 Signs of the End Times for FREE when you sign up for his monthly newsletter.