Written By
S.R. Shearer

November 16, 1998


Since September 29th the Federal Reserve has reduced its key short-term interest rate, the "federal funds rate," from 5.5 % to 5%. It has done so in order to pump liquidity (money) into the market and stop the plunge in world stock prices - prices which had plummeted in the United States by some 20% in the late summer of this year, and in the rest of the world by much more than that. Since then, stock prices have rebounded to the 8900 mark, making up for much of the stock market's loss. But Robert Brusca, chief economist for Nikko Securities in New York, says that more is needed - that the continuing fear and uncertainty in the global economy makes it incumbent on the Federal Reserve to keep pushing interest rates down.

For those not conversant with what's happening, let me explain. As stock prices fell last summer, billions and billions of dollars "disappeared from the market" - dollars that are needed to keep the world's economy working; for example dollars businesses need to meet payrolls (countless numbers of companies worldwide borrow money regularly on a short-term basis to meet payroll), to expand plant and equipment, to repair plant and equipment, etc.

Businesses borrow money on a regular short-term basis from the banks with which they do business because in the "real world" of commerce, the flow of revenues into a firm is not necessarily a steady flow, and - as a result - "shortfalls" occur. Should a "shortfall" occur, for instance, during payroll, these companies borrow money from their banks on a "short-term" basis to meet payroll, and then pay it back - sometimes within as little as a week - from the company's revenues. Short-term loans like this help to "even out" the normal "ups and downs" of a typical business - even healthy ones.

But when money becomes "tight" in the market - which occurs for a variety of reasons when there is a drop in stock prices - then the banks find it difficult to obtain the money in the "private sector" to lend to the businesses which depend on them for such loans. And if the private banks are unable to support the short-term loan requests their business customers need - for example, to meet payroll - then the companies' workers are not paid; when that occurs, the debts of their workers (car payments, mortgage payments, credit card obligations, etc.) go unpaid, and - if that goes on long enough (usually, just a few short weeks), and on a wide enough scale - a general collapse of the economy can ensue. And it can happen that fast (in a matter of weeks)! This is precisely what is occurring today in countries like Indonesia, Korea, Thailand, etc.! And this is to say nothing of the short-term loans businesses need to meet their other expenses and outstanding long-term obligations.

By discounting the "federal funds rate," the Federal Reserve, in essence, makes it easier for the nation's private banks to borrow money from them - i.e., "the banker's bank" - to make up for their own lack of funds as a result of the dearth of money in the "private sector," which occurred in August and early September as a result of the collapse in stock prices. In other words, the Federal Reserve "re-liquefies" the market - i.e., pumps money back into the economy. In essence, it floods "quasi-public" money into the market (in the form of loans to private banks) to make up for the lack of "private money" in the economy. This often has the double effect of not only providing liquidity to the market," but "restoring investor confidence" and, ipso facto, raising stock prices again on the world's indexes. Stock prices rise because "private money" is duped back into the market.


And why do we say, "duped?" - because if the underlying problems which caused the decline in the stock market in the first place have not been adequately addressed, then all that's occurred is a "hollow" fix" which will hold only until the next crisis occurs - until the next emergency in the "Derivatives Market," the next Indonesia, the next series of layoffs, etc.

Of course, the answer again will be for - as Diane C. Swonk, deputy chief economist at Bank One in Chicago, says - the Fed to "keep the liquidity spout open ..." - i.e., to keep discounting the "federal funds rate." In other words, to deal with each succeeding crisis by pumping more "quasi-public" funds into the market to make up for the shortfall of "private money" and to induce (i.e., dupe) that money back into the market.

The problem, however, is - as Bruscal says - the United States is "leaking income overseas like the victim in a cheap horror movie." In other words, in order to try to save themselves, the nations of the world, and particularly the nations of Asia and Latin America, are exporting to the United States on what amounts to an unheard of scale in order to earn revenues. That is to say, as the markets (i.e., the middle classes) in Indonesia, the Philippines, Korea, Japan, Brazil, Mexico, Argentina, etc. have collapsed, the indigenous companies based there (as well as even some of the multinationals) have re-doubled their efforts to make up for the resulting shortfall by selling into the American market. This effort is made all the easier by currency devaluations which makes it possible for most of these countries to "discount" their products here in the United States at unbelievable rates.

What all this is doing, of course, is causing massive layoffs in the United States - layoffs which are being masked by the still plentiful supply of minimum-wage jobs here. But for the person who has had to trade in a $16.00 an hour job for a minimum wage job, it's no joke.


Eventually there will be a reckoning! - and it will probably come when the Federal Reserve is unable to continue to discount the "federal funds rate" without causing massive inflation - which is what occurs when "public funds" flood into the market in order to make up for the lack of "private funds." This is what William Poole and Jerry Jordan, presidents of the Federal Reserve Banks of St. Louis and Cleveland, respectively, fear will eventually occur. [However, the more likely outcome, as economist Robert Samuelson says, is a depression - which is what occurs when there are too many products chasing too few customers. This is what occurs when "middle classes" - the "consumer machine" that makes the world economy work - are impoverished by layoffs.]

Believe us when we say, there is an end to the Federal Reserve's "game" of discounting the "federal funds rate" in order to keep the economy afloat - and that is what's finally occurring in Japan.

On November 7th, the Washington Post reported that in the "wackiest manifestation" to date of Japan's economic woes, the country's super-low interest rates (rates which had been pushed that low by the same policies which the Fed is currently pursuing) have fallen BELOW ZERO on certain types of borrowing. In other words, Japan - in doing the same thing the United States is doing today in lowering its "federal funds rate," has lowered its rate to a point BELOW ZERO. Of course, Japan has been at this "game" for a lot longer than the United States - their problems began in earnest almost ten years ago. Ours have just begun.

The yield on some six-month Japanese government treasury bills (which, while not exactly their equivalent to a "federal funds rate," is, nonetheless, indirectly related to it) fell for a while Thursday to a minus .005%, according to bond traders and news reports from Tokyo. In effect, that means people buying those bills were willing to pay the Japanese government a small fee to hold their money because they didn't want to take the risk of depositing it in one of Japan's troubled private banks, even though the bank would have paid them a small amount of interest.

To make matters even crazier, some of those investors were apparently willing to accept negative yields because Japanese private banks were lending them yen at even lower negative interest rates. It all adds up to a new low for a once mighty economy that has fallen into a historic slump since the early 1990s.


People in this country, naturally, think that we can't reach the same point. But they shouldn't be too sure. The fact is, there is no way the coming collapse of the world economy can be averted. It can be put off for a while, and stock prices can continue to rise for a while - but eventually the Fed will run out of "tricks," and the "game" will be up. That's when we will all find out what we are made of as Christians.

The point to be made in all this is a simple one: today we all - Christian and non-Christian alike - stand at the edge of a precipice. It's just a matter of time before we all fall off - precipitating a panic for which we are ill prepared. How we - as Christians - react to this panic will determine our future, both now and in the world to come - either to honor or to dishonor.

Two paths lay open before us: one path leads into apostasy; the other leads to a transformed life. The path we choose will reveal us for what we really are - children of this world, or children of the kingdom heaven. Unbelievers will be looking at us to see how we react to the turmoil to come. If we panic and join the mob in its stampede for an easy way out - for renewed financial security - then we will be led straight into the arms of the "coming world-ruler." But if we can say with the prophet Habakkuk:

"Though the fig tree may not blossom, Nor fruit be on the vines; Though the labor of the olive may fail, And the fields yield no food; Though the flock be cut off from the fold, And there be no herd in the stalls -

- then we will be the kind of testimony the world (and unbelievers) are secretly looking for; people who are so in love with the Lord that there is no longer any duplicity in their witness before the world. There is no longer any self-serving in their testimony; no attempt to serve both God and mammon - they follow Christ now wherever He goes, be it into fire, death, torture, or economic ruin. Their love for Jesus no longer permits any separation from Him Who now is the ABSOLUTE object of their love and desire.

Again we say, the Lord is looking for such to follow Him - those who will follow Him long after the "things" are gone, the crowds have left, the popularity faded; when the clothes are tattered and torn, there is no longer any food on the table, and persecution rages all around. These are the disciples of Jesus - with such people one can repose trust and friendship; true love is here to be found.

It is in this kind of love that the TRUE church will be "revealed," and "disclosed" (Romans 8:19) It is this kind of love that will expose the hypocrites for who they really are. It is this kind of love which will separate the wheat from the tares. And it is only in tribulation that this love is truly revealed in all of is splendor and beauty - the kind which will produce "The Great Harvest of the Lamb."

We need your help to spread the word concerning Antipas Ministries and the eschatological viewpoint it represents; WE NEED YOUR HELP BECAUSE WE DO NOT "LINK" WITH OTHER SO-CALLED "CHRISTIAN" WEBSITES which are, for the most part, "in the tank" insofar as their loyalty to the United States is concerned - a loyalty that has made them partners in the BLOODY trail the American military has left in its TERROR-RIDDEN rampage throughout the world, as well as making them partners in the abject poverty that American corporations have imposed on the peoples and nations the American military machine has ravaged - A BLOODY, TERROR-RIDDEN RAMPAGE THAT HAS TO A LARGE DEGREE BEEN CARRIED OUT IN THE NAME OF THE "PRINCE OF PEACE." [Please see our articles, "The Third World as a Model for the New World Order," Inside the American New World Order System" and "The American Empire: The Corporate / Pentagon / CIA / Missionary Archipelago."]




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