As you’ve probably been hearing in light of Biden’s induced inflation and bank bailouts, during the great systemic financial crisis of 2007 and 2008 many financial institutions around the world had already either collapsed, disappeared, or required a government bailout. Shockingly, some of these were very large and recognizable companies with global franchises, such as Lehman Brothers, Bear Stearns, and AIG. Other troubled entities were swallowed up or merged, including such major well-known firms as Merrill Lynch—bought by Bank of America—or Wachovia Bank, which was snapped up by Wells Fargo.
Many other financial institutions were threatened with collapse, or indeed did collapse. Such venerable companies as Morgan Stanley, UBS, and Salomon Brothers ran hat in hand to various sovereign wealth funds (SWFs) or governments for emergency funding. But the very largest financial companies—those deemed too big to fail—were propped up by governments. Here, such global juggernauts as Citigroup, ING, the insurance colossus AIG, the United Kingdom-based Fortis, and the Royal Bank of Scotland (once the king of British banks) required government investment to keep afloat.
As never before, a virtual financial storm ripped through the world’s financial securities and credit markets, shaking the infrastructure of mankind’s money systems to the very foundation. Every type of financial institution was touched, from banks to insurers, brokers, hedge funds, pensions, central banks, and SWFs. We can hardly attempt to completely recount the many rescued or folded financial institutions during this period. Without a doubt, it was an unprecedented financial debacle; it was more complex and potentially lethal than even the disastrous financial conditions of the 1930s.
Yet, despite the epic scale of the crisis, as of yet, the world’s financial system still stands. This is a significant point, though it may be obvious. While the global financial edifice may still be quivering and parts of it greatly weakened or collapsed, these international systems remain operative. This system is not yet at an end, but rather is experiencing a transition. But a transition to what? It is critical to understand the answer to this question, whether or not you are a Christian. However, crucially for Christians, there are added and urgent perspectives to understand: where these worldly developments intersect with faith, affections of the soul, and eternal hopes. This saga and its challenges to Christians, as we will explain, are much different than popularly thought. It is not the collapse of global financial institutions, but rather their continued enmeshing of human affairs that is the greater threat. The challenge does not primarily center upon financial gains and losses or the basic task of stewardship, but instead upon the vulnerability to materialistic entrapment and idolatry, especially during these last days. Without such a perspective on end-time global financial developments, one is at great risk of falling for the “cares of this world” (Mark 4:19) and being weighed “down with dissipation, drunkenness and the anxieties of life, and that day will close on you unexpectedly like a trap” (Luke 21:34).
Still a Future Global Role for Financial Institutions
The final chapter on global financial collapse has yet to be written. As the Bible reveals, the great final demise—this likely being a series of events, but definitely ending in total collapse—is yet future. The complete and final collapse of global commercial systems occurs in the latter half of the Tribulation period, most likely spanning periods of the sixth and seventh seal judgments described in Revelation Chapters 6-16. Until that fated time, the role of financial institutions—arrayed as they are in their global networked architecture—plays a significant and necessary role in endtime processes. Not only are these developments utilized for the capture and materialistic enslavement of unsuspecting mankind, but also to provide a facilitating foundation to humanism. With such global solidarity and prosperity possible through mankind’s global economic and financial systems, who would search for a heaven anywhere else than on earth, or think that God still sits on His throne? That said, financial and economic crises such as have occurred in recent years should surely cause people to think twice before putting their full faith and hope in mankind’s systems.
Looking behind the rather formidable complexity of financial markets and systems, we realize that the real essence behind global financial trends are essentially spiritual issues (what is not seen) and the affections of the human heart. The financial systems themselves cannot be blamed for disaster or hardships. After all, this must be the case as systems and machinery are amoral. They are incapable of either moral or immoral behavior. It is people who infuse them with intent and application. As the saying goes, it is people who kill people—not machines and oppressive systems. It is the affections of gain, comfort, and convenience, the emotions of greed and fear, that help build this monstrous, world-controlling edifice of financial tentacles.
Given that the topic of financial institutions cannot really be disentangled from matters of the human heart—concerning issues of faith and confidence—we must not lose ourselves in the technical detail of this global siege machinery of financial systems. As such, in our discussions of the roles of financial institutions, we must emphasize the human heart and not inanimate systems and dry financial theory. The reader will be pleased to know that we will not delve into complex financial terminology—monetarism, fractional reserve banking systems[i] of international trade law and policy, and so on. At their very core, financial markets and their participants, whether individuals or institutions, are driven by human impulses, as we will examine.
Global financial systems are made up of financial institutions, both privately owned or sponsored by individual countries or groups. These would certainly include central banks. Almost all countries today have one these days, all of them based on the same corrupting doctrine of fractional-reserve banking. Also included in this list of institutions would be such global organizations as the International Monetary Fund (IMF) or the Bank of International Settlements (BIS), which either coordinate financial activities globally or determine policy, not to mention a myriad of private companies that are involved in various types of financial services or activities. This latter group is made up of small and large companies, some perhaps only one-city credit unions while the operations of others can span one hundred countries and more. They may be active in insurance, banking, investments, or leasing—anything to do with trading or claims on money and credit. All of these entities are interconnected through trading markets, making up the totality of the global financial system. Uppermost, one must not forget that these systems are devised and commandeered by humans, from enterprising business executives to experts in greed.
Taken together, the involvement of these financial institutions in the everyday activities of humans has continued to grow leaps and bounds. The invasion of modern money has been rapid, if not near complete. It is a perspective that few in our modern age can fully fathom. Living inside the fishbowl, most people don’t realize it is full of water. We are so accustomed to conditions and conveniences of our times that we do not realize how different they are from the past—how institutionalized materialism and idolatry have become in our times. According to this author’s calculations, total global financial obligations at the end of 2007 were at a level fifteen times the annual economic output of the entire world ($818 trillion measured in U.S. dollar equivalents).[ii] Here, we are tabulating figures that necessarily involve financial institutions. If that were not so, these statistics would neither be available nor possible. What we see, reviewing this data, is a virtual explosion in financial position values in recent years and decades, catapulting upwards by a factor of sixty-five times from twenty-five years earlier (adjusted for population growth during that period).[iii]
Twenty-five years earlier, financialization (the process of expressing human activities into forms of money)[iv] was at a much lower level. We could employ a number of statistical definitions to track this trend. Suffice it to say that financialization then was less than a third of today’s intensity. Even earlier, the intrusion of financial institutions and their services was much lower still. Viewed differently, today probably as much as 80 percent of human activity in the Western world is already counted or logged through a financial transaction (this being a different component than the financialization trend of the previous twenty-five years). Seen over the course of the past two centuries, that represents at least a tripling of the role of money in the lives of humans, not to mention the cumulative piling up of financial obligations.
It therefore goes without saying that the financial institutions have been a growth industry. This sector in recent decades, before recent reversals, became the largest industry in the world by market value—larger even than the energy sector. At one point, financial industries accounted for greater than 40 percent of total corporate profits (2002) in the United States and other countries. Imagine! How is it that the business of money changing could make so much money? It really did not make sense as this industry was making a commensurate contribution to world’s productivity and quality of life. Much of the profits were illusory, as became painfully evident during the later crisis period. But such is the power and potential alchemy of this industry viewed collectively.
While profits will surely have declined significantly during the financial downturn of recent years, we can be reasonably sure that the role of financial institutions in world affairs will not diminish. It might be more regulated following recent financial catastrophes, but it will remain the most powerful industry in the world. If anything, its global grip upon human affairs will only tighten and consolidate as a result of recent events.
Hallmarks of the Recent Global Financial Crisis
Of what purpose is the recent booming development of a great globalized network of financial institutions that we see today? As we already reviewed, its invasiveness to all of human life, to the entire globe, is without precedent. But why? No other system on earth could be constructed with such capabilities of control that transcend peoples, cultures, and nations. Without a doubt, it must have a very important end-time role. But before we describe this function, it will help to first review the forces and issues that were (and still are) at play in the most recent world financial crises.
Looking back, the catastrophic financial crisis of 2007-2008 was clearly a global phenomenon; most certainly, it was the biggest globally interconnected crisis ever. It would be impossible to provide an accurate tally of the market losses and costs of government interventions, whether to undergird financial institutions, protect private depositors, or provide stimulus to credit-shocked economies. However, the scale of these costs is instructive. The bill for the world’s latest financial crisis could yet amount to the equivalent of 20-30 percent and more of annual world economic output—perhaps $15 trillion and greater. Most probably, the battle against global systemic collapse will end up costing in excess of any known world war in history.
To illustrate in the case of the United States—still the world’s largest economy—consider that its involvement in World War II is estimated to have cost $3.6 trillion. By comparison, total U.S. financial interventions of all types had already risen to a total exceeding $5 trillion by the end of 2008. This is equivalent to approximately 35 percent of recent annualized U.S. economic output. While it is expected that significant portions of these government guarantees and expenditures will be recovered, America’s financial crisis is far from over. Its full economic fallout has yet to be fully determined. Some of the more extreme doomsayers predict that America alone will require the equivalent of $8 to $10 million in interventions. No doubt, the scale of these figures are stupendous.
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The Psychology of Crisis
As we have already mentioned, despite the savagery of the financial storm of recent years, the world’s financial system has not collapsed. Though the scale and rapidity of the crisis was unprecedented in history, to date the interventions of the world’s leaders and authorities have managed to prevent total demise. Actually, it is partly because of the great government interventions around the world that global economic collapse has not occurred. It is these reactions on the part of policymakers and their role in establishing the nature of global financial systems that we wish to examine further.
The severity of the financial collapses prompted the interventions of policymakers in the first place. At this point, it might begin to seem somewhat circuitous that the crises themselves prompt interventions to further prevent them. But it’s actually not. This is precisely how mankind has propelled itself up the slope of globalism. It is the fears and irrational expectations of emotional humans that push up globalism’s slope. This is an important process to understand, beginning with the individual.
The carnal Homo sapien, driven by his or her basic impulses—“the lust of the flesh, and the lust of the eyes, and the pride of life” (1 John 2:15)—is to an extent facilitated by prewired neurological programming. In other words, it is the innate sinful nature of man that responds behaviorally to expectations and wants. At this level, the goals of natural man are quite basic—namely, the pursuit of pleasure and the avoidance of displeasure. Viewed in the great arena of monetary finance and economies, unsustainable economic excesses driven by unbridled greed and wants lead to conditions where threatening economic downturns generate avoidance behavior. This process is evident both at the individual and societal levels.
But, it is the “official” interventions that we want to focus upon in our examination of the role of financial institutions. Today, we live in an age when government intervention is considered a developed science. Policymakers and voters alike have come to believe that prosperity is an inviolable right and that it can be fabricated without any accountability to morality or behavior. No matter what might have occurred in the past—whether excesses, corruption, manias, organized deceptions, or national sins—a new period of prosperity can always be coaxed out of the magician’s hat by its policy-making wizards. Prosperity is always ahead, never to be restrained by past sins, whether or not past wrongs have been righted or restitution paid.
When Global Policymakers Know Best
A recent comment by Paul Volcker captures the times: “Fortunately, there is also good reason to believe that the means are now available to turn the tide. Financial authorities, in the United States and elsewhere, are now in a position to take needed and convincing action to stabilize markets and to restore trust. … the point is the needed tools to restore and maintain functioning markets are there.” [v] The octogenarian Mr. Volcker is highly respected, given his firm stewardship of America’s monetary affairs as chairman of the Federal Reserve Board between 1979 and 1987. While he certainly does not ignore the fact that it will take time to clean up the financial mess of recent years, his comments reflect the consensus of policymakers that governments today can fix any problem.
Few politicians are elected on the promise of delivering tough times to their constituents. Therefore, the fear of a very large, horrible financial meltdown or economic travails will trigger a very large intervention on the part of authorities. A smaller threat, on the other hand, may generate no response at all. The point being made here is that a crisis must be threatening enough to prompt an official government response and to be more easily accepted by the populace, especially when interventions may infringe upon freedoms.
Following a crisis, when the memories of previous fears and the sting of losses are still very fresh, policymakers collaborate to institute changes that will forevermore ensure that their country—or indeed, the entire world—will never again experience such a crisis. These may include new government spending programs, new laws or financial regulations, and new agencies with responsibilities as deemed necessary. Once these changes are made, society takes comfort from these changes, soon thinking that financial systems and economies will be invulnerable to similar disasters in the future.
However, in time, greed, unrealistic expectations, and complacency born of new confidence lead to another crisis. The important aspect of this repetitive and rotating cycle between human hubris and insecurity is that each new crisis must by definition be seen as greater and more unprecedented. If this were not the case, new interventions likely would not be seen as necessary. On balance, each round brings intervention and policy to new levels. Seen in the big picture, a progressive process is at work leading to ever more organized control and intervention. In the global arena, these same trends lead to heightened globalism and globalization.
The complacency and confidence born of past changes to “crisis-proof” financial markets and economies themselves often lead to the greater excesses. To illustrate, consider the great changes that took place as a result of the Great Depression of the 1930s. The hardships experienced during that time were the catalysts to deficit spending by governments, new central banking practices, and government-sponsored mortgage agencies. In time, the confidence put into these actions and new institutions led to even greater excesses. Mortgage debt over the following decades began to grow relative to household incomes (eventually exploding upwards in 2001 to 2005), central bankers were seen to become gods of wealth who reputedly could spin riches from nothing, and the large role of government spending came to be thought of as the shock-absorbing bedrock of continued economic prosperity.
Most of the twists and turns of modern financial history can be explained in this way. Human confidence builds, leading to a boom, only to falter due to the unsustainable dynamics of a false prosperity, which then leads to a panic stage. National governments and global agencies bring in restorative changes and central bankers steer a new, supposedly better course. In time, confidence again begins to build. The cycle repeats. In fact, to this point in history, countless financial and economic crises have occurred. Some have been local affairs limited to one country. Others have engulfed many nations or the entire world. According to the authors of one report from the IMF, as many as 124 systemic banking crises alone occurred between 1970 and 2007.[vi]
Evidently then, crises play a regular role in the affairs of mankind and should not be viewed as a surprise when they do occur. Most people, of course, have no idea that this is the case, thinking them complete accidents. It is therefore no wonder that the world’s wealth skew continues to widen. The rich become wealthier and the poor less wealthy in relative terms. The average person has little chance to keep abreast of these macro, global developments, and are not wise to the dynamics of fear and greed. As such, many become unwitting casualties.
The point is that crises are catalysts to organized changes, in fact, to a progression of changes. Nowhere do we see this more clearly than on a global level. The world’s path to greater globalism and globalization has been driven forward by crises. These have usually, but not exclusively, been of financial origin. The aftermath of major wars, for example, has quickened mankind’s resolve to coordinate global peace. Mostly, these initiatives (consider the formation of the League of Nations—the forerunner to the United Nations—the World Bank, the International Monetary Fund, etc.) sought to further peace by promoting global prosperity. Sometimes, two steps back have occurred, but generally two steps forward have unfolded for every one step back. Nevertheless, over time, mankind has proceeded to a greater, more centralized network of global financial institutions.
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[i] The terms “central banking” and “fractional-reserve banking” refer to a debt-based system and regulatory regime that controls money and credit. A powerful aspect of this system is that it can create monetary assets out of nothing and can influence the allocation of these new monies.
[ii] The definition of total world financial obligations used by the author includes the full notional values available for documented securities and derivatives markets and as well as bank lending. Using this conservative definition, total financial obligations (or “position value”) totaled $818 trillion at year-end 2007, or more than fifteen times global economic output for that year (employing the World Bank’s current value estimate in U.S. dollars and not adjusted for purchasing power).
[iii] This statistic is calculated on a per-capita basis, in other words, accounting for population growth over the period being reviewed.
[iv] Financialization, as a concept, captures the notion of human activities and obligations being expressed in a financial form—i.e., debt, an insurance policy, savings, deposits, etc.
[v] Paul Volcker, “We Have the Tools to Manage the Crisis,” Wall Street Journal (October 10, 2008).
[vi] Luc Laeven and Fabian Valencia, “Systemic Banking Crises: A New Database,” IMF Working Paper 224 (September 2008).
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