Monthly letter archive

Christian Biblical Church of God

Post Office Box 1442

Hollister, California 95024-1442

Fred R. Coulter

December 6, 2004

Dear Brethren,

I am writing this important letter to you because of the rapid decline of the US dollar in the United States and in the world. We are literally witnessing prophecy being fulfilled before our eyes.

For the past couple of years, the value of the dollar has declined dramatically. In fact, since this summer it has fallen by nearly 40%. (The value of the dollar today as compared to 1940 is a mere 3 cents.) This is wrecking great havoc on the international trading market and on other nations because they hold trillions of dollars of our government, business and personal debt. Most people do not realize it, but the United States owes nearly 45 trillion, some experts say more. This has caused the price of everything to rise dramatically. What has happened to the price of oil recently, though the prices now appear to be falling, is just a foretaste of what we will be facing in the future.

In 1980 the United States was a creditor nation—the nations of the world owed us money. However, in 25 years all that has changed. Today, we are the greatest debtor nation the world has ever seen. Now it appears the nations of the world are ready to begin taking action against the USA—which will also affect the UK, Canada, Australia and New Zealand.

At the present time it is most difficult for them to act, because if they pull the plug on our debt and start cashing out their trillions of dollar our debt, this will also cause their own economies to collapse. So at the present time the nations of the world are stuck with the declining dollar and the tremendous loss of value of their dollar holdings. No one knows how much longer we can hold out, but a major drastic dollar adjustment and decline is about to come upon us. If a depression does not hit us, we will be faced with run-away inflation. Either way it will affect everyone!

God prophesied that the nations of Israel would suffer these calamities for rejecting Him and not keeping His commandments. In Deuteronomy 28 God lays bare this coming economic upheaval: "The stranger that is within thee shall get up above thee very high; and thou shalt come down very low. He shall lend to thee, and thou shalt not lend to him: he shall be the head, and thou shalt be the tail.

"Moreover all these curses shall come upon thee, and shall pursue thee, and overtake thee, till thou be destroyed; because thou hearkenedst not unto the voice of the LORD thy God, to keep his commandments and his statutes which he commanded thee: and they shall be upon thee for a sign and for a wonder, and upon thy seed for ever. Because thou servedst not the LORD thy God with joyfulness, and with gladness of heart, for the abundance of all things; therefore shalt thou serve thine enemies which the LORD shall send against thee, in hunger, and in thirst, and in nakedness, and in want of all things: and he shall put a yoke of iron upon thy neck, until he have destroyed thee … And he shall besiege thee in all thy gates, until thy high and fenced walls come down, wherein thou trustedst, throughout all thy land: and he shall besiege thee in all thy gates throughout all thy land, which the LORD thy God hath given thee" (Deut. 28:43-47, 52, KJV).

The economic disaster will be the first thing to happen. And it will probably come in several stages. We need to understand the times we are living in and not get caught asleep at the wheel. On Sabbath December 4, I gave a sermon on the coming economic tribulation. I read excerpts from the book, The New Economic Disorder—Our Economy in the End Times by Larry Bates, ISBN 0-88419-383-7 published by Charisma House. If you want to order a book for yourself, you can call the publisher at 1-800-599-5750; cost is $7.99 plus $3.95 shipping. It is also available in many Bible bookstores for $9.95.

Brethren, we need to be wise and prepare the best that we are able, given our individual circumstances. God instructs us: "A prudent man foreseeth the evil, and hideth himself: but the simple pass on, and are punished" (Prov 22:3, KJV).

I am not a financial advisor, so I cannot tell you what to do. You have to make your own decisions, in faith trusting God to guide you. But I can tell you that the most important thing you can do first of all is to get out of debt as much as possible, except for your housing. Above all remain faithful to God in your tithes and offerings so that God can bless you according to his promises: "Bring ye all the tithes into the storehouse, that there may be meat in mine house, and prove me now herewith, saith the LORD of hosts, if I will not open you the windows of heaven, and pour you out a blessing, that there shall not be room enough to receive it. And I will rebuke the devourer for your sakes, and he shall not destroy the fruits of your ground; neither shall your vine cast her fruit before the time in the field, saith the LORD of hosts" (Mal. 3:10-11, KJV). And again as Paul wrote: "For God is able to make all grace abound toward you so that in every way you may always have sufficiency in all things, and may abound unto every good work" (II Cor. 9:8).

Recent News Excerpts on the Falling Dollar: I am including the following economic news reports about the steep decline of the dollar by Bruce Porteous entitled What the Collapse of the US Dollar Will Mean to the World. As you read them you will begin to understand the urgency of the current situation.

"The recent 42-month rally of gold is the 2nd longest since the breakdown of the Bretton Woods system in 1971. But the worst for the dollar is yet to come. In a written report for the National Bureau of Economic Research, former IMF chief economist Kenneth Rogoff and one Maurice Obstfeld warn...’When current-account adjustment comes, the exchange rate effects may be massive. The potential collapse of the dollar becomes considerably larger— "...the USA, under the just-reelected President George W. Bush, is bankrupt, and will be plunged into the relevant deep, global, chain-reaction collapse very soon. ... Bush might soon have very painful reasons to wish he hadn’t been elected, (since he) may absolutely rely on the rapid arrival of a bankrupt economy. ... As I have emphasized, repeatedly, the present world monetary-financial system is now entering a terminal phase of general, global collapse - from which it will never recover in its present form..."(Washington Insider, 11-11-04)

"The leading Italian financial daily Il Sole 24 Ore stated on its Nov. 9 front page editorial by banker and former minister Paolo Savona, that the re-election of George W. Bush had pushed the world closer to a ‘monetary Hiroshima’. He said that, due to the US imbalances, we are heading towards ‘a big explosion which will disintegrate the world dollar activities and will unleash the Second World Depression.’ " (EIR Strategic Alert, 11-18-04)

"The main current risks I see are in the immense American current-account deficit on the one hand, and the refusal of the Europeans, on the other, to contribute to the growth of the world economy. Therefore, a very severe crisis of the international financial system is preprogrammed. I see the problem in the fact that, since the ‘stock bubble’ burst 3 years ago, we have not had any significant dynamic of investment in the US any more. At the same time, we have a high consumption dynamic, which is not justified by anything, and therefore can't be sustained. Income didn't increase, and consumption was promoted primarily by the monetary policy of the Fed and other measures by the government. The savings rate in the US is dangerously low. Any additional shock, no matter whether caused by high oil prices or rising interest rates, could now lead to a situation whereby America's consumers normalize their savings quota ‘overnight’, so to speak—and that would be a catastrophe for the American, and therefore, the world, economy." (Interview with Prof. Dr. Heiner Flassbeck – Germany’s deputy finance minister [’98-99] and currently chief economist of the UN Conference on Trade & Development - in the Executive Intelligence Review, 12-12-04)

"During a routine sale of US Treasury bonds in early September, one of the essential pillars holding up the economy suddenly disappeared. Foreigners have been regularly buying nearly half of all debt issued by the US government. On Sept. 9, for the first time that anyone could remember, they stayed home. ... The foreigners returned in force at the next Treasury auction, and Sept. 9 was quickly dismissed as an aberration. But the episode demonstrated how much of the US economy is dependent on other countries to bankroll its free-spending ways. A cheaper dollar reduces the value of American securities, making them less attractive to foreign investors. That could eventually precipitate...the doomsday scenario’—Japan and China not only refusing to buy US bonds, but selling some of their $1.3 trillion in reserves. The only way Uncle Sam could then find new customers for its IOUs would be by raising interest rates...(which) would be disastrous for a country weaned on cheap credit. A number of economists and academics say there are real reasons for concern. If the dollar falls too far too quickly, those all-important foreign investors will abandon the US in favor of stabler places. Indeed, there are signs that such an exodus might have already started. In August...foreign private investors sold $2 billion more in US stocks than they bought...(and) they dumped $4 billion more in government bonds than they purchased. ‘A run for the exits could happen any day, that's for sure,’ said C. Fred Bergsten, author of Dollar Overvaluation and the World Economy and director of the Institute for International Economics, a Washington think tank. (Los Angeles Times, 11-14-04)

"Treasury Secretary John Snow has been forced to suspend the issuance of US debt, to postpone indefinitely the announcement of the coming Treasury bill auction and to admit to Congress and the world that he is running out of legal ways to keep America afloat." (International Herald Tribune, 11-19-04)

"Jean-Claude Juncker, who will become the official spokesman for the euro zone in January and currently the Luxembourg prime minister and finance minister, said the United States was not listening to calls for action to support the dollar. European officials fear that a continued drop in the value of the dollar could undermine the EU's fragile economic recovery, which is already under strain from the high oil prices." (International Herald Tribune, 11-17-04)

"The chairman of the Federal Reserve, Alan Greenspan, sounded a warning over the spiraling US trade deficit... Wall Street paid close attention to Greenspan's unusually frank assessment of the trade imbalance and its effect on the US economy. (He) said the economy...would be vulnerable to foreign influence should the deficits continue to build. ‘It was unusual for him to speak out on it like that, and it’s having an effect,’ said the chief investment officer at LPL Financial Services in Boston. This is not the first time Greenspan has warned about the risks of a spiraling current-account deficit. In testimony before Congress in February, he said: ‘Foreign investors, both private and official, may become less willing to absorb ever-growing claims on US residents.’ " (International Herald Tribune, 11-20-04)

"Alan Greenspan came to the home of the euro on Friday and warned anxious Europeans to expect little relief from the dollar's relentless decline against their currency. (He) said the persistently high US current-account deficit posed a risk to the dollar’s value, as foreign investors would eventually resist buying more American assets. Taken together [Greenspan's speech and Snow's ruling out of helping stem the dollar's decline], the two speeches have sent an unmistakable signal that the Bush administration is prepared to tolerate a weaker dollar for the foreseeable future. That could aggravate tensions between the United States and Europe." (International Herald Tribune, 11-20-04)

"Mr. Speaker, Congress is once again engaging in fiscal irresponsibility and endangering the American economy by raising the debt ceiling, this time by $800 billion. ... the debt limit has become merely another technicality on the road to bankruptcy. ... Congress has become like the drunk who promises to sober up tomorrow, if only he can keep drinking today. Increasing the national debt sends a signal to investors that the government is not serious about reining in spending. This increases the risk that investors will be reluctant to buy government debt instruments. The effects on the American economy could be devastating. The only reason why we have been able to endure such large deficits without skyrocketing interest rates is the willingness of foreign nations to buy the federal government’s debt instruments. However, the recent fall in the value of the dollar and rise in the price of gold indicate that investors may be unwilling to continue to prop up our debt-ridden economy." (Congressman Dr. Ron Paul [R-TX] to the Congress on 11-20-04)

"Japan has already made it clear it is unhappy with the export-damaging strength of the yen and some traders say it may not be long before Japanese authorities step into the market to sell yen for dollars. (The) Bank of Japan Governor said in an interview...that an appreciation of the yen could be destabilizing and become a big concern." (Reuters, 11-22-04)

"The Avalanche is coming: It happened before; it might happen again. The dollar could pitch the world into financial catastrophe. The Federal Reserve is becoming extremely anxious. ... The problem is not a new one. It is based on the structural weakness of the world’s leading currency. ... Since 1971 the dollar has been in an unusual and vulnerable position. It is a dominant, but inconvertible, currency. ... Such a currency is always at a disadvantage. ... The politicians of the dominant country can behave with relative irresponsibility, and they usually do. The dominant nation is also likely to accumulate debt, on a horrific scale. This is like the situation that precedes an avalanche. More and more loose snow gathers, until there is a huge overhang. At some point, which cannot be predicted exactly, the appetite for the dominant currency is sated, and people want to sell. Then the fear sets in; the avalanche is upon us." (The London Times - Opinion by Sir William Rees-Mogg, 11-22-04)

"The central bank of Russia said that it would stop trying to peg the ruble solely against the dollar, shifting instead to a target based on a basket of global currency reserves. The biggest questions hang over Asian central banks, which have bought hundreds of billions of dollars’ worth of US Treasury securities and other dollar-denominated assets in recent years to slow the decline of the dollar, in order to safeguard their countries’ exports to the United States. By adding more euros and other currencies into the mix, central banks could protect themselves against a loss of value in their holdings... " (International Herald Tribune, 11-27-04)

"The ‘Great Crash of 2004-2005’: Lyndon LaRouch issued a statement on Nov. 28 on the escalating world monetary crisis, centered on the US dollar’s rapid depreciation. The current world monetary tensions are the cutting edge of the systemic crisis of the global economic-financial system. In his statement, he warned against ‘voices heard from Asia and Europe, which propose an immediate withdrawal from the collapsing dollar now... Contrary to their delusions, the trend toward a "basket of currencies," as an alternative to the dollar, will merely accelerate the already onrushing worldwide depression. ...the entire world monetary-financial system has now reached the point of inevitable ongoing disintegration, that there is no hope for civilization...our civilization as we have known it, is doomed for generations yet to come...’ On Nov. 25, the executive director and chief economist of the Bank of England, gave a speech, in which he drew parallels between the times of the Roman Empire and the present. He said that today everything appears to be fine on the surface, ‘but, as the Romans in 60 AD failed to recognize, the chances of everything working out exactly as expected are remote... The largest currency traders...all reduced their forecasts for the dollar.’ These announcements will cause more investors to hedge their derivatives bets to protect against the collapse. The hedging, in turn, increases the rate of collapse, which will increase hedging, and so forth. We are now in an accelerating dynamic of the dollar plunging, while the euro is pushed even further up—driving Europe’s real economy even deeper into depression."

"Its (dollar) latest slide is merely a symptom of a worse malaise: the global financial system is under great strain. ... If the dollar falls by another 30%, as some predict, it would amount to the biggest default in history: not a conventional default on debt service, but default by stealth—wiping trillions off the value of foreigners’ dollar assets. The dollar’s loss of reserve-currency status would lead America’s creditors to start cashing those cheques—and what an awful lot of cheques there are to cash. As that process gathered pace, the dollar could tumble further and further" (The Economist, 12-03-04)

And last, but not least . . .

"Economic ‘Armageddon’ predicted: Stephen Roach, the chief economist at investment banking giant Morgan Stanley, has a public reputation for being bearish. But you should hear what he's saying in private. ... His prediction: America has no better than a 10% chance of avoiding economic ‘Armageddon.’ In a nutshell, Roach’s argument is that America’s record trade deficit means the dollar will keep falling. To keep foreigners buying T-bills and prevent a resulting rise in inflation, Greenspan will be forced to raise interest rates further and faster than he wants. The result: US consumers, who are in debt up to their eyeballs, will get pounded. Less a case of ‘Armageddon’ maybe, than of a ‘Perfect Storm.’ To finance its current account deficit with the rest of the world, America has to import $2.6 billion in cash. Every working day. That is an amazing 80% of the entire world’s net savings. Sustainable? Hardly. A source who heard his presentation concluded that a ‘spectacular wave of bankruptcies is possible. Smart people downtown (NY) agree with much of the analysis. It is undeniable that America is living in a ‘debt bubble’ of record proportions." (The Boston Herald, 11-23-04)

Brethren, these news articles clearly show that we are living in dangerous economic times indeed. We need to follow God’s advice and prepare, but our faith has to be in God the Father and Jesus Christ. Yes, we will face some tough times, but God will see us through it.

A final saving grace that may slow the decline is this: This nation is the only nation that is preaching the Gospel of salvation through Jesus Christ—whether the full truth or partial truths. Because of this, we can pray that God will give us wisdom to do what we need to do and to hold back the hand of His correction for the sake of preaching the Gospel and for the sake of the brethren.

I realize that this letter is coming to you just after last week’s letter. However, this information is so important, it is imperative that you receive it right away. May God grant you His love, grace and wisdom in all things.

With love in Christ Jesus,

Fred R. Coulter