A Time forFinancial CautionI
would surely think that none of our people would be invested in the stock
market; yet, even if there is one who is, the writing of this report was
worthwhile. In
addition, because of developing conditions, such a report is needed by all
our people. In the next few pages, you will learn why. I
am pastor to many people and I believe my duty to you extends to a number of
practical matters which strongly affect your lives. If
you think that this report has little relevance to your future, then toss it
aside or give it to someone who recognizes the urgency of what is presented
here. My
early years were lived in the Great Depression. Following the stock market
crash of October 1929, hundreds of people committed suicide, thousands of
businesses closed, and millions lost their jobs. America had a desolate
appearance for several years. Indeed, it was not until the Japanese raid on
Pearl Harbor that we really recovered. Beginning
in 1934, America began pulling itself out of the crash by going into federal
debt. We have been sinking deeper into that debt ever since. Economists and
financiers know that, it is now so high, when the next crash comes--the
nation will not be rescued by debt-building government public works
projects. Someone
will say that a stock market crash would only affect those who have stocks.
Not so. Most of you have no stocks; I have none. I am too much a child of
the Depression to go near them. But when the big crash (not just a dip here
and there) comes, it will place the entire nation in financial crisis. A
big crash is coming. Every expert admits it. The only question is when. When
it comes, it will sweep everything before it. Evidence indicates that this
crisis is nearing. The
Dow (the Dow Jones Industrial Average) of 30 stocks has risen into the
stratosphere. Whenever this happened earlier in U.S. financial history, a
crash has always occurred. Yet never before has the rise been so meteoritic
or so rapid, as it has over the last 10 years. The coming crash will be
terrible. The
Great Depression of the 1930s was brought on by a small stock market rise,
compared to what has occurred more recently. It went from about 600 in 1924
to about 1100 in 1929. In 1932 the Dow was 59. The stock run-up between 1923
and 1929 was only 83%. Compare
that with the present financial monster on Wall Street. On
August 12, 1982, the Dow began its most recent climb upward. On that date,
it registered at 776. It is now at about 9000! Such a rise is unrelated to
the real value or dividends from those securities. (Stock
market dividends now yield under 1.7% a year.) But
by December 1997, the total public investment in stocks was $2.3 trillion!
That is an additional $192 billion in stock investments in a little over a
year and a half! This
means that over 90% of all the money ever invested in stock mutual funds has
come in since late 1990. Whenever
the stock market goes crazy, a terrible crash follows; and at this time it
has gone rabidly insane. The worst part is that a majority of investors
really believe it is going to keep moving on up. That is why it keeps going
up. They keep pushing it up; and more people, who know nothing about stock
values, keep jumping on the train. Another
factor in this remarkable rise has been the ease with which investors can
buy stock in financial markets outside their own nation. A lot of money has
been shunted into New York markets from overseas investors. Yet
another factor in the staying power of this rise in the past few months is
the financial collapse in the Far East. It has brought still more money into
Wall Street. And
all this means that, when the crash comes, it will have even more
devastating effects all over the world than it might otherwise have had.
When the bottom drops out, invested money from all over the world
will disappear down the hole. In
1973, the Dow lost nearly 50% of its value, falling from a high of 1,051 to
577. From early 1977 to early 1980, the Dow dropped by 25%. In real terms,
the loss was closer to 50%. Nine times in the last hundred years, the Dow
has fallen to below the starting point of the previous bull (upward) market.
These falls have occurred, on an average, about every 10 years. But,
as noted earlier, the current bull market began on August 12, 1982, with the
Dow at 776. Will the next crash take us that low? Even if the collapse only
dropped halfway, it would be below 4,400. Another
comparison: From 1923 to 1929, the bull market shot up from about 600 to
about 1100. That was a run-up of 344%. The present run-up is almost three
times bigger. When
panic selling begins, and people are confronted with the fact that they may
lose a third of their investment dollars within a day or two, what will they
do? Panic selling would deepen! and could easily push the Dow to below
2,700. That would be a drop of more 6,300 points from recent highs. A
wide variety of events could trigger this, yet it is the underlying factors
which would drive it down. Another
indicator is the fact that Americans have so little in the bank. They are
not prepared for a crisis, should it come. They live for today, and care
little about what tomorrow will bring. The average U.S. family has less
than $5,000 in the bank. Every other First World nation has a higher
savings rate! Japan has an average household savings rate of $45,000. Personal
debt is becoming especially bad among lower-income households: those earning
less than $50,000 a year. Yet this group generates 55% of all consumption
and 66% of gross domestic product. That means that, at this time, a very
weak group is holding up our GDP. When the buying power of Americans vanishes, the nation is in deep trouble. Shops and
businesses close down. Those
Americans, who have not placed their savings in stocks, are in debt to
high-interest rate loan companies, credit card firms, or are gambling the
little they have left at the casinos. I guarantee you: What America gets is
what it brought on itself. Bankruptcies
were a record 1.1 million for 1996, and are projected to top 1.2 million for
1997. That means close to 1% of the population will go bankrupt in a span of
two years.
In the 1970s, there were only seven bankruptcy filings per 1,000 population;
today it is 34. This is a 3.5 times increase in the last two decades. Yet
credit card lenders are begging for more customers. They do this because
their interest rates are so exorbitant. Such lenders make so much money,
they can write off the bankruptcies which result from some of them. In
1992, they sent out one billion solicitations for credit card accounts.
Within three years that number had risen 250% to 2.5 billion. That is
equivalent to ten credit card offers to every man, woman, and child in
America. Clinton
promised to cut the overall deficit by $500 billion over five years.
Instead, under his administration, the total debt has gone from $4 trillion
to $5 trillion. What many do not realize is how he reduced the deficit
somewhat: Half the slowdown was accomplished by a massive tax increase. The
other half was primarily done by refinancing government debt from long-term
debt to the new, lower-rate short-term obligations--which, in a crisis, can
be far more dangerous! Can you imagine Washington, D.C. financed by the
equivalent of credit card debt! Yet,
in Washington, all the talk is about reducing
the deficit. The
deficit is the amount added each year to the debt. It is the national
debt which is the killer. There are those who would like us to forget about
the debt and think about the deficit. If
someone told you that he was $485,000 in debt, but that, good news, he had
only added $3,200 more debt to it last year, what would you say? He
personally owed $485,000, and his deficit last year was only $3,200. You
would be frightened for his family--because of the massive debt; you would
be giving far less thought to his deficit. While
the official national debt is now $5 trillion; the total
value of unfunded U.S. government financial obligations and private debt is
over $17 trillion! No one talks about this economic torpedo. Yet it is
destined to sink us--simply because, year after year, we are not getting
rid of it. Neither Congress nor the White House dare tackle it. As for
the people in the streets; they are satisfied with more handouts. Today,
a full third of our federal debt is financed at one year or less.
And the mere fact that our national debt is so massive, so much of it is
financed short-term, has led foreign holders to become increasingly wary.
They are losing confidence in our ability to control our debt. Ask
any financial expert if a large amount of short-term debt is safe, and he
will tell you the higher rate of interest on all that debt is the problem.
Smart people do not do what our government is doing. In
addition, when you rely on short-term financing you become extremely
vulnerable to fluctuations in interest rates. Its like having a huge
mortgage on your house, with a floating rate. All
this combines into a recipe for disaster: When the national budget becomes
tight (because a crash has put the taxpayers out of work), higher interest
rates will bankrupt the government. Here
is the U.S. budget:
The cost of operating the government: 11%. The cost of defense (we think we
should be continually able to conduct two wars): 22%. Social security: 21%. What
is left? the other benefits being given to the people (other entitlements,
32%), and the interest on the national debt (14%). It
is obvious that cuts in defense and entitlements is the only way to reduce
the debt--and doing that would automatically lower the interest payments. But
none of this will be done. Urged
on by their preachers, Americans have turned their backs on the Ten
Commandments. Babies are killed, immoral politicians and recreational heroes
are idolized, money is gambled away or placed in overpriced stocks. The
only thing maintaining the present high stock prices is misplaced investor
confidence. They are certain Wall Street will keep moving on up. Yet, once
something triggers a collapse, it could be immense. Look
at the Asiatic financial crisis! It is happening before your eyes right now.
Their markets also rose too high and every East Asian nation is in trouble
now. The
markets crash, because it is tied to rising interest rates, will boost
our national debt at least eight times above today's levels. At that
point, the country would go bankrupt. This is because the interest the
federal government is now paying on the national debt is already at the peak
which can be handled.
It is now 14% of the total federal budget! 85%
of the money now in the U.S. Stock Market has entered it during the last
seven years. It came
from novice investors who think they are guaranteed 14% returns every year.
When they jump out in panic, the market will fall so far--that it will take
everyone else down with it. Many institutions will go bankrupt. National
bankruptcy would mean the federal government could no longer pay its
bills--to other governments, to its bondholders, or even social security or
welfare. Why
social security? Because back in the 1960s, Congress pooled social security
accounts with the rest of the government budget. This enabled Congress to
leverage that money--and go out and borrow still more money for wasteful
spending. That is a major factor in the present instability of social
security. The government borrowed on social security. Factors
producing higher interest rates are complicated, but a crash will cause them
to move upward. Do not forget that interest rates spiraled over 20% in 1980
(which is why Davenports pyramid scheme collapsed when it did). It
is believed that, when the crash comes, interest rates will dramatically
rise again. Many businesses
will close, and employees will be laid off.
People will not be able to make car, house, and other loan payments. Repair
work and new construction will stop. Politicians will try to bandage the
situation by printing more money, which will result in inflation. The money
will be worth less and less. With
the lower classes out of bread, riots could occur in the cities. Suburban
house prices will fall to half their value.
People with money will leave. Only those who cannot afford to will remain. The
working population of America is only about 134 million people. A few years
of difficult times could result in one in 10 of the heads of these
households declaring bankruptcy. In
the heart of the Great Depression, nearly 50% of the people in the U.S. were
out of work. What
should you be doing?
You should sell your stock investments (hopefully, you have none).
You should close your offshore banking investments. These are based on price
fluctuations and bring you gain at a loss to others. Like stocks, they are a
form of gambling.
You should be living in the country, not in the cities or just outside them. It
would be advisable for you to have a well on your place and a hand pump you
can install in it. Then you can garden when all else fails. I
learned decades ago that, during the Great Depression of the 1930s, the
state which was the least affected was Nevada. This was because the people
there were self-sustaining. They had their little farms, and nothing else.
(The evils of gambling, prostitution, and quick marriage/divorces had not
yet been legalized.) However,
we would hope that not much will happen and only some moderate dips will
occur. Yet even those could wipe out the invested savings of little people. The
Spirit of Prophecy is very clear that practical religion is what counts, and
it reaches into every aspect of our daily lives.
Vance
Ferrell The
1920s were remarkably like the 1990s. Under one president (Warren Harding),
the executive branch of the federal government had a number of shocking
incidents, in which government officials engaged in scandalous
activities--although tame to what is happening now. Jazz
bands, a craze for sports, dancing, musical and film stars, and (in spite of
prohibition) liquor. Women were working out of the home. Morality had never
been lower in American history. Yet nothing like the depths we are
reaching today. Herbert
Hoover became president in 1929 and said he was going to improve the nation.
But that fall, the stock marked crashed.
On just one day, October 29, desperate speculators sold 16.4 million
shares of stock. When, two months later, the year ended--the stock market
crash had already cost investors $40 billion. As with all crashes, this one
dropped quickly. Today, with computer transactions, it would drop even
faster. One
day, shortly after the crash began, several of the wealthiest men in the
nation strode into the New York Stock Exchange on Wall Street, and announced
that they were sinking a vast amount of their money into stocks to keep them
from falling any farther. There were
rousing cheers from the traders. News about this powerful effort to
renew public confidence in the stock market went out across America. The
next day, the market continued downward, and continued on down, day after
day. It
is significant that, just as today, small businesses were already going
bankrupt before the crash came. But after it occurred, the nation was
desolated. The country steadily sank into the most acute depression in its
history. Year after year, conditions seemed to worsen. Millions lost
everything. Banks failed, factories closed, stores went out of business, and
those still open had few customers. People
had haunted faces, and wandered around trying to find work or wondering what
to do next. Men stood on street corners selling apples. Government on all
levels could not collect half their taxes. Transportation and foreign trade
ground into low gear. Trains were empty and there was nothing to trade. More
than 6 million Americans were out of work by the end of 1930, and 12 million
a year later. More than 5,000 banks failed, and over 32,000 businesses went
bankrupt. Farm prices lost value, and farmers could not pay their mortgages. In
both the cities and in rural areas, banks were foreclosing on unpaid
properties. Pitched battles occurred. In
the cities, people were eating in soup kitchens
and living in clumps of shacks called Hoovervilles. Workmen
demanded radical government aid. It was as in the days of Joseph, when the
famine was throughout the land; men were willing to do anything to get
government aid. But,
back then, Franklin Roosevelt came to the rescue of the nation in January
1933. He offered the people a New Deal, and instituted a variety of
governmental handouts and reforms to oil the machinery and get things
moving again. Vast federal work projects were started, which cost billions:
the Federal Emergency Relief Administration, the Civilian Conservation
Corps, the Works Progress Administration, to name some of the leading ones. Bank
deposits were insured, farmers were subsidized, and a variety of welfare and
benefit programs. All these programs cost money, and government spending
rose 1,100 percent from what it had been a few years earlier. Excessive
government spending never stopped, even when World War II brought
prosperity to the nation. And here we are today, immersed in national and
personal debt, awaiting the next crash; a possibility just as unthinkable as
the idea appeared in early 1929. But
we can know that economic collapse, whether moderate or severe, faces our
nation; and, just as in the 1930s, it will (if severe enough) spread outward
and include Europe and the other major nations as well. Statistics
reveal that Seventh-day Adventists like credit (source: Review, Vol. 170,
No. 48; no date printed, but had a 1993 copyright). Bank cards:
U.S. average - 32%
Adventists - 65% Travel cards:
U.S. average - 6%
Adventists - 14% Retail store cards:
U.S. average - 37%
Adventists - 47% Oil company cards:
U.S. average - 24%
Adventists - 34% The
angels of mercy hurried Lot and his wife and daughters by taking hold of
their hands. Had Lot hastened as the Lord desired him to, his wife would not
have become a pillar of salt. Lot had too much of a lingering spirit. Let us
not be like him. The same voice that warned Lot to leave Sodom bids us,
Come out from among them, and be ye separate, . . and touch not the
unclean. Those who obey this warning will find a refuge. Let every man be
wide awake for himself, and try to save his family. Let him gird himself for
the work. God will reveal from point to point what to do next. Hear
the voice of God through the apostle Paul: Work out your own salvation
with fear and trembling. For it is God which worketh in you both to will and
to do of His good pleasure. Lot trod the plain with unwilling and tardy
steps. He had so long associated with evil workers that he could not see his
peril until his wife stood on the plain a pillar of salt forever.2
Selected Messages, 354-355. The
time is near when the large cities will be visited by the judgments of God.
In a little while, these cities will be terribly shaken. No matter how large
or how strong their buildings, no matter how many safeguards against fire
may have been provided, let God touch these buildings, and in a few minutes
or a few hours how they are in ruins. The
ungodly cities of our world are to swept away by the besom of destruction.
In the calamities that are now befalling immense buildings and large
portions of cities, God is showing us what will come upon the earth.7
Testimonies, 83 (1902). I
am bidden to declare the message that cities full of transgression, and
sinful in the extreme, will be destroyed by earthquakes, by fire, by flood.
All the world will be warned that there is a God who will display His
authority as God. His unseen agencies will cause destruction, devastation,
and death. All the accumulated riches will be as nothingness
. . Calamities
will come--calamities most awful, most unexpected; and these destructions
will follow one after another. If there will be a heeding of the warnings
that God has given, and if churches will repent, returning to their
allegiance, then other cities may be spared for a time. But if men who have
been deceived continue in the same way in which they have been walking,
disregarding the law of God, and presenting falsehoods before the people,
God allows them to suffer calamity, that their senses may be awakened. The
Lord will not suddenly cast off all transgressors, or destroy entire
nations; but He will punish cities and places where men have given
themselves up to the possession of satanic agencies. Strictly will the
cities of the nations be dealt with, and yet they will not be visited in the
extreme of Gods indignation, because some souls will yet break away from
the delusions of the enemy, and will repent and be converted, while the mass
will be treasuring up wrath against the day of wrath. Evangelism, 27
(1906). There
are reasons why we should not build in the cities. On these cities, Gods
judgments are soon to fall. Letter 158 (1902). The
time is near when large cities will be swept away, and all should be warned
of these coming judgments. Evangelism, 29 (1910). O
that Gods people had a sense of the impending destruction of thousands of
cities, now almost given to idolatry. Review and Herald, September
10, (1903). Last
Friday morning, just before I awoke, a very impressive scene was presented
before me. I seemed to awake from sleep, but was not in my home. From the
windows I could behold a terrible conflagration. Great balls of fire were
falling upon houses, and from these balls fiery arrows were flying in every
direction. It was impossible to check the fires that were kindled, and many
places were being destroyed. The terror of the people was
indescribable. Evangelism, 29 (1906). While
at Loma Loma, California, April 16, 1906, there passed before me a most
wonderful representation. During a vision of the night, I stood on an
eminence, from which I could see houses shaken like a reed in the wind.
Buildings, great and small, were falling to the ground. Pleasure resorts,
theaters, hotels, and the homes of the wealthy were shaken and shattered.
Many lives were blotted out of existence, and the air was filled with the
shrieks of the injured and the terrified. The
destroying angels of God were at work. One touch, and buildings so
thoroughly constructed that men regarded them as secure against every
danger, quickly became heaps of rubbish. There was no assurance of safety in
any place. I did not feel in any special peril, but the awfulness of the
scenes that passed before me I cannot find words to describe. It seemed that
the forbearance of God was exhausted, and that the judgment day had come. The
angel that stood at my side then instructed me that but few have any
conception of the wickedness existing in our world today, and especially the
wickedness in the large cities. He declared that the Lord has appointed a
time when He will visit transgressors in wrath for persistent disregard of
His law. Terrible as was the representation that passed before me, that which impressed itself most vividly upon my mind was the instruction given in connection with it. The angel that stood by my side declared that Gods supreme rulership and the sacredness of His law must be revealed to those who persistently refuse to render obedience to the King of kings. Those who choose to remain disloyal, must be visited in mercy with judgments, in order that, if possible, they may be aroused to a realization of the sinfulness of their course.9 Testimonies, 92-93 (1909). For
years I have been given special light that we are not to center our work in
the cities. The turmoil and confusion that fill these cities, the conditions
brought about by the labor unions and the strikes, would prove a great
hindrance to our work. Men are seeking to bring those engaged in the
different trades under bondage to certain unions. This is not Gods
planning, but the planning of the power that we should in no wise
acknowledge. Gods word is fulfilling; the wicked are binding themselves
up in bundles ready to be burned. We
are now to use all our entrusted capabilities in giving the last warning
message to the world. In this work we are to preserve our individuality. We
are not to unite with secret societies or with trade unions. We are to stand
free in God, looking constantly to Christ for instruction. All our movements
are to be made with a realization of the importance of the work to be
accomplished for God.7 Testimonies, 84 (1902). We
are not to locate ourselves where we will be forced into close relations
with those who do not honor God . . A crisis is soon to come in regard to the
observance of Sunday . . The
Sunday party is strengthening itself in its false claims, and this will mean
oppression to those who determine to keep the Sabbath of the Lord. We are to
place ourselves where we can carry out the Sabbath commandment in its
fullness. Six days shalt thou labor, the Lord declares, and do all
thy work: but the seventh day is the Sabbath of the Lord thy God: in it thou
shalt not do any work. And we are to be careful not to place ourselves
where it will be hard for ourselves and our children to keep the
Sabbath.2 Selected Messages, 358 (1908). This
disaster [the burning of the Review and Herald building] may make a decided
change in affairs. I hope that our brethren will heed the lesson that God is
trying to teach them, and that they will not rebuild the publishing house in
Battle Creek. God means that we shall not locate in the cities, for there
are very stormy times before us. Letter 2; Publishing Ministry, 176
(1903). Men
will arise speaking perverse things, to counterwork the very movements that
the Lord is leading His servants to make. But it is time that men and women
reasoned from cause to effect. It is too late, too late, to establish large
business firms in the cities--too late to call young men and women from the
country to the city. Conditions are arising in the cities that will make it
very hard for those of our faith to remain in them. It would therefore be a
great mistake to invest money in the establishment of business interests in
the cities. Manuscript 76; Publishing Ministry, 185 (1905). Repeatedly
the Lord has instructed us that we are to work the cities from outpost
centers. In these cities we are to have houses of worship, as memorials for
God; but institutions for the publication of our literature, for the healing
of the sick, and for the training of workers, are to be established outside
the cities. Especially is it important that our youth be shielded from the
temptations of city life. Special Testimonies, Series B, No. 8, pp.
7-8. It
is no time now for Gods people to be fixing their affections or laying up
their treasure in the world. The time is not far distant, when, like the
early disciples, we shall be forced to seek a refuge in desolate and
solitary places. As the siege of Jerusalem by the Roman armies was the
signal for flight to the Judean Christians, so the assumption of power on
the part of our nation, in the decree enforcing the papal sabbath, will be a
warning to us. It will then be time to leave the large cities, preparatory
to leaving the smaller ones for retired homes in secluded places among the
mountains. And now, instead of seeking expensive dwellings here, we should
be preparing to move to a better country, even a heavenly. Instead of
spending our means in self-gratification, we should
be studying to economize. 5 Testimonies, 464-465 (1885). We
live in very uncertain times and we must be careful about investments. But
we must continue to push vigorously forward in our efforts to fulfill
Gods plans for our lives, and help those around us.
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