Special Bulletin 03-2010

ANALYSIS: This is a very real threat to many nations in the region, and does have the potential of pulling China and the U.S. into a confrontation. In this crisis China is holding most of the options. It is assumed that China can control its ally North Korea if it wants to, but so far it has just lamely offered to host talks. This signals that China does not want to reign in their belligerent neighbor. Why?

     China is an economic superpower that will likely surpass the U.S. as the biggest economy in the world very soon. However, its military is still no match for the U.S., and would not fare well in a military confrontation. China has a very obvious plan to wear down the U.S. by supporting constant crises and conflicts that stretch and consume U.S. military and economic resources.

     It is unthinkable that China would want a war between North and South Korea. Not only would such a conflict be dangerously close to their own border, but could be devastating to its rising economy. It would also be a huge blow to China’s rising diplomatic stature in the world because China would be widely viewed as the one nation that could have prevented such a war, but did not.

     Even with these risks China obviously believes it is in its interest to keep the tensions high between North and South Korea, as well as keep the U.S. on edge. This situation is so tense that any little spark could easily flame up into all out war between North and South Korea, which the U.S. would almost certainly be dragged into with nearly 30,000 U.S. troops now based in South Korea.

     Why would China risk so much by allowing these tensions to rise on the Korean Peninsula? Energy—specifically Middle Eastern oil. China’s economic growth is making its energy needs rise faster than any other nation in the world and it has very little of its own reserves. China does not like to be in a position of needing diplomatic cooperation but rather wants to control its own destiny and therefore it will have to ultimately control its own energy source. China needs the U.S. out of the Middle East, which means the U.S. must be so worn down that it cannot continue to intervene there. This is a simple and brilliant strategy that has been working.

CONSEQUENCES: North Korea has proven itself to be a rogue state for decades but it only seems to be getting more belligerent and more dangerous every time it causes a crisis and gets away with it - usually even getting rewarded with more aid or concessions. This is never the way to deal with a bully and if we keep giving in as we have, the cost of not standing up to them will get more expensive.

     We’ve allowed North Korea to become a nuclear power that is now in desperate need for hard cash and with only one thing of value to sell - these terrible weapons. Are we going to pay the ultimate price for letting this go on for so long?

     If you are secure in thinking they do not have missiles that can hit the continental U.S., this has changed because we’ve now given them time to develop one that puts our West Coast within their range. Even so a short-range missile could work even better for those seeking to do us harm, as it could be launched from a trawler or fishing vessel right off the coast. What were those contrails just off the West Coast a few weeks ago? How about tests?

ANALYSIS: This agreement has been in the works for some time, but their ability to actually complete it was likely stepped up by the U.S. Federal Reserve’s stated intention to start printing hundreds of billions of dollars more to place in circulation this coming year. This strategy brought a sharp rebuke to President Obama at virtually every stop of his recent Asian tour.

     What would cause Russia and China to make such a move? When the Federal Reserve puts more dollars in circulation it automatically devalues the dollar by creating inflation. Those who are holding large amounts of U.S. currency have the value of their holdings cut dramatically by such actions. A main reason why Russia, China, and other nations have been pushing for changing the U.S. dollar from being the world’s main base currency in trade and going to a basket of currencies has been the tendency of Washington to implement currency policies unilaterally that can impact the entire world without even consulting those it impacts.

     This action on the part of Russia and China signals a loss of confidence in the U.S. as the world’s economic leader, and they have perceived an opportunity to now seize it. This will have to play out, and it is by no means a slam dunk for Russia and China, but it was a bold move they must have had a great deal of confidence in to make at this time, or they felt a desperation that forced them to do it.

CONSEQUENCES: This does not bode well for the U.S. dollar. For those who believe that the strength of the U.S. dollar is essential to U.S. economic strength, an action such as this one has been one of their greatest fears. In military terms, to have the initiative in any battle is a huge advantage, giving you more options and limiting the enemy’s options. By this move on the part of Russia and China the U.S. may have just lost the initiative in the world economic contest. Instead of just being able to act and expect the rest of the world to react to what we do, our options have at the very least now become more limited, and they may well be severely restricted.

     Inflation in the U.S. is much higher now than the government is reporting because the government determined to move two of the most basic factors from the equation determining the rate of inflation—fuel and food prices. Removing fuel and food as factors determining the rate of inflation was done because they said these two commodities were too volatile to give us accurate readings. Volatile or not, they are very basic to the factoring of inflation across the whole economy. This reasoning is fallacious, and a very obvious ruse that did not build temporary confidence in the economy by hiding the true rate of inflation, but has caused even a greater erosion of faith in U.S. economic leadership.

     Printing more money and putting it into circulation automatically devalues the treasuries of those holding U.S. dollars. This was foreseen as a potential strategy of the Federal Reserve to thereby devalue the debt and deficits of the U.S. government. This will also stimulate the U.S. economy by making our goods more affordable to other nations. However, this only works while the dollar remains the world’s trading currency, and this agreement between Russia and China not only undermines this plan, but can have devastating long term economic repercussions for the already limping U.S. economy.

     The most basic fuel of the U.S. economy is faith, and faith in our economic leadership which had already been shaken worldwide by our wildly out of control spending, but is being further eroded by such schemes as this that just seem to be taking pot shots at what might work. The economic policies of the Obama Administration has been rebuked by virtually every friend and foe we have in the world, and the Russian/Chinese accord seems to mark that they are now taking steps to abandon what they see is a sinking ship.

     A weak U.S. dollar can have some trade advantages, which can help stimulate the domestic economy. We could see a bit of a boost from these actions. However, there is a way to allow the U.S. dollar to weaken in a slower and orderly way that does not erode confidence in the economy, so any advantages gained by this has likely been lost already. The result: inflation with a weakening economy, which is economic quicksand. We are on a path that could doom the dollar as not only the world’s trading currency, but as a viable currency at all, even in the U.S.

     This worst-case scenario has been forecast by many for some time, and the events that seem to be leading to this have been unfolding. It is conceivable that this could lead to a time when bartering is the currency in the U.S. for a time. As the strength of the dollar is based entirely on people having enough faith in it for them to take it in exchange for goods and services, that faith is being lost very steadily, and it could be completely lost overnight under certain potential circumstances.

     If this happens the only way the government could restore faith in its currency would be to make it a commodity based currency again (i.e. gold or silver backed). If the government sees this coming, they will likely react by starting to call in all gold and silver, even outlawing them being held by private citizens until the transition is made.

ANALYSIS: Biblical prophecy has a lot to say about these times, and makes it clear that at the end of this age there will be the greatest time of trouble the world has ever seen. These troubles are all basically the result of man trying to run this world without God, and all of creation will have learned from our story that t his is something that no one should ever try again.

     In virtually every area now the crises are getting beyond human remedy, but God will help all who call upon Him. There are answers to every human problem, and for those who turn to Him with the resolve to hear and obey His word, they will not only build their own houses upon the rock that can stand against the coming storms, but they will be able to reach in and save many others too.