Earlier this month, for the first time in history, the price of oil hit $100 a barrel. Oil prices have increased 5-fold in the last six years, starting from a low of less than $20 a barrel in early 2002. In 2007 alone, crude oil prices jumped nearly 60 percent. Analysts blame a weak dollar and rising demand for the spike in prices. Rising oil prices have brought into sharp focus the economic challenges facing our nation. In recent years the value of the US dollar has dropped, consumer debt has reached an all-time high, and we've entered into a nationwide housing crisis in which about one out of every 100 mortgages could end in foreclosure.
While some experts speculate that we may be headed for a recession, others say its already here. Top economists from two major Wall Street firms - Merrill Lynch and Goldman Sachs - recently predicted that the US economy would go into a recession this year. They cited a rise in unemployment and lower than expected retail sales as indicators. On Tuesday recession fears prompted the Federal Reserve to take emergency measures - reducing the federal funds rate from 4.25 percent down to 3.5 percent. It's the fourth time the Fed has cut rates since mid-September.
The Hidden Tax
The black horseman of the Book of Revelation speaks of a condition wherein a man's daily wages are so poor, he can barely support himself, much less his family. For the first time in the history of mankind we are seeing a condition which could fulfill that prophecy: global monetary inflation.
Inflation is essentially a massive, hidden tax imposed on citizens without their understanding or consent. Suppose you earn $10 for something you sold or a service you performed. You receive a $10 bill in exchange for your work. It represents the value of your hard work. It also means that at current market prices, your $10 will buy x amount of goods. Along comes government, which prints another $10 bill. It looks just like yours and spends just like yours. The only difference is that government did nothing to create its $10. Remember, you had to work for yours. At first, both $10 bills buy the same amount of goods. But after awhile, merchants notice there is more money "out there" and with it, more demand for their products. So they raise their prices. Suddenly, your $10 is worth $5 less than it was before. It is not the products and services which have become worth more; the currency is worth less than it was before.
Some economists say that inflation is a normal part of a healthy economy. This is false. It only exists when a monetary system has no sound base. We are also told that the boom and bust cycle is a normal part of all economic activity. It isn't. It's only part of an inflating money supply, and today that inflation is worldwide.
Economists say inflation between 3% and 5% is normal to moderate - a sign of a healthy, expanding economy. But let's assume 5% inflation over the lifetime of an individual. That 5% devaluation applies not only to the money earned this year, but to all money saved from previous years. At the end of year one, a dollar is worth 95 cents. At the end of year two, 95 cents is reduced again by 5%, being worth 90 cents and so on. By the time a person has worked 20 years, government will have confiscated by inflation 64% of every dollar the person saved over those years - not by taxes but by inflation. By the time the person has worked 45 years, the hidden tax will be 90%. The government will take virtually everything a person saves over their entire lifetime, not counting what they will pay in income taxes!
For more information on inflation, the history of our monetary system and financial institutions, and what the Bible has to say about it see our topical study Behold a Black Horse. Also be sure to check out Chuck's new briefing The Vortex Strategy, in which he discusses how we can prepare for times of economic uncertainty.
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