As COVID-19 spread across the world in early 2020, economic activity froze. Entire cities in China were put on lockdown, and the lockdowns soon spread to Europe, the United States, and the whole world. With people confined to their homes, many businesses closed. The global economy came to a grinding halt. Global supply chains broke, airlines canceled flights, and an oil glut drove down petroleum prices as supply outstripped demand.
The economic shock of the coronavirus hammered global markets. Bond markets went into freefall, stocks plummeted, and global trade slowed to a near stop. The abrupt impact of COVID-19 on the global economy caused panic around the world, and this panic forced governments and central banks to take unprecedented measures. As a result of trillions of dollars in stimulus, the U.S. stock market and markets around the world reversed course, and they’ve been on an upward trajectory ever since. Second-quarter U.S. Gross Domestic Product (GDP), which measures the economic output of the U.S. economy, was the worst on record at negative 31.4%, but third-quarter GDP was the best ever at 33.4%. Throw in the rollout of several vaccines in November/December 2020, and boundless optimism continues to drive markets higher on the idea the economy will reopen and the pandemic will end.
But is this really what will happen?
The Health of the Global Economy
As we begin 2021, global markets signal a rebound in economic activity. The widely held belief is everything will eventually bounce back to pre-pandemic levels once COVID is vanquished. At least, that’s the consensus. Unfortunately, it’s not reality. The global economy is in terrible shape, maybe even in terminal condition.
Right now, the global economy is much like someone who just survived a bad car wreck. Immediately afterward, they walk away. They feel and look fine, and they think they’ve escaped unharmed. They don’t yet realize the extent of their injuries and only discover how serious they are hours or days later. This is where we are right now with the global economy.
Government programs have covered up the true extent of the damage, but they can’t do so forever. Business bailouts, direct government payments to individuals, and rent and mortgage moratoriums have delayed the pain. Because of them, many people can’t see the true extent of the economic damage. But these government band-aids won’t prevent the inevitable. The economy won’t “spring back” due to pent-up demand. Yes, once the pandemic ends, more people might decide to take cruises or eat out at restaurants. But they won’t book two cruises for the same weekend or order 15 meals in a single night to make up for the cruises they would’ve taken or the meals they would’ve eaten. Those transactions are lost forever.
In many cases, the economic damage from COVID-19 is permanent. The National Restaurant Association reports more than 110,000 U.S. restaurants permanently closed their doors in 2020. This is compared to 2019 which saw an increase of more than 10,000 restaurants, and the carnage isn’t over yet. Many of the 2020 survivors will go out of business in 2021. More than 15,000 retail store locations closed their doors in 2020 in the United States alone. The list of companies impacted includes iconic brands like Pier 1 Imports, Lord & Taylor, and Neiman Marcus.
Rent and mortgage forbearance has kept many from losing their homes, but what about the landlords and bondholders who haven’t been paid? Eventually, someone has to pay for all those who have lived rent and mortgage free in 2020. And what about the commercial real estate industry? With restaurants and retailers not making their lease payments, commercial real estate firms face ruin. With many employees successfully working from home, many commercial real estate leases won’t be renewed. This leaves vast amounts of office space vacant in big cities throughout the world. And this is just one example of the coming debt defaults and bankruptcies that will soon ripple throughout the entire global economy.
Right now, the world is drowning in debt – $277 trillion in debt. Much of that will never be paid back. When the defaults and bankruptcies start to take place, they’ll cascade throughout the global banking system and create another financial crisis. The only way to avoid a massive deflationary spiral like the Great Depression will be for governments to print and hand out currency to keep people and businesses from going under. But this will create its own crisis – a hyperinflationary crisis. In other words, there’s no way out. We’re on the brink of a major financial crisis. Government policy can delay it, but any delay is simply the calm before the storm.
The Asset Bubble Collapse
Over the long-term, stock markets cannot outperform the economies they operate in. Yet that’s what we’ve seen since the COVID crisis. Global stock markets are up. Economic growth is down. By almost every measure, U.S. stock markets are more overvalued than any time in history.
Warren Buffett’s favorite metric for valuation of stocks is to divide the total value of the stock market by the GDP. When the market is fairly valued, this ratio is between 75% and 90%. Right now, the ratio is hovering around 190% – the highest in recorded history. This means the stock market is now in its largest bubble ever. This includes the 1929 bubble which led to a three-year 89% crash and ushered in the Great Depression. It includes the Dot Com Bubble which caused a mania of speculation and irrational exuberance and ultimately ended in a 78% crash of the NASDAQ.
And this isn’t confined to U.S. markets either. According to Siblis Research, the price-to-earnings ratio of the global stock market is over 27, considerably higher than the 30-year average. Combine these record valuations with an ailing global economy, and you have a recipe for disaster.
A Dangerous Economic Crisis
So, what does all this mean? It means a major economic crisis is on the horizon. It may be the worst global economic crisis ever – worse than the Great Depression. This is cause for concern for more than just financial reasons.
In times of chaos and economic instability, dangerous political leaders and demagogues capture the public imagination. Past economic crises led to the rise of Napoleon, the launch of the Bolshevik Revolution, and the consolidation of German state power in the hands of Adolph Hitler. All these events had grave consequences for the entire world, not just the individual nations in question. Why should we believe this time will be any different?
Why This is Relevant to Bible Prophecy
The Bible describes terrible economic conditions in the end times. Revelation 6 tells us an entire day’s wages will barely buy enough food to survive (Revelation 6:5-6). This describes a world ravaged by hyperinflation, and it’s the backdrop against which the Antichrist makes his drive for global conquest (Revelation 6:3-4).
Ultimately, the Antichrist will implement a global economic system which requires the people of the world to worship him. The Bible says he will require everyone on earth to receive a mark, and no one will be able to buy or sell without the mark (Revelation 13:17). We see the beginnings of this system today. Central banks openly discuss plans to replace national currencies with new cryptocurrencies, giving their governments unprecedented power. With such power, not only will government be able to track everything you buy or sell, it will be able to kick you out of the economic system – just as the Bible says.
What You Should Do
Knowing all this, what should you do? A global economic crisis is coming. How can you best prepare for it?
The most important thing you can do is to build your life on a firm foundation. Jesus says anyone who listens to Him and follows His teachings is wise, like a man who builds his house on solid rock. When the storm comes, his house won’t collapse because it’s built on solid rock. But anyone who hears His teachings and doesn’t obey is like a man who builds his house on shifting sand. When the storm comes, his house will collapse with a mighty crash (Matthew 7:24-27).
Be like the man who builds his house on solid rock. Build your life on the unmovable rock – Jesus Christ. If you do, not only will you survive in a global economic crisis, you’ll thrive. In fact, with Jesus, you can weather any crisis the world brings. Remember, in this world, you will face many trials and sorrows, but take heart, for He has overcome the world (John 16:33). The days ahead will be tough for the whole world, but those who trust in Him will not be disappointed (Romans 10:11).
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Britt Gillette is author of the free ebook Coming to Jesus as well as the books Signs of the Second Coming, Racing Toward Armageddon, and The End Times. Receive his book 7 Signs of the End Times for free when you sign up for his monthly newsletter.