2008 Ending on the Road to Disaster By Stephen M. Studdert

“Let us dare to read, think, speak and write.” – John Adams, 1762
Two of my favorite verses of scripture are found in the Doctrine & Covenants. The Lord gives us fundamental counsel and the promise of personal peace when He said , “… if ye are prepared ye shall not fear ” [D&C 38:30] and “… prepare every needful thing.” [D&C 88:199]

Today is a time to prepare.

As 2008 draws to a close, for each of us this should be a time of cheerful season festivities and spirited anticipation for a bright new year. Regrettably, I am having a hard time with either – as I watch our great nation slowly commit economic and moral suicide. An associate recently remarked to me that he couldn't wait for 2008 to end so we could begin 2009 and “a better year.” For a host of reasons, my view of 2009 is just the opposite.

Succinctly put, things are bad – yet for many we are being “lulled away into carnal security”, saying “ All is well in Zion ; yea, Zion prospereth, all is well —and thus the devil cheateth their souls, and leadeth them away carefully down to hell.” [2 Ne. 28:21] For those who will not heed the words of prophets past and present, this hell may at a minimum become a crushing financial hell.

The worst financial crisis in two generations has erased $23 trillion, or 38 percent, of the market's value. As a band aid solution, your money that's been pledged by Congress is already equivalent to $24,000 for every man, woman and child in the country. It's nine times what the U.S. has spent so far on the wars in Iraq and Afghanistan , according to Congressional Budget Office figures. It could pay off more than half the country's mortgages.

Without a miracle – which I do not yet see anywhere on the horizon – 2009 is going to be a financially disastrous year for America and for Americans. To protect ourselves and our families, to know the real facts has now become urgent and imperative. As Marq de Villiers said, “Good information is the best antidote.”

Talking heads on cable television tell us the worst is over, things are looking up, and 2009 will be rosy. Nonsense! A recent banner headline in the San Francisco Chronicle screams “Financial Armageddon” – yet it referred only to the state of California 's state government. It could just as well describe our entire national economy.

Financial Experts See Trouble
The list of respected financial experts who now foresee formidable challenges and a crumbling of our historic economic model is numerous and growing.
John Whitehead, former Goldman Sachs chairman and former Under Secretary of State bluntly says:
* “I think it would be worse than the depression.”
* “I see nothing but large increases in the deficit, all of which are serving to decrease the credit standing of America .”
* “I just want to get people thinking about this, and to realize this is a road to disaster.”
* “I've always been a positive person and optimistic, but I don't see a solution here.”

Whitehead predicted it could take "several years" for the current mess to be resolved. “Before I go to sleep at night, I wonder if tomorrow is the day Moody's and S&P will announce a downgrade of U.S. government bonds," he said. "Eventually U.S. government bonds would no longer be the triple-A credit that they've always been."

Eugene Ludwig, former Comptroller of the Currency, concurs:
* “We're dealing with a crisis that makes the S&L crisis look like a peanut.”
* “The financial system rescue will ultimately cost trillions of dollars, certainly if you count the federal economic stimulus.”

According to Olivier Blanchard, the chief economist of the International Monetary Fund, who told the Swiss business newspaper Finanz and Wirtschaft:
* “The worst is yet to come.”
* “A lot of time is needed before the situation becomes normal.”
And he predicts economic growth will not begin to recover until 2010 and the global financial situation won't return to normal until 2011.

Another warning voice is multi-billionaire George Soros. In testimony before the House Oversight and Government Reform Committee, Soros gave an ominous prediction: "A deep recession is now inevitable and the possibility of a depression cannot be ruled out."
If they weren't enough, our nation's Treasury Secretary Henry Paulson has broken historic tactfulness and customary discretion in saying “This is a humbling, humbling time for the United States of America,” calling this ” our worse financial disaster ever.”

The respected German magazine Spiegel wrote that “it really does look as if the foundations of U.S. capitalism have shattered.”
Ethan Harris, co-head of U.S. economic research at Barclays Capital Inc. and a former economist at the New York Federal Reserve, says “This is the worst capital markets crisis in modern history.”

Even President George W. Bush, speaking at the G-20 economic crisis meeting, raised the possibility of a depression that could exceed the Great Depression. “We are faced with the prospect of a global meltdown.”
Colliding Forces

If those voices aren't enough to convince us that we are in a financial pickle of extraordinary danger, nothing will. There are so many colliding forces it's hard to know where to start, so I'll just start with facts. Our nation's second president, John Adams, said it well: "Facts are stubborn things; and whatever may be our wishes, our inclination, or the dictates of our passions, they cannot alter the state of facts and evidence." How loud do the facts need to shout before we wake up and realize just how gargantuan this economic train wreck is?

Household indebtedness has ballooned from $680 billion in 1974 to over $14 trillion today. Consumer debt alone is over $2.5 trillion, with the average household possessing 13 credit cards.
Across the nation, at every level of state and county and city government the budget woes are running wild. California 's budget deficit this year has ballooned to nearly $15 billion, and Governor Arnold Schwarzenegger warns that without action this year, the state could be staring at a deficit as great as $40 billion by June 2010. The State of New York faces a projected record $13.7 billion deficit in the state's 2009-2010 budget. Other states and municipalities are not far behind.

Remember when President Bush talked of returning the federal budget to surpluses by 2012? It won't happen now, and maybe never, as the thought of a balanced federal budget is nothing more than wishful thinking. No one with whom I've spoken in Washington really knows the real deficit amount anymore, though all agree the government's annual deficit will top a mind-boggling $1 trillion this fiscal year.

On top of all our recklessly ineffectual Congress has spent this year, it's expected when President-elect Barrack Obama assumes command in January that Congress will have yet another economic stimulus package ready to go – costing you, the taxpayer, another $500 billion or more. That's in addition to the hundreds of billions Congress and the Treasury have already spent.

The Congressional Budget Office put the deficit in October, the first month of fiscal 2009, at a staggering $232 billion. Its figure included $115 billion in bank stock purchases the Treasury Department made as part of the financial bailout. In just the first two months of the current fiscal year, the federal deficit totaled an astounding $401 billion. In November, the federal government ran a record budget deficit, on track to post an all-time high annual deficit of $1 trillion or more. Borrowing by the Treasury could top $2 trillion this year.

The national debt, which stood at about $5.7 trillion in 2007, topped the $10 trillion mark in October and now stands at about $10.6 trillion. All this when manufacturing jobs in the U.S. are now at the lowest level since 1942.

For the United States to run up even more debt – even as much as $7.76 trillion more – someone has to buy that debt. And there is only one country left on earth with that kind of cash, and that's China . Three months ago, China became our nation's largest creditor when Japan quit buying our Treasury junk notes.

China now holds about 10 percent of all U.S. public debt, and has, for all practical purposes, become America 's banker. That thought should scare us to death!
China 's foreign exchange reserves are calculated to be $2 trillion – this while the United States foreign exchange reserves are down to below $75 billion.
The only way all this government debt works is if China keeps buying Treasury bonds. But China is now embarking on its own internal financial stimulus package. Do we really think they can (or will) keep buying our debt at the same time? If China ceases to buy our debt, our political leaders have no backup plan. There is no other nation on the earth we can turn to. We all best keep our eye on China .

The Danger of Terrorist Attacks
If things aren't bad enough with the economy, the United States remains in constant danger from further and more devastating terrorist attacks. According to a bipartisan commission briefing to Vice President-elect Joe Biden, the United States can expect a terrorist attack using nuclear or, more likely, biological weapons before 2013.

The Commission on the Prevention of WMD Proliferation and Terrorism warns that pathogens and nuclear bombs can be obtained if terrorists find scientists willing to share or sell their know-how. The report states:
"The biological threat is greater than the nuclear; the acquisition of deadly pathogens, and their weaponization and dissemination in aerosol form, would entail fewer technical hurdles than the theft or production of weapons-grade uranium or plutonium and its assembly into an improvised nuclear device"

While anthrax remains the most likely biological weapon, contagious diseases — like the flu strain that killed 40 million at the beginning of the 20th century — are looming threats. That virus has been recreated in scientific labs, and no vaccination exists to protect against it.
"We think time is not our ally. The ( United States ) needs to move with a sense of urgency."
Iceland Melts

The sovereign nation of Iceland has already become the first nation to fall victim to the global financial crisis. Its three main banks are in receivership, yet in mid August the government declared all three “solid”. Iceland 's stock market has lost 90% of its value and the central bank is technically insolvent, its modest pile of assets dwarfed by a mountain of liabilities.
Icelandic households amassed debts exceeding 220% of disposable income – almost twice the proportion of American consumers. Net foreign debt as a percentage of Iceland 's GDP is 246%. Household debt as a percentage of annual income is an astounding 227%.

You may say, “We're not Iceland .” It would be better to ask yourself, “Can it happen here?”
Yes, it can. Will it? No one knows, but with each passing day the global economic catastrophe worsens and serious solutions remain evasive. It is not my desire to be an alarmist, but the indicators cannot be ignored.

Remain Faithful and True
In the recent October General Conference, President Boyd K. Packer counseled that “ Whatever tests lie ahead, and they will be many, we must remain faithful and true.”
Now, possibly more than ever before in our lifetime, each of us will do well to “remain faithful and true” and carefully heed the warning counsel of the Lord and His prophets. For “if [we] are prepared [we] shall not fear.”

Stephen M. Studdert has served as a White House advisor to three U.S. Presidents. In the Church he has served twice as a stake president and as a mission president. He is the author of America in Danger.