Japan, so long an economic superstar on the world stage, appears to be entering its first recession in a quarter-century. Some analysts are predicting a worst-case scenario of a 1930s-style Japanese deflationary depression. International experts believe the economic turmoil that began with financial collapse in Southeast Asia last summer may be beginning to affect economies all over the world.

Since the crisis started, business leaders have begun to change their tune. Through borderless flows of money and trade aided by favorable government policies, business leaders for the last decade had assumed an ever-expanding prosperity would bless those who participated in the rising tide of worldwide business activity. Unfortunately, something else is happening.

Bubbles do burst!

Once proclaimed the engine of growth for the 21st century, East Asian economic might is falling apart. Deflation seems to be rearing its head in some areas.

While Japan is experiencing even sharper price declines for manufactured goods, global commodity prices for wheat, corn, metals and gold have had dramatic drops, and gasoline prices in the United States have recently been at their lowest in years (adjusted for inflation). In February, computer prices dropped 6.6 percent-the greatest monthly plunge in history.

Premier technology companies that have driven much of American economic growth in the 1990s are feeling the pinch of a flood of cheap Asian imports while the export market to Asia is evaporating. The Asian crisis has meant at least $6.5 billion less revenue to the semiconductor industry alone this year, according to industry experts.

In a confusion of cross currents, stock prices for high-technology giants like Intel, Motorola, Microsoft and Hewlett Packard have taken heavy hits while other stock prices continue to reach stratospheric levels on the New York Stock Exchange.

But some experts are clearly sounding caution. The most powerful voice in the world economy, the American Federal Reserve board's chairman, Alan Greenspan, cautioned American investors in early March. "Vicious cycles are evidently emerging more often," he said, and predicted that many investors may be sorry in 12 to 18 months.

As Hong Kong's financial secretary, Donald Tsang, recently told Business Week: "The Asia crisis is not a regional crisis but a global issue. We are all in the same boat."

Most of us give little thought to the possibility of a worldwide economic calamity. But recent economic problems in Asia, and stock-market gyrations around the world, should alert us to the real possibility of global economic reverberations.

A system of faith

As the stock markets of the world began to topple like dominoes last fall, Wall Street analysts convinced themselves that their faith in the U.S. economy was so strong that even the "Asian meltdown" could be contained.

Soothing words were offered by President Bill Clinton and Secretary of the Treasury Robert Rubin. They insisted the American economy was fundamentally sound; in fact, better than ever.

American and global investors left their trillions in American equities. Even the dramatically expanding numbers of small American investors kept their faith in the future of the market, even though stocks are at their highest prices and lowest dividend rates since before the 1929 crash.

Even as Asian markets declined, the prices of American financial assets continued to hold strong. Money poured into American stock exchanges from foreign investors, pension funds, speculative profits, retirement investment proceeds, savings from high salaries and corporate profits.

By March 1998 the record prices of stocks in the U.S. markets seemed to become disassociated from underlying dividends. Stock prices escalated as dividend predictions went down.

Surveys show that Americans continued to place faith in the long-term future of their stock holdings, perhaps unconsciously acknowledging that faith is the basis of the global economic system: faith in the dollar, faith that their financial assets would make them ever wealthier and faith in the heart and core of global capitalism's materialistic system. This belief in and preoccupation with material well—being and progress can blind us to basic spiritual truths.

Some, like controversial economic journalist William Greider, see this faith as misguided. In his book One World, Ready or Not: The Manic Logic of Global Capitalism, Greider predicts the end of stability in a world financial system awash in bad debt and misdirected financial capital. He feels these forces are "propelling the world toward some new version of breakdown, the prospect of an economic or political cataclysm of unknowable dimensions."

These economic forces have continually been at work after World War II. And although nothing truly catastrophic and long lasting has yet happened, the long-foreseen economic collapse will come. The good times are going to come to an end.

Falling dominoes

As 1997 drew to a close, the world saw that faith in the international financial infrastructure may have been overstated. The financial stability of South Korea (with the world's 11th—largest economy) collapsed. Other alarms sounded as Japan's $4.5 trillion economy grew shakily uncertain.

The Asian financial morass forced leaders of Pacific Rim economies to adopt a financial rescue centering on intervention by the International Monetary Fund (IMF). What started as a $20 billion bailout grew to almost $60 billion a few weeks later for South Korea alone. Total IMF and bilateral financial arrangements targeted more than $100 billion to stabilize the region.

In mid—December a commentary in U.S. News & World Report observed that "the Pacific Rim looks more like the Pathetic Rim." The Economist proclaimed "the Asian bubble has burst."

Business Week, along with others in the financial press, expressed concerns about the Chinese banking industry. Unless something happens soon, it warned, "the economy is sure to take a massive hit" from a "staggering official figure of $200 billion in bad bank loans[and] the true amount likely is much higher."

The problem? The Chinese banking system is technically bankrupt, with uncollectible debt five times greater than bank capital. Business Week concluded that, if China doesn't fix itself soon, "the whole world will be affected."

A few weeks later, the Japanese government roughly tripled its estimate of the amount of bad loans held by Japanese financial institutionsto a staggering $581 billion. Japan's prime minister warned that, if Japan's economic-recovery plan fails, the country's economic ills could trigger worldwide financial problems.

Destination America

With domestic demand declining throughout much of Asia, analysts think the only workable strategy to fix the economic mess is for Asians to export their way out of their problems. Although potentially helpful to Asia, this could dramatically impact world trade balances.

"This will unleash a flood of cheaper imports into the flourishing American market, while shrinking Asian economies will not be able to import more American goods," said Washington Post Writers Group columnist Jim Hoagland. "With factories dumping excess inventories onto international markets, exports so far this year have soared by 25 percent, accounting for roughly half of China's economic growth and causing the trade surplus to balloon."

Analysts predict that goods at deflationary prices will emanate not only from prodigious China and the other Southeast Asian countries, but from Japan. With its currency plummeting in value against the dollar20 percent in 1997Japan will likely choose this route as the easiest way out of its problems.

But to whom will Japanalong with China, South Korea and the Southeast Asiansdirect their huge wave of consumer and industrial products in a world of collapsing markets and declining real incomes?

In the minds of the architects of Asian bailout plans, all roads lead to the American consumer. With much of Europe hampered by high unemployment and slow economic growth and Asian economies on the verge of collapse, there is simply no other viable market for such goods.

No doubt about it, American consumers have a seemingly endless appetite for merchandise. From hair dryers and makeup to microwaves and mansions, the American public's impulse to consume drives more than $4.5 trillion in annual U.S. economic activity.

Although the U.S. economy certainly appears robust, analysts predict coming problems. The IMF predicted that the American current trade-account deficit would surge to $230 billion in 1998. Others place the future U.S. trade deficit $100 billion higher. Some U.S. firms will face heated competition from inexpensive Asian imports, leading to lower profits and increasing layoffs as companies slash expenses. At the same time, falling prices will be a boon to consumers and businesses using imported goods and components. Time will tell when and how it all gets sorted out.

Collapse of consumerism?

Inevitably "the borrower is servant to the lender" (Proverbs 22:7).

Whether about toothpaste or a new car, the not—too—subtle message of the media is that the way to happiness and fulfillment is the next purchase. All too often the path is perilous and leads to a precipice.

The path is debt.

Consumer debt in the United States is at its highest historical level, at $1.2 trillion, not including mortgages. In 1997 a record 1.34 million people filed for personal bankruptcy-a 20 percent increase over the previous year. The federal government debt is more than $5 trillion-$68,000 per family. Notwithstanding the fact that some inroads have been made towards lowering the national debt and some optimistic Americans even contemplate balancing the budget, sooner or later the bills will come due.

America's buying binge began after World War II with the premise that the good life can be endlessly and painlessly charged on credit. But, says Greider, "sooner or later, like any other kind of debtor, the United States will be tapped out."

How long can this continue? Only God knows. But clues may lie in recent economic trends.

The spiritual bottom line

Most people are blissfully unaware that God condemns the practices that are leading the global economyincluding Americato the brink of disaster.

Like it or not, we are not immune to the consequences of ignoring God's instructions. How often have we heard that we reap what we sow, not realizing that this principle originated in the Bible? "Do not be deceived, God is not mocked; for whatever a man sows, that he will also reap" (Galatians 6:7).

God gave us laws thatif obeyed would prohibit the exploitation of those less fortunate. "If one of your brethren becomes poor, and falls into poverty among you, then you shall help him, like a stranger or a sojourner, that he may live with you. Take no usury or interest from him; but fear your God, that your brother may live with you" (Leviticus 25:35—36).

The Tenth Commandment (Exodus 20:17) also cautions us against greed coveting things that do not belong to us or we have not rightfully earned. Jesus Christ added, "Take heed and beware of covetousness, for one's life does not consist in the abundance of the things he possesses" (Luke 12:15).

For those caught up in its worship, materialism is a god that inevitably fails. In a whirlwind pursuit of gain, many people have placed their faith in the shortest paths to wealth, thereby artificially distorting markets and the economies of poor countries.

Some 3,000 years ago an astute observer of human behavior said, "A man with an evil eye hastens after riches, and does not consider that poverty will come upon him" (Proverbs 28:22). A millennium later Jesus Christ explained that the great and small points of the divine law of God would never pass away (Matthew 5:17—19). We can keep them and prosper. Or we can break them and be brokenpersonally, nationally and globally.

"He who trusts in his riches will fall," warned King Solomon (Proverbs 11:28). The vision of economic utopia based on the pursuit of personal gain and material affluence has a hidden pitfall because it obstructs spiritual well—being.

Jesus said "the deceitfulness of riches" can "choke" the Word of God (Matthew 13:22), blinding individuals and nations to God's divine purpose and plan. The world has largely been seduced into believing materialism is the ultimate goal of this life and the bulwark against bad times.

An inevitable day of reckoning

Christ said that one cannot serve God and "mammon"the pursuit of material possessions (Matthew 6:24). Jesus also said a person will love the one and hate the other. Many people behave as if mammon is the god that delivers the goods that make life worth living.

For the foreseeable future, some may enjoy a tremendous variety of quality imported goods at heavily discounted prices. But this could well create significant pressure to depress corporate profits, the stock market, consumer spending, employment, real—estate prices and financial infrastructures.

As this century comes to an end, American dominance also may be ending soon. "This reality may surface as a dramatic thunderclap or simply emerge from the slow bleeding process that is already in progress," said Greider in One World, Ready or Not.

The lack of understanding and applying godly principles inevitably leads to harm, whether to an individual or to a nation. The excesses and manipulations that created the Asian economic crisis violate God's instruction, and the world is beginning to see its inevitable fruit.

As God said of ancient Israel's rejection of His instruction, "they sow the wind, and reap the whirlwind" (Hosea 8:7).

How strongly, and how far, those winds blow are the central questions of the world's economic future. And remember, we are warned by Jesus Christ Himself to "keep on the alert at all times, praying in order that you may have strength to escape all these things that are about to take place, and to stand before the Son of Man" (Luke 21:36, New American Standard Bible). GN