What will be the Cause of the Next Meltdown?

In the aftermath of the pandemic, governments and central banks around the world over stimulated the economy with cash giveaways and ultra low interest rates. In doing so, they created bubbles in multiple asset classes throughout the world. Now, faced with inflation, governments and central banks are trying to crack down and reverse the inflationary trend. But the damage has been done. We now stand on the verge of a massive global financial crisis. One of the only questions that remain is what will trigger the crisis. By definition, no one can know what the next black swan event will be. We can never be certain beforehand what the ultimate catalyst will be for a global financial crisis, but in my opinion, these are the six most probable triggers:

1) Chinese Property Market Meltdown

Starting in 2021, the Chinese property market experienced a massive decline. Many property developers failed, construction projects stopped, and the average Chinese citizen now avoids what was once the primary savings vehicle of choice. Earlier this year, a Hong Kong court ordered Evergrande, one of the largest property developers in China,to liquidate. With $300 billion in debt, it’s one of the largest corporate defaults in Chinese history. Country Garden, once China’s largest property developer by sales, is facing a similar fate. A creditor is currently seeking the liquidation of the defaulted Chinese developer in a Hong Kong court. The fall of these companies that once dominated the enormous Chinese property market indicates just how far property values have fallen. Several cities in China have lowered mortgage rates and down payment requirements in an effort to stimulate property demand, but those efforts are unlikely to impact the depressed Chinese property market.

The collapse of these companies and similar defaults on the part of other property developers and individuals threaten to spill over into the wider economy. As a result, the prospect of a deflationary spiral similar to the Great Depression is a real possibility. China is the second largest economy in the world. If it falls into the grip of a deflationary spiral similar to what the world experienced during the Great Depression, the rest of the world will find it nearly impossible to avoid the same fate.

2) Japanese Currency Crisis

Meanwhile, the world’s fourth largest economy is on the verge of a major currency crisis. The Japanese yen currently sits at its lowest level relative to the U.S. dollar since 1990. To prevent the situation from getting worse will likely require the Bank of Japan to raise interest rates or the U.S. Federal Reserve to lower interest rates. Given the recent persistence of inflation, it’s unlikely we’ll see the U.S. lower rates in the short term (absent a major financial crisis). This means the Bank of Japan may be forced to raise rates and take other measures to defend its currency.

But this will cause a number of problems. First, the Japanese economy is in recession. Raising rates will only make the problem worse. Second, Japanese government debt stands at over 260% of GDP. Believe it or not, that’s twice as bad as the United States. Raising rates means more interest on the national debt, potentially sparking a debt spiral that could destroy the country. Furthermore, if the Bank of Japan starts hiking rates, this could cause a reversal of the yen carry trade (succinctly explained here), which could quickly lead to a disorderly unraveling of financial positions all over the world. Along the way, we could see margin calls and exploding derivatives positions that crash global financial markets.

3) German De-Industrialization

Since reunification over three decades ago, Germany has served as the economic engine of Western Europe. Much of the economic might of German industry depends on cheap energy inputs, primarily in the form of Russian natural gas. Following Russia’s invasion of Ukraine in 2022, Germany has failed in its ability to consistently acquire affordable natural gas and other energy sources to power its economy. Initially, Europe saw skyrocketing energy prices. While those prices are nowhere near peak levels today, Europe still faces energy insecurity and volatile energy prices. This uncertainty has led many industrial and manufacturing companies to move their operations overseas to countries where energy is more consistently affordable and more readily available.

Nothing better illustrates the issues faced by Germany than this September 2022 article highlighting the insolvency of four German companies in the same day. Each of those four German companies boasted over a century of continuous operations. These companies – all in different industries – managed to survive World War I, Weimar Germany hyperinflation, the rise of Nazi Germany, World War II, and all the decades since. Yet, they all failed in the face of German energy insecurity. And this story is still unfolding. For example, BASF, Europe’s largest chemical conglomerate, is fleeing Germany. They’re investing billions of dollars in a new large-scale Chinese plant and closing some of their production in Germany. They’re hiring new staff in China while shedding German workers. As the German economy contracts, the impact could draw Europe and the rest of the world into depression.

4) U.S. Commercial Real Estate Crash

The pandemic pushed millions of workers out of urban office settings and into work-from-home jobs. Four years later, many of those workers continue to work from home. This means vast amounts of commercial real estate square footage are no longer needed. Keycard entry data for these offices indicate only half the pre-pandemic workforce has returned to the office on a daily basis. As companies consolidate space, renegotiate leases, and allow current leases to expire, the cash flow of commercial real estate properties has come under great strain.

Making matters worse, most commercial real estate is purchased using five to seven-year loans, and 89% of those loans are interest only loans. As those loans mature, they must be renewed at much higher interest rates. In many cases, the value of those properties has declined significantly. This means the borrower has to put up millions of dollars in additional cash in order to refinance. Instead, many are choosing to simply walk away. This leaves the bank that made the original loan left holding the property. Properties once worth hundreds of millions of dollars are now worth pennies on the dollar. Many sit empty in hollowed out urban core areas where crime and homelessness run rampant.

The implosion of commercial real estate threatens to bring down a number of regional banks with high exposure to this market. Similar to the residential housing crash which led to the Great Financial Crisis, this threatens to drive ripple effects throughout the U.S. economy as well as the global economy.

5) Widespread Bank Failures

In March 2023, a run on Silicon Valley bank triggered a wider banking crisis. Within just a few months, the United States witnessed the 2nd, 3rd, and 4thlargest bank failures in U.S. history. At the same time, Credit Suisse, a global systemically important bank, was forced into a shotgun marriage with UBS in order to avoid failure. The world managed to dodge a full-fledged banking crisis with contagion spreading to banks throughout the world because of a number of measures undertaken by central banks. These included the U.S. Federal Reserve Bank’s Bank Term Funding Program, which gave over $160 billion in low interest loans to the banking system.

Today, the health of the U.S. banking system is not much better than it was in March 2023. According to the FDIC, U.S. banks currently sit on hundreds of billions of dollars in unrealized losses on their bond portfolios. High interest rates also make their mortgage portfolios less valuable and place additional strain on commercial real estate portfolios. If another bank run begins, a real possibility exists it could get out of control, spreading contagion throughout the global banking system.

6) The Rapture of the Church

I mentioned this in a previous article, “6 Global Events that Could Rock the World at Any Moment,” and it applies in this instance as well. The Bible says Jesus will come in “the twinkling of an eye” (1 Corinthians 15:52). This means, in a fraction of a second, Jesus could snatch every born-again believer from the face of the earth.

When that happens, it will trigger a number of second order events, and one of those is a global financial crisis. Imagine the implications. Millions of homes will sit empty, and no one will pay the mortgages or taxes. Millions of key employees and community leaders will disappear. The impacts on the global supply chain, consumer demand, and global productivity will be significant. In fact, the rapture of the church would likely exacerbate all of the potential global financial crisis triggers discussed so far.

A Global Financial Crisis is Inevitable

Any of these triggers could set off a global financial crisis. The world economy now faces its greatest crisis since the Great Depression of the 1930s. According to the Buffett Indicator– a measure used by world famous investor Warren Buffett – the U.S. stock market is currently more overvalued than it was at the 1929 peak or the top of the Dot Com Bubble in 2000. The U.S. housing market is also in a bubble. Right now, the home price to median household income ratio is the highest in recorded history – higher than the peak of the housing bubble in 2006, which eventually led to the Great Financial Crisis.

Meanwhile, U.S. Treasuries, long considered the “risk free asset,” face an enormous challenge. The United States is $34 trillion in debt, and interest on the national debt alone is over $1 trillion per year. In fact, interest on the national debt now exceeds defense spending. This means the United States, the world’s largest economy, has bubbles in its three largest financial markets – stocks, bonds, and real estate. On top of these massive bubbles is a global derivatives market in excess of several quadrillion dollars. No one in the world truly understands how many derivatives exist or what would happen to those derivatives in the event of a major global financial crisis. This means the global financial system is nothing more than a house of cards ready to topple over at any moment. In fact, such a collapse is inevitable. The only questions are when it will happen and what will trigger it.

When the crisis takes hold, you can be sure the solution offered by politicians and central bankers throughout the world will involve granting more power and control to centralized government authorities. They’ve made no attempt to conceal their desire to roll out central bank digital currencies (CBDCs), and the next crisis will give them the opportunity they seek to offer CBDCs as “the solution.” This means tyranny on an unprecedented scale, and it sets the stage for the mark of the beast system outlined in Revelation 13:16-17.

The stage is set. A crisis is coming. But the good news is that all these things that are happening mean something else is coming – the rapture of the church and the Second Coming of Jesus Christ!

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Britt Gillette is the author of several books on Bible prophecy and the end times. You can find more of his work at brittgillette.substack.com

The constant state of crisis we see in the world today is exactly what Jesus said the world would look like just prior to His return. He said many things will happen, but “all this is only the first of the birth pains, with more to come” (Matthew 24:8). What does this mean? It means we should expect painful events on a global scale to increase in both frequency and intensity in the time leading up to His return.

What’s Coming Next?

If that’s the case, then what’s the next major event? If the global events we’ve endured over the past few years are going to be more frequent and more severe, what are the most likely events we’ll see next? The possibilities are endless. We could see large magnitude earthquakes, major terrorist attacks, or even another global pandemic. We can’t be certain what the next event will be, but here are the six most probable events on the horizon:

1) The Destruction of Damascus

In the event of all-out war between Iran and Israel, Iran will almost certainly unleash its proxies in Yemen, Lebanon, Syria, Iraq, and other parts of the world. Hezbollah is believed to have approximately 150,000 rockets and missiles pointed at Israel from southern Lebanon and Syria. If Hezbollah engaged in a massive attack on Israel and overwhelmed Israel’s air defenses, it’s not out of the question we could see Israel respond with a nuclear weapon.

Damascus is known to be a hotbed of terrorists with a mix of Syrian militants, Iranian military personnel, and Hezbollah leaders. If it feels its existence is threatened, Israel will use every weapon at its disposal, and Damascus is one of the top targets. Israel has the ability to destroy the city with a nuclear strike, and many people believe Isaiah 17 (which describes the destruction of Damascus) is a prophecy yet to be fulfilled. Don’t be surprised if the current conflict escalates to a point where we witness exactly that – the destruction of what many believe is the longest continuously inhabited city on earth.

2) Iranian Closure of the Strait of Hormuz

Even if we don’t see an escalation to all-out war between Israel and Iran, we’re very likely to see Iran take another action – the closure of the Strait of Hormuz. The failure of Operation Prosperity Guardian to open the Red Sea is evidence the deterrent effect of conventional naval power has ended. Drones now dominate conventional weapons systems on the battlefield. We see this in the Russia-Ukraine conflict, and we see it in the Red Sea.

The Red Sea shipping corridor has been closed to Western shipping since Iran, working through its Houthi rebel proxies in Yemen, launched a campaign to attack and harass Western container ships. If Iran can shut down Red Sea shipping lanes, closing one of the most vital corridors to world trade for the past four months, then why can’t they do the same in the Persian Gulf? Given its location, Iran effectively controls the Strait of Hormuz, the narrow shipping lane that’s the only way in or out of the Persian Gulf. Last month, Iran hijacked the MSC Aries, marking the sixth vessel recently hijacked by Iran or its proxies. Over 20% of global oil consumption travels through the Strait of Hormuz, making it the most important maritime chokepoint in the world.

Rather than engage in an all-out kinetic war with Israel, Iran may instead choose to harass Western shipping in the Persian Gulf or altogether block any ships associated with countries supporting Israel. Even without completely closing off access, a few attacks on oil tankers would dramatically increase insurance costs for oil tankers – costs that would be borne by the whole world in the form of higher oil prices. If Iran did shut down Persian Gulf oil tanker traffic, global oil prices could immediately skyrocket to over $180 per barrel or more – an event that would trigger a global financial crash the likes of which we’ve never seen before.

3) Cyber Attacks on Infrastructure

Despite the warnings, many people remain oblivious to the prospect of cyber attacks on vital infrastructure. We’ve seen numerous instances where this has taken place on a limited basis, but the prospects of escalating war in the Middle East and other places around the globe make this more likely with each passing day. The threat is greater now because state-sponsored cyber attacks during a time of war will likely cause damage and chaos on a much greater scale than attacks we’ve seen in the recent past.

In the past few years, nation states have shown a greater willingness to attack vital infrastructure. Examples include destruction of the Nord Stream pipelines and Houthi threats to sever underwater Internet cables in the Red Sea. Recently, Iran threatened to attack U.S. water systems, and speculation continues over whether or not the Baltimore bridge collapse was due to a cyber attack or not. The WEF has warned of (which probably means they’re preparing to launch) a global cyber attack on the Internet. A broad-based attack could shut down financial institutions, water supplies, the electrical grid, and/or other resources vital to daily life. Such an attack could take place at any moment, and most people are woefully unprepared for such an event.

4) A Global Banking Crisis

In March 2023, a global banking crisis emerged, resulting in the second, third, and fourth largest bank failures in U.S. history. In addition, Credit Suisse (a global systemically important bank) came close to failure before a shotgun wedding with UBS. A failure of Credit Suisse would have triggered a global financial crisis, prompting credit fears to spread through the global financial system overnight. Central bank actions (such as the Federal Reserve’s Bank Term Funding Program) kicked the can down the road, delaying the crisis for another day. But the end of that program, along with other factors, sets the stage for a new banking crisis to re-emerge at any moment.

Some of the largest banks in the world (such as J.P. Morgan, Bank of America, and Goldman Sachs) recently issued disappointing earnings reports due to a number of factors. One of those is the imploding commercial real estate market, which has hammered a number of regional banks already and could trigger a crisis worse than the 2008 sub-prime housing crisis. On top of that, the recent rise in interest rates has hit bank balance sheets hard with U.S. banks alone currently sitting on more than $600 billion in unrealized losses.

As if the banking environment weren’t already difficult, the Bank Term Funding Program that helped prevent the 2023 banking crisis from consuming the entire banking system came to an end on March 11^th. In addition, a major source of post-pandemic liquidity for banks – the Federal Reserve’s reverse repo facility, is drawing down to its end. The result is a set-up that could quickly lead to a re-emergent banking crisis at any moment.

5) A Currency Crisis

As if all these other prospective events weren’t bad enough, we’re also on the verge of a major currency crisis. The Japanese yen currently sits at its lowest level relative to the U.S. dollar since 1990. To prevent the situation from getting worse will likely require the Bank of Japan to raise interest rates or the U.S. Federal Reserve to lower interest rates. Given the recent persistence of inflation, it’s unlikely we’ll see the U.S. lower rates in the short term. This means the Bank of Japan may be forced to raise rates and take other measures to defend its currency. This is especially true if conflict in the Middle East leads to a spike in oil prices.

If oil prices spike while the yen continues to depreciate relative to the dollar, Japan (the fourth largest economy in the world) will stand on the precipice of economic ruin. Despite efforts to move away from the petro-dollar, the majority of global oil transactions are still denominated in U.S. dollars. Japan produces virtually zero fossil fuels domestically, making it heavily dependent on foreign imports to power its economy. If the yen continues to depreciate relative to the dollar while oil prices spike, Japanese energy costs will skyrocket as the Japanese are forced to trade yen for dollars in order to buy oil.

Faced with an economic meltdown regardless of what actions it takes, the Bank of Japan would almost certainly move to defend the value of the yen. This would cause a reversal of the yen carry trade (succinctly explained here), which could quickly lead to a disorderly unraveling of financial positions all over the world. Along the way, we could see margin calls and exploding derivatives positions that crash global financial markets. Yet despite the potential carnage, most people remain unaware of this possibility.

6) The Rapture of the Church

The overwhelming majority of the world remains ignorant of the reality that Jesus will one day return for His church. Jesus promised to keep the church from the Tribulation (Revelation 3:10), and signs all around us indicate the 7-year Tribulation period is drawing near. Furthermore, Paul says Jesus will come in “the twinkling of an eye” (1 Corinthians 15:52). This means, in a faction of a second, Jesus could snatch every born-again believer from the face of the earth.

Imagine the implications. The disappearance of potentially hundreds of millions of people in an instant would cause global chaos in and of itself. That’s before accounting for all of the second-order impacts of so many missing people all over the globe. Each and every one of those people plays a major role in someone’s life, and the sudden disappearance of so many will directly impact society and all its institutions in profound ways. In fact, the rapture of the church could trigger many, if not all, of the events in this article in an instant and without warning.

What You Should Do

With all these things on the verge of taking place, what should you do? Simple. Make the most of the time you have left. If you’re not a Christian, turn to Jesus now. The Bible says we’re all sinners (Romans 3:23), and the wages of sin is death (Romans 6:23). Yet, while we were still sinners, Jesus died for us (Romans 5:8). He paid for our sins through His blood as shed on the cross, and there is no other name by which we are saved (Acts 4:12). Jesus alone is the way to heaven (John 14:6), so put your faith in Him while you still can.

If you’re already Christian, don’t fear the things of this world, especially the coming events of the Tribulation. Jesus promised to protect His followers from “the great time of testing that will come upon the whole world” (Revelation 3:10). So, Christians will not endure the Tribulation. However, don’t think that means you won’t face sorrows in this life. Jesus says you will. He says you’ll face many trials and tribulations in this world, but don’t be discouraged because He has overcome the world (John 16:33).

Understand this – the rapture of the church could be the next traumatic event to hit the world. Think of those left behind. Think of the fear they will have. Think of the world they’ll be living in. Let that motivate you to spread the Gospel. Right now, more people than ever are seeking God. And according to His purpose, He uses every event for good (Romans 8:28). World-shaking, global events are no exception.

Traumatic global events are an assault on the world’s sense of security. It’s in these moments when people seek God the most because He can not be shaken. He’s the rock upon which you should build your life (Psalm 18:2). If you do, such events won’t have the same impact on your life. So if you know this already, make sure to share what you know. Take advantage of this moment and tell others about the hope you have in Jesus Christ (1 Peter 3:15). You may not have much longer because He is coming soon!

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Britt Gillette is the author of several books on Bible prophecy and the end times. You can find more of his work at brittgillette.substack.com