The Dow Jones Industrial Index plunged more than 1,033 points on August 5 amid fears that the United States is about to enter an economic recession. The downturn began after the U.S. government released a report showing that the U.S. economy had created only 114,000 new jobs in July. This means the economy is slowing down, and many fear the country will enter an official recession by the end of the year unless the Federal Reserve slashes interest rates, a move that could bring back the inflation crisis.

The U.S. economy is in a very difficult position. On the one hand, the Federal Reserve has pumped $15.7 trillion into circulation since the beginning of the covid-19 pandemic. This means that one-third of dollars currently in circulation have been put into circulation in the past four years. The laws of supply and demand dictate that with every dollar created out of thin air, each existing dollar becomes worth less. So it should not be surprising that each U.S. dollar only has 79 percent of the purchasing power it had before covid-19.

The Federal Reserve is trying to tamp down inflation by raising interest rates, hoping to encourage people to pull their money out of circulation and stash it in savings accounts, money-market accounts and other investments. The strategy seems to be working: People have pulled nearly $700 billion out of circulation over the past two years as inflation fell from 9.1 percent to 3.0 percent. But the catch is that reduced spending leads to reduced economic growth, fewer jobs and, potentially, economic recession.

The Federal Reserve could avert such a recession if it lowered interest rates in a bid to get people spending again. But such action would bring the inflation crisis roaring back if the government does not stop expanding the money supply by borrowing trillions of dollars every year. The habit of borrowing or printing money rather than earning it is the root cause of the economic crisis. Until this root cause is addressed, raising and lowering interest rates only presents the nation with two different sets of economic problems: America can have low inflation and low job growth, or it can have high inflation and high job growth. But it cannot have low inflation with high job growth unless the government starts spending less than it collects in taxes.

The late Herbert W. Armstrong highlighted Bible prophecies about a 10-nation European superpower and predicted that a financial crisis in America would likely be the catalyst prompting these nations to unite. Specifically, he warned in 1984 that a crisis in America “could suddenly result in triggering European nations to unite as a new world power larger than either the Soviet Union or the U.S.” (co-worker letter, July 22, 1984).

The current stock market downturn probably isn’t this crisis, yet that 1,033-point plunge on August 5 still highlights that America’s spending is unsustainable. The U.S. already spends more paying interest on its national debt than it spends on national defense. And its interest payments will only increase as it continues to borrow money.

An economic crash is coming that will devastate both the U.S. and Europe. Yet the Bible says Europe will recover from this crisis and exalt itself over America. For more information on these sobering prophecies, read “How the Global Financial Crisis Will Produce Europe’s 10 Kings,” by Gerald Flurry.