The days surrounding Sept. 11, 2008, will go down in infamy. The speed at which so many of America’s most prestigious financial institutions collapsed should be etched into the hearts and minds of the American populace—because, whether people want to admit it or not, that disastrous, gut-wrenching, sobering week represented a drastic turning point in U.S. financial hegemony.

What remains is a gaping crater in the nation’s now-discredited economic core.

Consider 154-year-old financial icon Lehman Brothers. This revered banking giant survived the American Civil War, two world wars and the Great Depression. But on Friday, September 12, America’s fourth-largest investment bank began to fail. By the following Monday morning, it was the largest corporate bankruptcy in the history of the world. This momentous event sent shock waves rippling through the system. Lehman’s investors and business partners hemorrhaged money. Global stock markets plunged. The Dow Jones took its biggest single-day fall since the morning, seven years before, when two airliners slammed into the World Trade Center in the heart of New York’s financial district.

All by itself, the $600-billion-dollar Lehman Brothers failure was a significant event—but Lehman did not go down alone. After emergency closed-door meetings hosted by the Federal Reserve and the Treasury Department that weekend, it was announced that Merrill Lynch, another ailing Wall Street giant, would also cease to exist as an independent company.

That same Monday morning, it was also announced that American International Group (aig), the largest insurance company in the world, had failed to secure funding to cover its multibillion-dollar losses. By Tuesday night, the situation became so dire that the Federal Reserve announced it would purchase 80 percent of the company to keep it functioning.

All of these seismic events occurred in the immediate aftermath of perhaps the biggest shock of all. On Monday, September 8, the U.S. government announced the $5.2 trillion nationalization of Fannie Mae and Freddie Mac—the largest corporate seizure in the history of finance.

In hindsight, the week surrounding Sept. 11, 2008, may prove to be a turning point no less significant than the one that occurred seven years before.

It was a stark, blaring announcement to the world that the American economic system has passed the point of no return.

A Closed-Door “Mafia” Meeting

The September 11 weekend saw some of the most intensive banker activity in history. According to the Scotsman, the assembly of bankers and global financiers at the offices of the New York Federal Reserve resembled “a scene from a gathering of Mafia dons” (September 16).

All the big names were present: Richard Fuld, chairman and chief executive of Lehman Brothers; John Mack, head of Morgan Stanley; Jamie Dimon of JP Morgan Chase; Vikram Pandit of Citigroup; Lloyd Blankfein of Goldman Sachs; Bob Diamond, chief of Barclays Capital; and senior executives from Mellon Bank and Royal Bank of Scotland.

Awaiting them was United States Federal Reserve Chairman Ben Bernanke, U.S. Treasury Secretary Hank Paulson, and the chairman of the New York Fed, Tom Geithner. “It was Geithner who opened the meeting—and presented Wall Street’s finest with the fright of their lives” (ibid.).

The agenda was clear: to determine how to save their own skins and halt the financial collapse before the U.S. banking system completely broke down.

As we now know, the meetings failed: A Trumpet source inside Lehman reports that a deal with Barclays was scuttled at the last minute by UK regulators; apparently they were worried that losses from Lehman would be so fearsome as to critically imperil Barclays’ financial position, further threatening the UK banking system. And JP Morgan Chase and Goldman Sachs successfully resisted Fed pressure to extend lines of credit to aig, so the Fed itself was forced to use its own rapidly dwindling funds to take over the insurer’s operations.

Beyond Fixable

The crisis facing America is unprecedented. But it is not the fact that a couple of banks have failed that is causing worry.

“There’s a serious banking crisis somewhere in the world approximately once every 10 years,” wrote Jeremy Warner for the New Zealand Herald (August 5). Then, every three or four decades, there is a really big one like the Great Depression, or the stock market crash of 1973-74, which saw the Dow plunge 45 percent.

The worry this time is that what is occurring is far bigger—a once-in-an-80-or-100-years-type event—or worse.

Economist and university professor Nouriel Roubini—a man Barron’s once compared to the Prophet Jeremiah, whose warnings to ancient Israel went unheeded—is warning that the worst is still ahead.

According to Roubini, a recession is about to help kill off hundreds of banks. Looking at America’s “medium-sized regional banks, a good third are in distress,” and half of the group could go bankrupt, he told Barron’s. He also warned that big banks like Citigroup and Bank of America face collapse too, although the U.S. government might intervene to try and prop them up.

This is no longer just a “subprime” crisis, he said back in July. “[T]his is the crisis of an entire subprime financial system.”

So far, total system-wide admitted losses are approaching half a trillion dollars. But this number may be a fraction of what is coming, and does not include the cost of Lehman’s failure, the hundreds of billions that the Fannie and Freddie nationalization will cost, the $85 billion that the Fed spent on aig, or the cost of recapitalizing the fdic when it is overwhelmed.

The U.S. banking crisis could now be nearing critical mass: where it starts feeding on itself. Bankers are losing the ability to stop it, as the collapses of Lehman, Merrill and aig prove. Bank failures lead to losses at other institutions, many of which are already financially unstable, causing more asset fire sales and markdowns, and more stress to the system. Thus, other banks fail, and the cycle feeds on itself.

“The entire Anglosphere bank and economic systems are imploding,” Hat Trick Letter author Jim Willie wrote. “The United States, the United Kingdom, … Ireland, Australia and New Zealand are suffering from critically wounded banking systems, led by housing markets” (August 7). Canada is not much better off.

The stage is set for the biggest financial calamity in history.

The Treasury Department and Federal Reserve are sure to implement a number of ingenious-sounding fixes. Unfortunately, any patch that regulators may put together at this point is like putting a band-aid on a wound that requires intensive surgery. It might hold a cut together for a while—it might buy the patient some time—but it does nothing about the internal bleeding. The economic system is dying.

Burn Me Once, Shame on You …

When the current banking crises began in June last year, even the gloomiest of analysts were quick to point out that if conditions did deteriorate, foreign investors would be only too happy to come to the rescue and seize the opportunity to purchase stakes in prestigious U.S. banks.

The analysts were right. As the banking crisis deepened and American banks went cap in hand to foreign investors for money, foreign governments jumped at the opportunity to purchase billion-dollar chunks of U.S. financial institutions: 10 percent of Morgan Stanley was bought by the Chinese government; 4.5 percent of Citigroup by the United Arab Emirates’ government; 10 percent of Merrill Lynch by Singapore’s government. Other foreign investors spent billions more, snapping up chunks of these firms and other U.S. financial institutions such as Bear Stearns.

But then something went wrong. American financial institutions quickly became poisoned chalices. U.S. banks weren’t nearly as healthy as they or the investment ratings agencies claimed, and as corporate balance sheets continued to deteriorate, share prices plummeted.

Now, international investors are paying for the folly of their impulsive investments. And as Merrill Lynch found out after its deal with the Korean Asset Management Corporation fell apart and it was forced into a takeover by Bank of America: When investors get burned, others become very cautious about making the same mistake.

That was one of the reasons—maybe the primary reason—the federal government seized Fannie Mae and Freddie Mac: America couldn’t afford to burn its foreign lenders again.

Foreign investors, including the governments of China, Japan, Russia and some Middle Eastern nations, had loaned Fannie and Freddie more than $1.3 trillion. China and Japan alone lent more than $600 billion to the mortgage twins.

These are the same lenders that provide the hundreds of billions of dollars the federal government needs to borrow each year to function. And as the Wall Street Journal pointed out, the Treasury Department received a flurry of calls from angry and worried Asian investors just before it decided to nationalize the two mortgage companies.

“I suspect this is the first case where foreign central banks exercised their leverage as creditors to push the U.S. government to make a policy decision that protected their interests,” Brad Setser, a geo-economics fellow at the Council on Foreign Relations, told the Washington Times (September 8).

“The United States must acknowledge that its deep indebtedness is especially dangerous in times of economic crisis,” wrote the New York Times. “The level and stability of American interest rates and of the dollar are now dependent on the willingness of foreign central banks and other overseas investors to continue lending to the United States” (September 9).

Did you get that? “The level and stability of American interest rates and of the dollar are now dependent on the willingness of foreign central banks and other overseas investors to continue lending to the United States” (emphasis mine throughout). That is a serious, serious statement.

But it is really much worse than that. For example: August last year, two Chinese government officials highlighted how China could use its massive U.S. dollar holdings (which include hundreds of billions in government treasuries) as a political weapon to influence the United States. One Chinese cabinet-rank minister went as far as saying that America’s debt should be used as a “bargaining chip” to influence trade talks. Another Chinese official warned that China could set off a dollar crash if it so desired. Chinese state media referred to the country’s stockpile of U.S. dollars as its economic “nuclear option,” capable of destroying the dollar at will.

As the Master Economist of the universe says, “The borrower is servant to the lender” (Proverbs 22:7). America has become the servant of China and Japan and all the other foreign countries it relies on for money.

It never pays for a servant to anger his master. The federal government has to keep its foreign creditors happy, even if that means U.S. taxpayers must unjustly pay for investment losses. That is why the Treasury nationalized Fannie and Freddie even though the move effectively doubles the public debt and raises grievous questions about the federal government’s solvency.

Turning Point

Perhaps the biggest revelation of the current banking crisis is the incredibly shaky foundation America’s banking system was built upon.

“The global economic crisis that has generated the collapse of the investment bank Bear Stearns … is almost certain to get much worse before it gets better,” wrote the National Post back in March. “But even if it does not, we have reached a turning point in recent economic history. We are witnessing a literal discrediting of the financial community without precedent since the Great Depression. We are experiencing a loss of confidence in our capitalist game and those who play it that will have profound, lasting repercussions” (March 19).

When three of America’s five princes of high finance—Bear Stearns, Lehman Brothers, and Merrill Lynch—all fail within a matter of months, surely it is a sign that global finance has, as the Post said, “reached a turning point.”

America’s days as the global economic kingpin are over.

For those unwilling to accept this truth, what will it take to cause reality to sink in? The demise of either or both Morgan Stanley and Goldman Sachs, America’s two remaining large investment banks? Just the fact that America is down to two boggles the mind and should be proof enough of America’s fall from power. How about if a couple of big savings and loans like Washington Mutual or National City closed up shop? Would that be enough proof that the system is doomed? Or would it take something more dramatic? Commercial banks Citigroup (formerly the world’s biggest bank) and Wachovia have been referred to as “dead men walking.” If one of the large commercial banks were to collapse, would that be enough proof? The Royal Bank of Canada has said that 300 U.S. banks will go bankrupt over the next couple of years. It made that estimate back in July.

Proof is on the way.

It is only a matter of time. You can either stand and stare like a deer in the headlights and get run over—or you can accept reality and do something about it.

Where Investors Are Running To

As was the case after Sept. 11, 2001, the world has changed. Only this time, instead of the world rallying around America, the U.S. banking collapse is creating bitterness.

The world is turning away from America. Financial confidence is returning to an old power.

A crumbling America leaves only one alternative. The new rising powers in Asia are new and untested, and investors appear unwilling to wholeheartedly trust Communist China. Economic leadership is shifting back to Europe.

The euro is now the currency of choice for 320 million people. Including economies that are linked to the euro, 500 million people now depend on this currency. The total value of euros in circulation now exceeds the value of dollars in circulation. And the euro’s share as a percentage of central bank reserves has continually increased, largely at the expense of the dollar, since its introduction as a currency in 2002. Even former Federal Reserve Bank Chairman Alan Greenspan openly acknowledged in September last year that it was “absolutely conceivable that the euro will replace the dollar as reserve currency, or will be traded as an equally important reserve currency.”

But most importantly, biblical prophecy indicates that Europe will, if only for a short time, dominate global finance and trade.

Revelation 13:16-17 speak of a coming European powerhouse that will totally control global economies. As America topples, this will be the next superpower to come on the world scene.

After the 9/11 attacks, the Trumpet’s Tim Thompson wrote this: “Satan used the September terror attacks in his latest attempt to destroy [America] in order to put his unholy Roman Empire [the historic identity of a sequence of European empires] back in power once again—which God will allow one final time. And because God allows it, trillions and trillions of dollars of investor money will flow out of America and into Europe.” For a more thorough explanation of Revelation 13 and a description of the Holy Roman Empire, request our free booklet Germany and the Holy Roman Empire and a copy of the article “The Battleground,” from the March 2006 issue.

We are seeing this forecast come to pass today.

Back in 1984, Herbert W. Armstrong, editor in chief of the Plain Truth magazine, wrote that a massive banking 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.” (member and co-worker letter, July 22, 1984). That was 24 years ago, before the creation of the European Union or the euro monetary agreement.

“That, in turn, could bring on the Great Tribulation suddenly,” Mr. Armstrong continued, using the biblical term for the time of unparalleled suffering that will conclude this age of man. “And that will lead quickly to the Second Coming of Christ and end of this world as we know it.”

Even now, a uniting Europe is fulfilling Bible prophecy, which says that for a time—just prior to Christ’s return—Europe will dominate global trade and finance. America’s spectacular banking collapse is paving the way.