Saturday, September 20, 2008

Origins of the Subprime Crisis

Over the past few months, America’s financial sector has been hit with its largest crisis since the Great Depression. The crisis began with a rise in foreclosures and the failure of some small banks. The problem spread to investment company Bear Stearns failed in May 2008. Liquidation was avoided by a government-orchestrated takeover of the company by JP Morgan. Bailouts of Fannie Mae and Freddie Mac followed. Over the past week, two prominent companies failed. Lehman Brothers, another investment bank, was liquidated, while American International Group (AIG), an insurance conglomerate, was judged by the Federal Reserve to be too big to fail. This prompted the government to bail out AIG by purchasing an 80% interest in the company with taxpayer dollars.

As the crisis grows, there are more and more calls for increased regulation on Wall Street. To determine whether regulation will solve the problem, the cause of the problem must first be determined. If the source of the problem is not simply short selling, fraud, or basic greed, then new regulation might cause further problems instead of resolving our current ones.

When we delve deeply into the causes of the crisis, it is soon apparent that lack of regulation is not necessarily the problem. Along with healthcare and commercial aviation, finance is one of the most heavily regulated sectors of the US economy. The law of unintended consequences states that any purposeful action will produce unintended consequences. An example of unintended consequences is the passage of the Renewable Fuels Standard in 2007. This law was intended to lower fuel prices by mandating increased production of ethanol. Instead, the net result was that food prices almost doubled while oil prices kept rising. With that in mind, we should look at some of the regulations that the government has enacted on the banking industry.

Many point to the Community Reinvestment Act of 1977. This Carter-era law was intended to combat the practice of “redlining,” denying credit to people who live in certain areas. The law’s language was originally so vague that it only required banks to show a good faith effort. This began to change when the law was strengthened in amended in 1989 to grade banks on a four-point scale and to make these reviews public. In 1991, Congress passed the FDIC Improvement Act, allow regulators to consider a bank’s CRA performance when processing applications for FDIC services.

The law was strengthened yet again by President Clinton in 1995. The Clinton Administration changed compliance of the law from a matter of making an effort to one based on hard numbers of specific loans and specific levels of service. It also significantly stepped up enforcement of the law.

Since the passage of the CRA, the purchase of mortgages by minorities and in minority neighborhoods has risen sharply. The problem is that the underlying assumption that minority loans were denied on the basis of racism rather than credit turned out to be erroneous. According to a 1999 report by Freddie Mac, one of the mortgage companies now in dire straits, revealed that African-Americans have disproportionately large number of credit problems. For example, the report states that on average blacks with incomes of $65-70,000 per year have more credit problems than whites with an income of under $25,000. Consequently, as banks were pressured to make more loans to minorities and low-income borrowers, they were also making more loans to people who were poor credit risks.

A second possible root of the current crisis is the repeal of the Glass-Steagall Act. The Glass-Steagall Act was passed in 1933 during the height of the Great Depression. The banks of the era were accused of speculating in unsound investments. Banks would make loans to companies that were shaky, and would then recommend the same company’s stocks for their investment clients. The GSA established a wall between investment banks and commercial banks. The law was intended to prevent the use of deposit accounts to cover a bank’s investment losses.

In 1999, President Clinton signed the Gramm-Leach-Billey Act into law and repealed the GSA. This was done to make banks more competitive with foreign companies that offered a broader range of financial services. In addition to removing the barriers between banking and investing, the GLBA also allowed banks to offer insurance-related services. The predictable result of an increase in the number of sellers in the marketplace was more competition for the available investors.

At the same time, the United States was experiencing an economic boom. The Federal Reserve under Alan Greenspan was aggressively cutting interest rates. The inexpensive cost of borrowing money combined federal pressure for banks to lend to low-income borrowers. As the competition among lenders became fierce, banks began issuing loans that were more and more risky. Loans were made to borrowers without down payments, without income verification, or with poor credit records.

Borrowers who wanted more house than they could afford were sold Adjustable Rate Mortgages (ARMs). These loans had low interest rates and payments at inception, but since interest rates were at historic lows, both the rate on the mortgage and the mortgage payment had nowhere to go but up. In some loans, teaser rates were artificially low at first, and then adjusted sharply upward. In any case, as payments rose, borrowers found that they could no longer afford their homes. Tightening credit made it impossible to refinance into a fixed rate loan and falling real estate prices made it impossible to sell the home for enough money to pay off the loan. For many, the result was foreclosure.

Yet another commonly cited source of financial problems for companies is a change to arcane accounting rules that occurred over the past fifteen years. In the past, companies used cost accounting, which applies historical costs to a company’s their assets. More recently, the SEC and the Financial Accounting Standards Board have changed accounting rules to a method known as Fair Value Accounting. Assets are now valued at their market price. In other words, assets are valued not by their true economic value, but by what they can be bought or sold for on the current market.

The obvious problem is that when a market suffers a sharp decline, so does the value of the company’s assets. It doesn’t matter that the decline may only be temporary or that the company had planned to hold the assets for the long term. In effect a company’s holdings are required to be valued at an unrealistically low price. When the market was high, fair value accounting was one of the tools used to artificially inflate Enron’s bottom line.

In aviation, there is the concept of an accident chain. There are few instances in which an accident is caused by only factor. In most cases, there are multiple factors that link together to form an accident chain. If any of the factors are missing, the chain is broken and the accident does not occur.

The subprime mortgage crisis is also the result of numerous factors. Government pressure convinced banks to make risky loans. Low interest rates, deregulation, and increased competition all combined to fuel a housing bubble that eventually burst in 2007. When the bubble burst, fair value accounting principles exacerbated the problem by magnifying the decrease in value of the securities held by banks.

Old-fashioned greed also undoubtedly played a role. Some companies, such as Countrywide Financial, focused almost exclusively on the subprime market. Many of these companies did not service their loans, but instead immediately bundled them into mortgage-backed securities and sold them to other companies, such as Fannie Mae and Freddie Mac. In this way, the cancer of failing mortgages was metastasized throughout the financial community.

Some lenders engaged in predatory lending practices. Likewise some borrowers defrauded banks. For whatever reason, many borrowers were either misinformed or failed to care about the terms of the loans that they obtained. Bad loans were either sold off to other companies or the homeowner simply walked away from the house, leaving the bank to foreclose.

Hedge funds, aggressive funds that catered to limited numbers of ultra-wealthy clients, snapped up risky financial products in their attempt to boost returns. Naked shorting, selling short without having stocks to cover the position, occurred even though the SEC considered the practice fraud and attempted to rein it in.

The greed and fraud did not stop within the bounds of the financial community. Countrywide made loans with generous terms to VIP borrowers. The list of Friends of Anthony (Mozilo, Countrywide’s founder and CEO) is long and distinguished. Democratic Senators Chris Dodd, chairman of the Senate Banking Committee, and Kent Conrad received favorable loans from Countrywide. So did numerous members of the Clinton Administration such as cabinet members Alphonso Jackson and Donna Shalala, staffer Paul Begala, and Postmaster General John Potter. Henry Cisneros, Clinton’s secretary of Housing and Urban Development was a former Countrywide director. Franklin Raines and Jim Johnson, former CEOs of Fannie Mae as well as fundraisers and advisors to Barack Obama, also received preferential loans from Countrywide.

In 2003, three years before the crisis broke; President Bush did make an attempt at reforming Fannie Mae and Freddie Mac. The housing industry and realtors opposed the plan, which went nowhere.

Representative Barney Frank of Massachusetts, now chairman of the House Financial Services Committee said, “These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

In 2005, John McCain sponsored the Federal Housing Enterprise Regulatory Reform Act. This law would have established a new independent regulatory agency to oversee Fannie Mae and Freddie Mac. Unfortunately, the bill was allowed to die in committee; the same committee headed by Friend of Anthony Chris Dodd.

There is another saying in aviation: “Don’t just do something. Sit there.” Hastily doing the wrong thing is often worse than doing nothing at all. Government pressures and corruption were largely responsible for the unfolding financial crisis. Hasty and ill-advised additional regulation is more likely to make the problem worse instead of resolving it.

“How To Save the Financial System,” William M. Isaac, Wall St. Journal, September 19, 2008

Monday, September 15, 2008

The Economics of Oil Prices

This past weekend oil prices shot to near-record highs again after several months of decline. While on a weekend trip to visit the grandparents, we were unpleasantly surprised to see gas prices climbing as quickly as the gas station attendants could change their signs. Even at high prices, many stations were selling completely out of gasoline.

To understand the reason for the fluctuations, we must first see the big picture. Oil prices have been increasing over the last few years for a number of reasons. More demand is one of the most important factors. The United States has been using more oil every year. The demand of other countries is increasing as well. China and India are both becoming industrialized nations. As they industrialize, they use vastly more oil than they did in the past.

Additionally, much of the easily tapped oil has already been drilled. Oil fields are increasingly difficult and expensive to tap. Even nations like Saudi Arabia have already pumped much of their easily accessible reserves. New oil fields are often found far out to sea or in very inhospitable areas, such as the arctic. There are new sources of oil, such as Colorado’s oil shale, but many of these are also more expensive to produce. Many oil-rich areas are also politically unstable, which makes the supply of oil uncertain.

Furthermore, oil prices have also been affected by the weak US dollar over the last few years. When the dollar is weak relative to other currencies, it takes more dollars to pay for the same barrel of oil.

Over the summer, oil prices have been driven down by several factors. First, high oil prices did what global warming alarmists were unable to accomplish: They persuaded people around the world to use less oil. Oil demand declined in the first half of 2008 and is forecast to continue falling in 2009.

Basic economic theory is that as prices rise, demand will fall. This has been true in other oil spikes as well. When oil prices increased sharply in the 1970s and 1980s, they led to economic slowdowns, which, in turn, caused the price of oil to drop. In the 1980s, the price of oil not only dropped, it collapsed and didn’t recover for about twenty years.

The dollar also gained over the summer of 2008. As the dollar grew stronger, the relative price of oil decreased. As the dollar increased in its value, it took fewer dollars to buy each barrel of oil.

A final factor in the oil price decline was President Bush’s decision to repeal the presidential ban on offshore oil drilling in mid-July 2008. Conservative estimates are that there are at least 18 billion barrels of oil off the coasts of the United States that are currently off limits to oil companies. Drilling will still not be allowed unless the congressional ban is allowed to expire, but President Bush sent a clear message to oil producers that the supply of oil might increase dramatically in the next few years. The effect was an almost immediate decline in the price of oil.

Many people place the blame for high oil prices squarely at the feet of the oil companies. While the oil companies once had the ability to set prices, that is no longer true. Most producing countries nationalized their oil fields and facilities in the 1960s and 1970s. They then formed OPEC, a cartel tasked with organizing oil production and stabilizing prices. Currently oil-producing countries set the price for their oil and buyers simply choose whether to buy or not. Given the high demand for oil, usually the choice is to buy regardless of price.

There are few cures for high oil prices. One is to reduce demand. This can be accomplished through alternative energy sources. One of the most practical solutions is to shift to electrical power. Electricity could be supplied cheaply through nuclear, wind, and solar power. All of these energy sources require large capital investments to start, however. Costs to consumers for new cars and home heating systems would also be significant. Conservation is promising way of reducing demand as well.

Increasing oil supplies is the other way to reduce oil prices. Billions of barrels of domestic oil reserves are going unused because of environmentalist-inspired bans on drilling. These oil reserves could be used to buy time to shift to other energy sources. Because much of the pre-production work has already been done, these oil reserves could be brought to market in as little as two years.

Supply could also be increased by new sources of oil. A process to turn coal into gasoline was invented by the Germans in WWII. Since the US has some of the world’s largest reserves of coal, this process holds much promise. Due to large investments for facilities to process the coal, this is not cost effective when oil is cheap, but is being considered now.

A common question is why retail gasoline prices rise faster than oil prices. The answer can be found in how gas stations are supplied. Over the past few years, gas stations have only been making a few cents profit on each gallon of gasoline. When gas prices rise, the station owner knows that his next shipment of gasoline is going to be more expensive. He raises prices so that he will be able to pay for the next shipment of gasoline. If he doesn’t increase the price immediately, he knows that he will lose money.

Conversely, when prices fall, the gas station owner sees an opportunity to make a little more profit for a short time. As he loses customers to gas stations with lower prices, he will eventually have to lower his own prices or be stuck with a large inventory of gasoline.

Last weekend, the run on gas stations had several factors. One is that the newest refinery in the US is over thirty years old. Due to government restrictions and costs, refinery capacity has not kept pace with increasing demand. As a result, US refineries are operating at about 97% capacity. When there is any interruption, such as that caused by Hurricane Ike, there is the possibility of an interruption of supply and a resulting shortage.

Another factor is that the public was panicking. Even though news reports were saying that there was no possibility of a shortage, as prices rose, the word went out among friends and families that it was time to fill up, before prices rose further. This created an artificial surge in demand. As economic law tells us, when demand rises, price follows. As station owners saw that they were going to sell out, it was obvious that it was better for them to sell out at a higher price than a lower one.

This may strike some as price gouging, but it can actually be a good thing. Rising prices prevent hoarding by those who don’t need the product. If someone doesn’t need gas, they won’t pay the higher price. Therefore the gas will be available for someone who does need it and is willing to pay the higher price. If the price stayed low, then hoarders would quickly snap up all available supplies.

Oil prices will probably decline again in the next few weeks, but $100 per barrel oil is likely here to stay. As long as demand remains high and supplies are constrained with no slack available at the production facilities, we should prepare for price spikes every time there is an interruption, whether real or perceived. The only real answers are to reduce demand through conservation and alternative energy sources, while simultaneously boosting supply and production in the short term.

The Prize, Daniel Yergin, Simon & Schuster, New York, 1991,-2009-oil-demand-forecasts/

Sunday, September 7, 2008

The Palins Choice for Life

Recently a media firestorm was introduced around Republican Vice President nominee, Sarah Palin, regarding abortion. On one front, Palin’s seventeen-year-old daughter Bristol was revealed to be pregnant outside of marriage. On another front, Palin recently gave birth to a son, Trig, who was diagnosed in the womb with Down’s syndrome. Governor Palin, who is pro-life, or anti-choice in the parlance of most media outlets, was roundly criticized for opposing abortion in both areas.

More than almost any other issue, Governor Palin’s response to these family crises highlights the difference between conservatives and liberals. In the decades since the 1973 Supreme Court decision in Roe v. Wade, the answer to both problems from the political left has been to turn to abortion.

Democratic Presidential candidate Barack Obama made it clear what his choice for his daughters would be if they were in Bristol Palin’s position. While campaigning in Pennsylvania in March 2008, Obama said, “…I’ve got two daughters, nine years old and six years old. I am going to teach them first of all about values and morals. But if they make a mistake, I don’t want them punished with a baby. I don’t want them punished with an STD at the age of 16.”

That Obama equates a baby with a disease is telling and highlights the difference between the two positions. The left views an unborn baby as nothing more than an inanimate lump of cells that has the potential to become a baby if left unchecked. Since the baby is not human, they reason that abortion is no more a moral issue than removing a tumor or some other unwanted growth.

Abortion advocates argue that unwanted and disabled babies should be aborted. They believe that children with disabilities or who are born to parents that did not want children have no chance for happiness, and are better off not being born.

Sometimes even being born is not enough. Barack Obama helped to kill the Born Alive Infants Protection Act in the Illinois legislature. The bill would have allowed infants born alive in botched abortions to receive the full protection of a human person under the law. Fortunately, a federal version of the law was passed by Congress in 2002 without dissent.

The right views an unborn baby as a human that simply has not been born yet. Since the unborn baby is a person already, it should be protected by the same laws that protect all other people. Abortion kills a living person and thus is murder and immoral.

Pro-lifers also argue that allowing abortion ultimately cheapens all life. Since 1973, euthanasia and suicide have become increasingly acceptable. In 1997, Oregon became the first US state to pass a law permitting assisted suicides. In 2005, Terri Schiavo died after her husband had her feeding tube removed against her family’s wishes. In Holland, infants can be euthanized, even without parental consent, if the baby is determined to have “an unlivable life.” Princeton professor Peter Singer, viewed in many circles as a leading philosopher, also espouses infanticide of disabled babies, even after they are born. The next step will be to euthanized the elderly who are terminally ill in order to save resources for the young.

One problem with aborting, or euthanizing, the disabled is that while most healthy people imagine that they would be miserable with a severe disability, in reality, disabled people are just as likely to be happy as healthy people. People with a severe illness or disability adapt to their condition and often become stronger mentally and spiritually. In fact, a group of disabled activists called Not Dead Yet has arisen to oppose Peter Singer and his ilk. The list of disabled people who have made significant contributions to society is long and includes such names as Helen Keller, Franklin Delano Roosevelt, and Stephen Hawking. Disabled children often have a profound impact on their family and friends even if they do not achieve notoriety.

Most American women (75%) who have abortions say that the baby would interfere with caring for dependents or that they cannot afford to care for a baby. Many of these women are young (50% are under 25, 17% are teenagers) and poor (over four times as many women who live under the poverty level obtain abortions as do women 300% above the poverty level). While carrying a child under these circumstances can be daunting, there are options that women can consider.

The first option is become a single parent. While parenting alone is a difficult prospect, it is also rewarding. Financial assistance from the government, religious groups and family may make the job easier. Additionally, the baby’s father may be legally obligated to provide child support. A disadvantage to a single-parent family is that it can be extremely challenging financially.

Another option is marriage. If the woman is already in a serious relationship, it might be relatively easy to take the next step and get married. Marriage provides a supportive and stable family environment for raising children. An important advantage is that both parents can provide incomes or one can work while the other keeps the children. The responsibility for everything does not fall onto one person. Additionally, there are tax advantages to marriage as well.

An underutilized option is to place the baby up for adoption. No child is truly unwanted. Many couples who have difficulty in becoming pregnant would like to adopt a baby. The birth mother can choose which family will adopt her baby and can even choose to have further contact with her child as it grows up.

To help women overcome the basic human instinct to not kill another human being, abortion advocates devote considerable time and energy to proving that unborn babies are not human at all. They conspicuously avoid discussing babies and instead speak of “fetuses,” “embryos,” and “choice.”

Scientific evidence gives lie to the claim that unborn babies are not human. Even at very early points in its gestation, the unborn fetus takes on the appearance of a tiny person. The heart starts beating as early as the fourth week of the pregnancy, likely before the mother even knows that she is pregnant.

New 3-D ultrasounds provide a new window into the baby’s life inside the womb. It is not known at exactly what point an unborn baby can start to feel pain, but it is generally accepted even by abortion opponents that the fetus can feel pain by twenty weeks. Many scientists believe that even abortions done much earlier cause the fetus to die a painful death. The film Silent Scream ( offers haunting, but inconclusive evidence of the consciousness of an unborn baby at twelve weeks.

There is virtually no doubt that partial birth abortion, which are commonly performed at twenty-six weeks or later, cause excruciating pain for the baby. In a partial birth abortion, also called dilation and extraction (D&X), the child is partially delivered. While the head remains in the womb, the abortionist sticks a set of surgical scissors into the baby’s skull, and then spreads them to enlarge the opening. He then sucks out the baby’s brain with a suction catheter. The head must be crushed with forceps to be removed.

A similarly brutal method of late term abortion is dilation and evacuation (D&E). In this procedure, the abortionist grasps the child in the womb with a clamp, then proceeds to dismember its body and remove the pieces. Again, the head, referred to by the abortionist as “number one,” must be crushed with forceps to be removed

One of the most dramatic pieces of evidence that point to life inside the womb was a photo taken in 1999 by Mike Clancy. Clancy actually photographed two separate pre-natal surgeries to treat spina bifida in unborn babies. The photos of Samuel Armas and Sarah Marie Switzer show the unborn babies reaching out of the womb to grasp the surgeon’s finger. Samuel was at twenty-one weeks when his photo was taken. The picture can be seen at

If abortion opponents deny that life begins at conception, they must determine an arbitrary point at which life does begin. Some options for the beginning of life could include the first heartbeat, the first trimester, when the baby can live outside the womb, or when the baby is finally born.

The problem with most of these points of view is that they are arbitrary. Science has shown us that the baby is very much alive and active inside the womb long before it is born or can survive on its own. Scientific advances allow babies to live outside the womb with the help of medical technology at increasingly early stages of development. A baby that needs an incubator to live is no less human than an adult who needs a dialysis machine or a pacemaker.

Because sperm can live in the female body for up to five days, conception can occur several days after intercourse. Conception occurs twelve to twenty-four hours after the woman ovulates. The body will not know that it is pregnant until the egg implants itself on the uterine wall. This occurs between five and twelve days after conception.

If conception is allowed to occur, the unborn baby will grow according to a clearly defined schedule. The gestation period continues for forty weeks, until the baby is mature enough to live outside the womb. At that point, birth occurs. If the baby is healthy enough to prevent miscarriage and its growth is not artificially inhibited, conception results in the birth of a full-term baby forty weeks later. Therefore, it is evident that life begins at conception. It follows that if that life is artificially terminated, a living human being has been killed.

There are several medicines, referred to as morning after pills, which can prevent conception. Because these pills prevent, rather than terminate, a pregnancy, they escape most of the moral problems of abortion. A morning after pill must be used quickly after intercourse, before the woman is actually pregnant. To that end, women should be educated in the use of these contraceptive pills.

If it were as simple as educating women to use contraceptives though, abortion would be an almost nonexistent problem. Over the past few decades, sex education classes have been taught in more and more schools across the country, both in order to reduce unwanted pregnancies and sexually transmitted diseases. In spite of the increased education, almost fifty percent of women who have abortions did not use any contraceptives. Of those who did, most (76% of pill users) did not use their birth control consistently.

The effects of abortion on the mother are not often discussed, but they can be significant. Abortion is touted as an easy solution, but there are real physical, emotional, and psychological risks. In most states, abortion clinics are not required to meet the same standards of cleanliness as hospitals. Many women report that abortion clinics are dusty, smelly and generally unclean. These conditions can cause women to develop infections that can be life threatening. Infections might also result in infertility and disease.

An emerging problem with abortion is that numerous studies are finding strong links between abortion and breast cancer. In the early stages of pregnancy, the woman’s estrogen level increases dramatically. This leads to the growth of undifferentiated cells, in the breast that would ultimately help the body produce milk. In an abortion, the woman is left with abnormally high numbers of these cells that are never differentiated. Scientists believe that these cells are very vulnerable to carcinogens and lead to an increased likelihood of tumors later in life.

Psychological and emotional damage often last longer than the physical effects of the abortion. Post Abortion Syndrome (PAS) is a form of post-traumatic stress disorder. Many women experience feelings of guilt and anxiety that sometimes leads to depression and thoughts of suicide. In other cases, the guilt leads women to become obsessed with becoming pregnant again. Some women turn to alcohol, drugs or self-punishing behaviors as a means of coping.

All of these thoughts might not have been explicitly discussed by the Palin family as they dealt with Bristol’s pregnancy and Trig’s disease; they were already predisposed to err on the side of life. Although as many as 80% of unborn children who are diagnosed with Down’s syndrome are aborted, but the Palin’s strongly held pro-life views influenced them to allow Trig to be born. Similarly, Bristol Palin chose life for her as yet unborn child. With her family’s help, she will be able to raise a well-adjusted child regardless of whether she eventually marries the baby’s father.

By sticking to their principles and standing up for their pro-life beliefs, both Gov. Palin and Bristol are changing the way America looks at the choice of abortion. If Gov. Palin becomes our next Vice President, American’s will be able to see the childhood of both children. They will see that raising a disabled baby or an unplanned child is not as bad as it might seem. That, in turn, might help to further reduce the number of abortions in America and around the world. That would be a beautiful thing.


Posted in Winner, South Dakota

Thursday, September 4, 2008


In recent years, there has been an increasing interest in Biblical end-times prophecies. Among these prophecies are several that refer to a latter-day ruler who will control the world. Although referred to by many names in the Bible, this leader is commonly known as The Antichrist.

Speculation as to the identity of the Antichrist is at a high pitch. Many prominent leaders and politicians have been alleged to be the Antichrist. Recently, a nationally syndicated radio talk show host, Michael Medved, asked for callers’ opinions on whether Barack Obama is a “Lightworker,” an enlightened spiritual being who will help lead us to the next level. To his surprise, most callers instead believed that Obama was the Antichrist. This was based on his charisma, his meteoric rise, and his ability to influence massive audiences to follow him with little more than pretty speeches.

Many people do not know what the Bible actually says about the Antichrist. Does Barack Obama (or Hillary Clinton or George W. Bush, two other popular candidates) actually fit reality?

When people think of the Antichrist, they think of the Book of Revelation. In reality, the word “antichrist” is not found in Revelation at all. The only two verses which refer specifically to the Antichrist are 1 John 2:18 and 4:3. The first verse says that the Antichrist is coming in the “last hour” and will be preceded by other “antichrists.” The second verse says that spirits who do not confess that “Jesus Christ has come in the flesh” are the “spirit of the Antichrist,” which is “already in the world.” Other verses in 1 and 2 John refer to antichrists who deny that Jesus is the Christ and the incarnate Son of God (1 John 1:22 and 2 John 1:7).

From these verses, we learn that there is one Antichrist of the last days, but there are also other, smaller, antichrists, who serve the Antichrist. These antichrists are characterized by denying the divinity of Jesus Christ. They are literally against Christ. Their purpose is to deceive people and pave the way for the Antichrist. As the end approaches, we can expect the number of antichrists to increase. Jesus Himself said that we would see “many” who claim to be the Christ in order to deceive as many people as possible (Matthew 24:5, 24-26; Mark 13:6, 21-22; Luke 21:8; John 5:43).

The first detailed reference to the Antichrist is in Daniel 7. In this chapter, Daniel explains a dream of different beasts. The four beasts represent worldwide empires. The first three beasts are widely believed to represent the Egyptians, the Medo-Persians, and the Greeks respectively. The fourth beast represents the Roman Empire (7:23). It’s ten horns represent ten kingdoms (7:24). The little horn represents the Antichrist and its “eyes of a man” represent his intelligence.

The little horn becomes larger than the other horns. The little horn profanes and blasphemes God. He persecutes the saints, the people of God, and even prevails against them at first. His rule will last for “a time, times, and half a time” (7:25). This is understood to mean one year plus two years plus half a year for a total of three and one half years.

A similar passage in Revelation is one of the Bible passages most closely associated with The Antichrist. Beginning in chapter 13, John describes a “Beast from the Sea” that is given power by the Dragon, Satan (Rev. 12:9). This Beast captivates the world and everyone whose name is not in the Book of Life of the Lamb, those who are not Christians, eventually worship him. When they worship the Beast, they are also worshipping Satan. The Beast blasphemes God and makes war on the saints who do not worship him. John says that God grants the Beast 42 months to continue his blasphemies (13:5). This is equal to the three and one half years foretold by Daniel.

The sea in these passages may refer to the gentile nations, that is, nations other than Israel. This may indicate that the Antichrist will arise from the gentile world. The seven heads and ten horns refer to kingdoms. The seven heads refer to monarchies that ruled the known world: Egypt, Assyria, Babylon, Persia, Greece, Rome, and the future kingdom of the Antichrist. The ten horns are kingdoms that make up the Antichrist’s world empire.

In verses 13:3 and 13:12, John alludes to a mortal wound that the Beast will receive. The Antichrist, in an apparent reflection of the resurrection of Jesus Christ, will be healed after having received a mortal wound. Seeing this charismatic leader revived from the dead will undoubtedly inspire many people around the world to worship him as a god.

In the latter half of chapter 13, John describes another beast. The second beast leads the religion that worships the Beast from the Sea. He performs miracles, such as calling down fire from Heaven. This beast is also a deceiver who power is derived from the first beast, who in turn derives his power from Satan. The second beast creates an image of the first Beast for his followers to worship. This image can speak and kill those who refuse to worship it.

Revelation 13:16-18 contains one of the most famous passages of all the Bible’s end-time prophecies. John says that after the first Beast is healed, the second beast will cause all people, rich or poor, to receive a mark on either their right hand or their forehead. Without this mark, no one will be able to buy or sell. This would quickly render opponents of the beastly government destitute. The mark contains either the mark, the number of the beast or his name. John reveals that the number of the beast is 666.

As there has been much speculation on the identity of the Antichrist, there has also been much speculation on the meaning of the number 666. It is very likely that none of the speculative theories about the number are correct and that its meaning will only be clear when God chooses to reveal it. One theory that is most likely correct, as far as it goes, is that the number is a contrast to the number seven, which in the Bible symbolizes perfection and completeness. The number six falls short of perfection, just as man continually falls short of perfection. The repetitive six symbolizes sin and the coming judgment.

The Old Testament prophet Daniel also offered some additional clues about the Antichrist. Daniel 8:23-26 refers to a fierce king who will arise in the “latter time.” He will be mighty by power other than his own. His reign will be characterized by deceit and hostility, not only to the people of God, but also to God, “the Prince of princes,” Himself. In the end, the king will be destroyed as God intervenes.

In the next chapter, Daniel says that “the people of the prince who is to come,” the Antichrist, will destroy the city, Jerusalem, and the sanctuary, the Jewish Temple (9:26). This occurred when the Romans under Titus razed Jerusalem and the Temple in AD 70. Therefore, Daniel indicated that the future Antichrist would be a descendant of the Romans.

Daniel goes on to say in verse 27 that the Antichrist will make a treaty (covenant) with Israel (the many) for one week. In this passage, the word “week” is commonly understood to mean seven years. The treaty will be broken in the “middle of the week” or three and one half years later.

Daniel alludes to the Antichrist again in 11:36-45. This passage follows up a detailed prophecy that was fulfilled by Antiochus Epiphanes, a Roman ruler of Palestine. Antiochus was a prototype of the Antichrist who defiled the Jewish Temple by placing a statue of the Roman god, Jupiter, upon the altar. Daniel tells us that the king will not only blaspheme, but will place himself above God. The passage also refers to an end-time battle mixed with some details of campaigns of Antiochus. The king will enter Israel, the “Glorious Land,” and will camp between the Dead Sea, the Mediterranean, and the Temple Mount in Jerusalem.

The Apostle Paul also addressed the Antichrist in 2 Thessalonians 2:3-12. Paul refers to him as the “man of sin,” “the lawless one,“ and the “son of perdition.” Paul reiterates the claim that the Antichrist will exalt himself above God and defile God’s Temple. Paul also confirms that the Antichrist’s power is from Satan.

Paul also tells us that even though the spirit of lawlessness is already at work, the man of sin will not be revealed as long as God restrains him. When God’s restraining influence is removed, the man of sin will come to deceive those who reject the truth of Jesus Christ (John 14:6). Those who accept the lie rather than the truth will be condemned.

The Apostle John echoes other Biblical claims that the Antichrist, as well as many antichrists, are coming (1 John 2:18, 22). Paul states that a way to know antichrists is through their denial of Jesus Christ and his status as the Son of God the Father. He stresses this warning yet again in 1 John 4:3 where he states, “Every spirit that does not confess that Jesus Christ has come in the flesh is not of God. And this is the spirit of the Antichrist, which you have heard was coming, and is now already in the world.” A similar warning is given in 2 John 1:7.

After examining what the Bible says about the Antichrist, we can draw several conclusions. The first is that the Bible does not give enough clues to identify the Antichrist before he takes the world stage. The Bible says very little about his background or identity and then speaks only in very general terms. We can assume that the Antichrist will not be conclusively identified until he assumes the mantle of world ruler and begins fulfilling prophecy. The identity of the Antichrist will become increasingly obvious as prophetic events unfold.

A second conclusion is that while the Antichrist has not been conclusively shown to be physically on the world stage at the present time, the spirit of the Antichrist has been in the world since shortly after the time of Christ. The spirit of the Antichrist came into the world to deceive and deny the deity of Jesus Christ. The spirit of the Antichrist is obviously Satan and his minions. These satanic and demonic spirits gain when people are deceived and do not accept salvation through Christ.

Additionally, there are numerous warnings in the Bible that there are a multitude of antichrists who also deceive and deny. These antichrists might work through influential politicians, leaders, writers, filmmakers, and celebrities, among others, who deny the deity of Christ and are instrumental in causing others to be deceived as to the true nature of Jesus Christ. These lesser antichrists have also been hard at work in the world since the resurrection of Christ and will probably contribute to the “falling away” that precedes the arrival of the Antichrist (2 Thessalonians 2:3).

Finally, and most importantly, we can be assured that the Antichrist and antichrists will roam free only as long as God allows them. The Antichrist will not burst onto the scene until God removes his restraining influence (2 Thess. 2:7). When he does arrive, he will only rule for his appointed time (Revelation 13: 5, Daniel 7:25) and will then be judged by God. The end of the story is that the Antichrist and his false prophet will be captured by Christ’s heavenly forces after their satanic army is routed after the Battle of Armageddon. Their punishment is to be dropped into the lake of fire (Rev. 19:20). Satan, the spirit of the Antichrist, is first bound and thrown into bottomless pit for a thousand years (Rev. 20:2-3). After his release, Satan will lead another failed rebellion against God, after which, he too, will be condemned to the lake of fire (Rev. 20:7-10).

Followers of Christ should not fear the Antichrist. Instead, we should study the Bible so that we will not be deceived by the numerous antichrists who roam the world. Paul points out that the word of God is the “sword of the Spirit” (Ephesians 6:17), a potent defensive weapon against deceit, as well as an offensive weapon with which to wage war against the spirit of the Antichrist.

James-Fausset-Brown Commentary, Bible Explorer 4, 2006 Wordsearch
Mathew Henry Concise Commentary, Bible Explorer 4, 2006 Wordsearch

Scriptural References:
Daniel 7:1, 8, 17, 19, 20-21, 24
Matthew 24:5, 24-26
Mark 13:6, 21-22
Luke 21:8
John 5:43

Posted in Long Beach CA