Servias Ministries Blog

Gold went into to backwardation recently.  Backwardation is the name for the condition that the market quotes a lower price for a more distant delivery date, and a higher price for a nearby delivery date.  This means that people want the delivery of gold now rather than later in the futures market.  Why?  There is developing an expectation that delivery might not occur later and the settlement could take place in cash instead.  Trust is leaving the system.  People are now getting concerned there might be a shortage of physical gold available for sale and delivery.

Consider this, the global economy is worse off today than it was in 2008 and the stock markets are at record highs.  Why?  The central banks keep pumping money into the system but the underlying system is not improving.  Can the U.S., Britain, Japan, and other large European countries ever pay off their accumulated debt?  Not in today’s currency value.  Only by further depreciating the currencies can they attempt to pay off debt.  Yes, you can print enough dollars to pay off outstanding debt but the currency would severely devalue as you complete the process.  Your creditors would be the losers.  Do you think bondholders will tolerate a severe depreciation of value of their holdings?  No, they will demand higher interest rates to offset devaluation.  If this happens then the United States will have a severe increase in interest expense and consume much of its tax revenue.  The Federal Reserve manipulated the interest rate down to cap the nation’s interest obligations.  The Fed is between a rock and a hard place.

As I have written in the past, the price of gold is the canary in the mine.  If the price shoots up, it is an indication that currencies are depreciating at a higher rate.  This is why the central banks have committed to manipulating the price of gold, especially in the last two years.  This can only happen to a point before the global investors as a whole see through the scam.  Once that happens, the paper price of gold (futures market) will decouple from the physical price of gold.  Backwardation is the first sign of this occurring.  Premiums for physical gold are beginning to increase.  At some point you will not be able to reconcile the paper market with the physical market.  When this day arrives, the paper market will crash and the physical market will take over in pricing.  I would expect us to see dramatic increases in the price of gold on a daily basis.

In the last seven years, the U.S. official debt has gone from $8 Trillion to $17 Trillion.  Employment numbers do not reflect any true improvement thus the tax base cannot pay off the increased debt.  It took the country 200 years to get to $8 Trillion.

Government bonds will collapse and pension funds will suffer dramatically.  Expect to see additional cities and municipalities file bankruptcy when this occurs.  Wealthy investors’ bond portfolios will dramatically contract which will cause them to quit spending.  This will have a cascading affect further affecting the Gross Domestic Product and reducing tax receipts.  In turn, the government will have to borrow more money.  There is not a positive outcome to this situation for the current system.

Currently in most countries, governments are the only buyers of their own debt.  What’s wrong with this picture?  This means that debt is increased simply by printing more money with no backing.  A decline in purchasing power is assured for those holding that currency.  Isn’t this fraud at the highest level?  This satisfies the Ponzi scheme definition.

A hyperinflationary depression is a likely outcome.  This is where prices increase even though demand from lower output decreases.  It’s a double whammy.  Higher prices with less people employed.  This would ultimately cause a reset to the system.  A system of equal weights and measures is the only plausible alternative once you have lost trust in the current system.  If people no longer trust the current money being issued, they will flock to an alternative store of value.  Gold backwardation is the first sign that this could be happening on a large scale.

John Williams of www.shadowstats.com stated in his July 17th newsletter:

Nothing is normal: not the economy, not the financial system, not the financial markets and not the political system.  The financial system still remains in the throes and aftershocks of the 2008 panic and near-systemic collapse, and from the ongoing responses to same by the Federal Reserve and federal government.  Further panic is possible and hyperinflation remains inevitable.

Our Heavenly Father is the only One with the path of deliverance from this mess we are in.

Recently, I was sent an email from the Marriott Hotel chain warning me that their “world-class” site had been compromised and that hackers had obtained some of the passwords to their clients:  “There have recently been attempts made to gain unauthorized access to a small number of members’ online accounts.”  Notice how there was little information concerning the extent of the compromise.  I wrote my first software program forty-two years ago in Fortran IV and have written over a million lines of code since.  If there is anything that I have learned over the years, there is always a weak link in any system and it can be exploited by hackers.  A system can be “fool-proof” but may not be “hacker-proof”.  Systems are built by people and those people are of varying levels of expertise.  Personal assumptions and bias are embedded in the design and implementation of those systems thus the hackers look for the unanticipated.  Since Our Heavenly Father is the only flawless One, all of men’s systems will contain flaws.

J.C. Penney’s computer network has been compromised for over seven years by hackers.  Other companies that were victimized included electronic stock exchange Nasdaq, JetBlue, Heartland Payment Systems Inc. and the Belgium bank Dexia Bank Belgium.  Hackers stole over 160 million credit card numbers.

We have a perception of security but the reality is we don’t have a guarantee of security.  This is why physical paper checks are superior to electronic transactions from the consumer point of view.  The physical piece of paper eliminates the ability of someone on another continent creating a fraudulent transaction on your checking account.  Banks assure us that online checking is safe.  Yes, the transmission link may be encrypted but how do you know that a hacker hasn’t loaded a “ghosting” program on your pc that records every keystroke of your keyboard then sends it to his database for later use?  If he knows what website your are at and knows what keystrokes you entered, then he knows your User ID and password.  Get my drift?  A smart hacker will simply gather the data until such a time he decides to sell it to someone else.  If hackers target a single bank or group of banks, how much damage could they inflict?  This is why I don’t do internet banking.

The Weakest Link applies to all aspects of systems and organizations.  The weakest link in credit processing is the minimum wage server who takes your physical card, takes a picture of the front and back and texts it to a buyer for $10.  Later that buyer encodes a card for use at a gas station or fast food restaurant.  The transaction may not be noticed.

As man’s systems become more complex, there are more inherent weaknesses in the systems.  At some point, those systems are at risk of collapsing.  This is true of the current global fiat currency system.  Since all of the major countries are fiat-based, there is no physical backing to keep men from exploiting the weaknesses of the system.  This is what lawless men do.  With over 1 quadrillion dollars in financial derivatives in existence, the question is not whether they system will have a fatal flaw causing a collapse, but when.

Another reason to simplify.  Also, you can’t “hack” gold & silver coins.  It may not be a bad idea to keep a couple of coins around, just in case.

If you believe that the current economic system of fiat currency is at risk of failure, then-

To minimize personal pain if and when the coming economic crisis arrives:

1. Your equities are held in certificate form.
2. You have no Federal retirement funds.
3. You have no CDs and investments in bonds.
4. You store your own precious metals.
5. You have no mortgage obligations.
6. You keep cash on hand for 6 months expenses.
7. You have no consumer debt at all.

If you believe that the current economic system is solid and will continue indefinitely, then-

1. Do nothing, all is safe and good.

This week JP Morgan announced it is exiting the physical commodity trade business amid scrutiny.  See: http://finance.yahoo.com/news/jpmorgan-exit-physical-commodities-business-195443069.html

Let’s review the scandals:

1. Banks manipulated Mortgage-backed Securities which led to the 2008 meltdown

2. Banks manipulated the LIBOR rate which sets interest rates worldwide on trillions of dollars of investments

3. Banks manipulate the gold and silver commodities

4. Banks manipulate the aluminum market

We must conclude that banks virtually manipulate the entire “current” financial markets in one form or another.  They have done this for years with impunity.  When they got into trouble, governments bailed them out with taxpayer funds or newly created money, a future liability to taxpayers.  This fraudulent behavior is worldwide.  The deception is so widespread that it would be hard to find a jurisdiction that was not affected.  What about your local bank?  Unfortunately its interconnectedness to the larger banks put it at risk as well.  Let me explain.

On a daily basis, the local bank sells its excess funds to a larger “correspondent” bank who has an ongoing relationship with it.  These funds are called “Fed Funds”.  A smaller bank might sell $10 million to the larger bank overnight.  The next morning the smaller bank receives the $10 million plus one day of interest income.  The larger bank will accumulate funds from many of its correspondent banks and sell to a money center bank such as Citibank, JP Morgan, etc.  Typically it will make a small margin buying and selling.  I worked the cash desk at the largest bank in Oklahoma in the 1970’s where I bought and sold around $100 million in Fed Funds.  Our overall deposits were about $650 million.  Our capital structure was under $100 million.   Effectively I sold more cash than our capital structure or stockholder equity.   This happened every day of the year.  What would happen if the New York bank failed to deliver back our money?  We would immediately become insolvent.  What would happen if we failed to deliver our smaller correspondent banks’ money?  They would also be insolvent.  These funds are sent through the Federal Reserve wire system.  The Fed has full knowledge of everyone’s accounts but it is all electronic money.  Currency never moves between banks in this market.

As you can see the current system is so interwoven that if one of the money center banks went insolvent, it could take down the entire system.  This current system is built on trust since there is no gold backing any of the money being traded.  The same is true for your bank deposits, your pension balance, your social security, and your stock brokerage account.

I am not excited about being the purveyor of bad news.  I relay this information so that you can make adjustments to your financial state.  Be cautious going forward.  Simplify, get rid of “stuff”.  Get out of debt.  Buy a little silver each month.  Keep the cupboard full of non-perishable food and rotate it to keep the food fresh.  Keep your vehicle serviced.  Try to lower your ongoing monthly bills if possible.  Pain is sure to come to the masses.  I cannot tell you when for Our Heavenly Father has not told me.  However, as you focus on hearing HIS Voice, HE will guide your steps in the turbulent times ahead.  I am convinced that Love will see us all through the coming economic storm.  HIS thoughts are above our thoughts, HIS ways are above our ways.  HIS Love has all the answers needed to endure the trouble ahead.  The Remnant will have taken on HIS Nature and will be plugged into the solution.  The rest of the world will be looking to this Remnant to show them the Way.  The illusions the populace were led to believe will be exposed and they will realize they have been blinded to the point of trusting a system built on smoke and mirrors.  There will be much gnashing of teeth.  If you have been forewarned about the coming challenges then you can deal with any fear that might try to grip your heart.  There will be many with much fear and desperation.  They will need to hear a calming voice.  It will not be the end of the world, only the end of a failed system.

The answers to the physical realm reside at a higher level in the Spiritual realm.  If you can connect to the Spiritual realm then you will find the answers you need for the challenges ahead.  We offer books at www.unity153.net to help “connect”.  If you can’t afford them, we will give them to you for free.  Write us at:

Servias Ministries

PO Box 1471

Bethany, OK  73008

If you want to join us in our pursuit of becoming mature “Sons of GOD”, join us at our weekly Bible study at 3PM CDT on Sundays.  You can watch live or watch the recorded previous broadcasts at http://www.ustream.tv/channel/the-baptism-of-love

We are doing our part to minister Love, life, and reconciliation to all men and women around the world.

The physical gold market is extremely tight to the point where the cash price is greater than the future price reflected in the paper market.  This is called backwardation.  This may decouple the two markets from each other.  Cash gold exchanges are cropping up in other countries around the world.

Turmoil will continue as the Fed continues to delay the reckoning that must occur.  The “Mother of all bubbles (Moab)” in the bond market will burst before long.  Some observers believe that gold will soar to $50,000 per ounce.  It that indeed happens, silver could soar to its classic ratio with gold of 16 to 1 thereby ascending to a price of $3,125 per ounce.

Morgan Stanley has $75 Trillion of derivatives on their books.  How in the world do you unwind that position?  The financial markets are highly unstable and finding the right security that will remain unaffected by the bursting of the Moab will be impossible.  The markets are now so interconnected, all paper investments will be in harm’s way.  You must find an investment that Bernanke cannot control.  You must reduce your leverage so that you can weather the collapse of markets when that black swan event triggers the bursting.  The correction will be violent and fast, just like the 2008 event.  The unsustainable debt must be liquidated.  The coming event will be severe.  No one but Our Heavenly Father knows how this will all play out.

When Moab plays out, men and women in their desperation will be looking for answers.  This is when Love will speak and provide true solutions, not just temporary, carnal ideas to sustain a failed lifestyle.  The Kingdom Infrastructure continues to be prepared for this eventuality.  The matured Remnant will be equipped with the answers mankind will finally seek.

In an interview with the Mayor of Detroit, he commented that there were 100 more cities in the same shape as Detroit.  There are many counties in the same predicament.  Historic assumptions for pension funds are no longer valid.  Interest rate increases are sure to damage the bond market which is a notable portion of the pension fund strategy.  What option does the Fed have but to continue the Quantitative Easing unless they want to burst the “pension” bubble as well.  There is not a plausible alternative without damaging “value” whether it be the U.S. Dollar, real estate perceived equity, stock market, bond market, etc.  The Fed hopes to allow slow inflation i.e. depreciation of the Dollar to fix the problem.  Holders of the Dollar may not let that happen.  Just how much more can the Fed create out of thin air before the market finally says “no more”?

The following graph provides perspective on cities that have shrinking populations:

Cities and counties base their revenue projections on perpetual growth.  Oops!

Is Our Heavenly Father setting the globe up for a transition?

GlobalEurope Anticipation Bulletin believes and reported that the 2008 crisis as a warning before that of 2013. All of the world’s regions won’t be affected the same way but all will suffer. According to LEAP/ E2020 the stages of this second crisis  as follows:

-end 2013, financial impact: collapse of financial markets especially in the US and Japan. Banks can no longer be saved by the states and BAIL-Ins are put in place;

-end 2013 / 2014 spreading to the real economy: The financial impasse causes / reveals a major world recession and the reduction of international trade;

-2014, social impact: The economic deterioration causes unemployment to explode, in the United States the dollar’s decline lowers the standard of living, riots mushroom everywhere;

-2014 political crisis: the governments of the most affected countries are under fire for their handling of the crisis, forced resignations and early elections are expected, if not coups;

-2014-2015, international management of the crisis: together Euroland and the BRICS impose a new international monetary system and lay down the basis of new global governance;

-2015: The least affected regions have exited the crisis definitively;

-2018: It will take the United States, the United Kingdom and Japan five years to purge themselves of the crisis with, ultimately, a greatly reduced standard of living and a considerable loss of global influence (resulting from their refusal to participate in the re-casting of global governance on new bases).”

To subscribe to http://www.leap2020.eu/English_r25.html , go to:  http://www.europe2020.org/spip.php?article25&lang=en

Each of us needs to be personally prepared.

Pension Funds attempt to look out 50 years in their investment horizon.  The problem is that they are just a group of men taking their best educated guess.  In the 1980’s I had a life insurance policy that assumed long term rates to average 9%… wrong!  This was after the Federal Reserve had pushed rates up to 15% and above.  Now long term rates are pathetic and have lasted for 5 years due to another action by the Fed.  Detroit can thank the Federal Reserve in part for its bankruptcy.  Pension Funds are suppose to be self-funding based on the contributions of those who are now receiving checks.  However if you have financial bubbles popping everywhere, how can you properly invest the principal?  Money Managers used to look at “return on investment”.  Now they look at “return OF investment”.  There are no safe paper assets anymore.  You can thank the American Politicians for allowing banks to become casino operations.  The only assets with no intrinsic liability attached are gold, silver, oil, gas, farm land, and other tangible assets.

“Muni Retirees Face 90% Loss Under Detroit’s Pending "Free-Fall" Bankruptcy”

Wouldn’t you hate to wake up to that headline after spending 20-40 years as a city employee?

This is the historical 10 Year U.S. Government Bond Yield.  Get the picture?

The Federal Reserve has painted itself into a corner.  Can you reduce interest rates to a negative level?  The 10 year bond yield has increased and that worries Bernanke and company.  There have been some resignations at the Fed and at the same time Harry Reid is trying to make it easier to get President Obama’s appointees approved through the Senate.  See: http://abcnews.go.com/blogs/politics/2013/07/harry-reid-vows-to-break-filibuster-rule-in-this-new-era/

I do agree with Reid, this is a new era coming but I have a different view of how it will look.  The U.S. is desperately trying to keep the Dollar in demand by initiating trade agreements that are dollar-based, mainly with Europe.  In the meantime, the Kings of the East are putting together a financial infrastructure that eliminates the Dollar as the world reserve currency.  They have had enough of the U.S. exporting devaluation to their shores.

I suspect that we may have one more attempt at a smackdown of gold and silver prices before the bottom of prices is in.  The problem in another smackdown is that most of the weak sellers of gold and silver have already exited the market.  The current buyers are longer term investors who are looking for bargains and are not scared by a price drop.  On the contrary, they hope they get another rock-bottom buying opportunity.  The current prices of gold and silver have put stress on the mining companies.  I am focusing on those companies with zero debt and cash in the bank.  Some of the senior producers will come out with ugly numbers this quarter as they cut away any excess and take the loss.  This should provide a stronger sector in coming quarters.

Bernanke publicly eluded to the fact that the unemployment numbers may be understated.  I wonder if he is now a subscriber to John Williams’ www.shadowstats.com?  We’ve been reporting this reality for some time.  What kind of shape is the economy in?  The following graph from Zero Hedge may tell the story:

How can a central bank manipulate the price of gold downward?  Let’s assume that you have 8,134 metric tons of gold in the depository.  Recently, a 50 ton sales order was issued.  The following table provides the latest estimates of official reserves (http://en.wikipedia.org/wiki/Gold_reserve):

As you can see, only a handful of countries could back a single sale of 50 tons.  From a practical matter, the U.S. is the only country that could put 50 tons on the market without a notable outcry.

Step 1:  Create a contract to lease 50 tons to an agent such as Morgan Stanley or Goldman Sachs.  With a lease in place, you can still claim ownership of the 50 tons of gold on your balance sheet.  The leasing price is set at 1% per annum.  The return of the metal is “indefinite” or on demand.  (Wink, Wink)

Step 2:  The agent bank sells 50 tons into the market causing the price to plummet.  The market is overwhelmed with such a large sell order thus the price goes down until more buyers enter in.

Step 3:  The agent bank allows the momentum of price decline to take hold as “momentum traders” jump on board to ride the price downward.  They sell short into the gold futures market and push the price down further.

Step 4:  Once a new price level becomes stable, the agent bank starts buying back the original gold (with the proceeds in Step 2) at a much slower pace, booking a profit and hoping to keep the price at the lower level.

So, what is the problem?  Gold has been rising in price for over a decade and the agent bank cannot recoup the gold sold into the market.  The central bank may not be able to get the gold back into its physical possession.  The gold reserves then only represent what is on paper versus what is physically in inventory.  Some observers believe that there are virtually no reserves left in some countries.  The Germans want their gold back from the New York Federal Reserve Vault but have been told it will take years to get it back on their soil.

China is ranked #6 with 1054 tons but there are sources who claim that China has at least 4,000 tons, possibly up to 8,000 tons.  Add India to the mix and you can see how the Kings of the East could move the world’s reserve currency to their control.  Both countries continue to aggressively accumulate gold, especially at these low prices.

If the U.S. Dollar loses reserve currency status, the price of gold will skyrocket in terms of the U.S. Dollar.  Paper wealth will substantially decline for those who hold the Dollar.  The only thing keeping the Dollar from tanking is the perceived safety of holding Dollars.  If that perception changes, volatility would occur overnight.  Why do you think that the media is so focused on managing the perception of the populace?  Why do you think that there are so many Executive Orders in place to handle a widespread upheaval?  What reason did the authorities put in place capital controls so wealth could not flee the borders?  Why do you think the military is now being used for domestic police assistance?  The central planners are concerned that they will lose control.  If they only realized that Our Heavenly Father is really in control, they could rest easier at night.  Love will prevail.  Yes, it is counterintuitive to what a person thinks is needed.  However, Love framed the universe.  I think it can resolve a few economic issues.

P.S.  If gold is such an ancient relic, why do countries keep their reserves?