Servias Ministries Blog

Bail-In Negotiations Continue

Depositors’ money around the globe continues to be a target for the central planners.  Rather than returning to laws that protect depositors from bank “gambling” activities in the derivatives arena, the focus is on how to keep taxpayers from taking on the burden of bank failure.  They act as though the depositors and taxpayers are two totally separate groups.  So who are they targeting?  All of us in the end.

See: http://www.stuff.co.nz/world/europe/8829748/Banking-collapse-bail-in-dispute

Japan’s Economy is in shambles

Expect Japan to have an ugly economic event within the next eighteen months.  Their aging population will force a collapse in bond prices.  There appears to be no way that Japan’s bonds can be funded by the population.  Will the contagion spread to other parts of the globe?

1st Quarter Gold Demand: Look to the East

They want to thank the West for depressing the price and paying for their gold with exported U.S. Dollars.  What a deal!

I finally received my tax return for 2012 back from the tax authority. It puzzles me!!!
They are questioning how many dependents I claimed.
I guess it was because of my response to the question: "List all dependents."
I replied: 1 million illegal immigrants;  1 million crack heads; 4 million
people on government support; 1 million people in over 50 prisons;
and 5000 persons in the Federal and State Parliaments, plus 1 useless
Prime Minister."
Evidently, this was NOT an acceptable answer.
I KEEP ASKING MYSELF, WHO DID I MISS?

(From our friends from Down Under)

You may insert your own numbers and names.

83% of the AAA rated Mortgage Backed Securities (MBS) created during the housing bubble were later downgraded.  What is wrong with this picture?  Pension funds are restricted to what investments they can acquire.  Often, they can only acquire securities that are “investment grade” or AAA.  A scathing article was written by Matt Taibbi.  He writes for the Rolling Stone Magazine.  His language can be offensive, you have been warned:

http://www.rollingstone.com/politics/news/the-last-mystery-of-the-financial-crisis-20130619

‘We were told to lie’ – Bank of America employees open up about foreclosure practices

See: http://rt.com/usa/foreclosure-america-employees-bank-946/

The hailstones keep getting bigger!

This is the takedown I have been expecting.  At this writing, gold has dipped below $1,300:

Silver dipped below $20:

This is the classic takedown play after the Federal Reserve’s meeting.  The intent of this takedown is to dissuade investors from fleeing to the precious metals as the Fed is continuing its debasement of the U.S. Dollar to the tune of $85 Billion per month.  The markets are now addicted to the Quantitative Easing (money printing) and when you take away the addict’s stash, he goes into severe withdrawal.  If aggressive money printing isn’t working, why would you continue it?  Out of fear of collapse.

Is this the bottom?  It is hard to say.  Typically, Friday is the day the central planners force the price down in order to “paint” the technical charts into bear territory.  Nonetheless the second half of this year will possibly be chaotic.  Once again, the Chinese are smiling as they buy these metals at bargain prices… unbelievable!

The following site lists the Fed’s bailout recipients.  If you have much money in any of those institutions, it might by wise to diversify.  Even if they paid back the funds, they still may have the issue of mismanagement or a less than robust business model that put them on the list in the first place.  See: http://projects.propublica.org/bailout/list

The following chart shows the “official” position of both numbers:

Calls for an audit of Official U.S. Gold Reserves have been left unanswered.  The true public debt with unfunded liabilities moves the red much higher.

Additionally, one of the most admired and read of the investment newsletter writers, Richard Russell, writes about what he calls, “The Great Gold Rip-off.”  In his recent newsletter, he is quoted as saying:

“My guess is that China and Russia soaked up a good deal of the bargain-priced gold near the bottom of the panic. China waits patiently while the US spends its way into bankruptcy.  Which reminds me, there’s still lots of talk about the true amount of gold owned by the US.  Then why the hell doesn’t the government or the Fed finally audit our gold holdings and put an end to the rumors?  From what I understand, neither the Fed nor the US government want an audit.  If the gold is really there, then why don’t they put an end to all the rumors?  For heaven’s sake, let’s have an audit — or is there really something to hide?

I feel we are besieged with rumors, secrets, lies and manipulations.  I’ve felt this way before, but I’ve never felt this strongly that we (Americans) are being lied to and manipulated.  What’s to hide?  Jesus told us that we must know the truth, and the truth will make us free.  Then for God’s sake, start telling us the truth!  My intuition tells me that if it’s a secret, it’s probably evil.  Ultimately, good or bad, everything comes to light– although it may take time.”

To subscribe to his newsletter, click here: https://ww2.dowtheoryletters.com/ServicesOnline.nsf/Subscription+Form?OpenForm

The host of the 2014 World Cup is having its own internal economic issues.  See: http://www.businessweek.com/news/2013-06-17/brazil-protests-to-resume-after-rousseff-jeered-at-soccer-match

Having traveled internationally, I can attest to the disparity of wealth in many countries:  The wealthy and the poor.  A strong middle class is needed to promote economic stability and in many countries there is not much of a middle class.  America’s strong middle class is disintegrating.  The change in laws concerning the financial institutions have created an environment where the average middle class family cannot properly plan for the future.  Ultimately stagnation comes and shrinks the middle class structure.

The Brazilian people are getting tired of their conditions.  The Internet has served to provide a “second witness” to their situation.  Communication is typically the first thing to be removed from a country during war.  If you can isolate people, you can more easily control them.  It will be interesting to see if the Internet becomes restricted from free speech in Brazil.  Until then, videos like the one below will provide opinions other than the “official” position of a country:

This video is not provided as a political statement about Brazil but to simply show the global concerns expressed by a diversity of people.  The true solution is from Our Heavenly Father and revelation from Above that will resolve all that the young lady mentions as Brazilian infrastructure issues.  Love is the answer to our problems and until it is fully embraced by those in charge, dissension will continue.  As Our Heavenly Father places HIS remnant in positions of authority, the Kingdom will come.  I think it would be fabulous if everyone in Brazil would read our books on Love and implement the revelations contained therein.  You could then embrace a World Cup because everyone would be working together instead of being in division.  The solution for all countries remains the same: Love!

Japan, the world’s third largest economy, has tried to print money as a way to get its economy growing again.  The strong economic growth of the 1980s ended abruptly at the start of the 1990s. In the late 1980s, abnormalities within the Japanese economic system had fueled a speculative asset price bubble of massive scale by Japanese companies, banks and securities companies. The combination of exceptionally high land values and low interest rates briefly resulted in heightened liquidity in the market. It led to massive borrowing and heavy investment mostly in domestic and foreign stocks and securities.  Hmmm!  This sounds like what the U.S. has been experiencing.   There is one big difference.  The economic size of the U.S. dwarfs the other countries and can cause the entire global system to suffer the contagion.

The following graph depicts the recent Japanese Stock Market performance from Nov 11th, 2012 to May 28th, 2013:

Japan attempted to use the money printing presses to inflate its economy.  On a temporary basis it worked… only temporary.

It seems that the U.S. learned nothing from the 2008 Financial Meltdown.  The second crisis is continuing to develop.  This crisis could have been avoided if the rest of the world had taken note that the United States is unable, unwilling, and structurally incapable of reforming itself.  Greed prevailed in the “too big to fail” banks.  Unfortunately the institutions of global governance have proved to be completely ineffective and powerless in managing the crisis.

Self preservation at the personal level has prevented those currently in control to take any action for the good of the average citizens.  Recent revelations of the widespread eavesdropping activities only serve to expose the willingness to bypass the “Sacred Trust” of the people in order to promote skewed agendas that have greed and power at their source. “Power corrupts; absolute power corrupts absolutely.”

We are moving into a time of upheaval.  One must continue the preparation even though there are no immediate signs in view.  Be cautious and move your trust away from the current system.  Put your trust in Our Heavenly Father.  The less trappings of the world you have, the less “stuff” you must maintain.  A move toward “personal efficiency” needs to be made.  De-clutter your life, simply put.

In the coming months, you will hear more about the “Bail-in” method of financial institutions staying afloat.  This is where creditors’ money is converted to bank stock, without their explicit approval.  It is a simple balance sheet method of converting a liability to equity and voilà, you have improved equity ratios and stability.  The poor creditors are now holding stock in a financial institution that made poor decisions that caused this display of magic.  If creditors wanted to hold stock, they would have invested in the bank’s stock to begin with.  In essence, this is robbery and fraud mixed together.  Only in a Theocracy would the creditor be assured of proper treatment.  “Wax on, wax off”, “Bail in, bail out”… it is all sounding the same.

I write these economic blogs to keep you abreast of the condition of the current system.  We need to monitor the current system as we personally prepare ourselves for the upheaval ahead.  The personal preparation must continue as each of us matures toward that “Remnant” stage.  We must be vigilant in our focus to hear Our Heavenly Father, gain new revelation from Above, and mature in Love toward others in our daily walk.  We have been given the opportunity to prepare.  Let’s not overlook it.

The latest buzzword is SIFI and this particular buzzword can “buzz” right through your checking account without notice.  In a recent speech, Fed Governor Jeremy C. Stein at the "Rethinking Macro Policy II," a conference sponsored by the International Monetary Fund, Washington, D.C. on April 17, 2013 made the following statement about large banking institutions:

“Where do we stand with respect to fixing the problem of "too big to fail" (TBTF)? Are we making satisfactory progress, or it is time to think about further measures?

I should note at the outset that solving the TBTF problem has two distinct aspects. First, and most obviously, one goal is to get to the point where all market participants understand with certainty that if a large SIFI were to fail, the losses would fall on its shareholders and creditors, and taxpayers would have no exposure. However, this is only a necessary condition for success, but not a sufficient one. A second aim is that the failure of a SIFI must not impose significant spillovers on the rest of the financial system, in the form of contagion effects, fire sales, widespread credit crunches, and the like. Clearly, these two goals are closely related. If policy does a better job of mitigating spillovers, it becomes more credible to claim that a SIFI will be allowed to fail without government bailout.”

See: http://federalreserve.gov/newsevents/speech/stein20130417a.htm

Does he think that the ultimate depositor isn’t also the taxpayer and that the taxpayer isn’t the ultimate loser of the SIFI bank’s gambling policies that have been allowed to infiltrate the entire financial infrastructure?  Does he think there are a bunch of smaller banks isolated from the impact of a SIFI bank melting down?  C’mon!  Help me somebody!  They have been pushing for a fully integrated financial system so they can control the population and now it is poised to bite the on the ______. (please insert your own word)

The systemic risk of the overall system is being overlooked, misunderstood, or just plain misrepresented.  Only Our Heavenly Father knows how this will play out.  The probability of a Black Swan event is on the rise.  The central planners have allowed the system to become too complex to maintain control.  None of this is unexpected by Our Heavenly Father.  Man’s systems independent of Our Heavenly Father always end up failing.  It is only a matter of time.

This is not your parents’ era where there were no worries about the money in the bank being at risk.  It is important to understand what is being contemplated to save those “too big to fail” banks.  Don’t think that local banks are isolated.  When I was in banking, I studied and analyzed the operations of the “Cash Desk” where Fed Funds (excess bank cash on hand) were traded on a daily basis.  I would buy $10 million from a community bank, packaged it up with other community bank Fed Funds purchases and sale up to $250 million of Fed Funds overnight to a NY money center banks such as Chase Bank.  The next morning the funds would be returned to us, then the community banks.  Then the process would start all over.  On Friday we would sell for 3 days to cover the weekend.  What would happen if a Black Swan event happened on Friday night?  On Monday, all the downstream banks would be out of cash.  Oops!

Resolving Globally Active, Systemically Important, Financial Institutions
A joint paper by the Federal Deposit Insurance Corporation and the Bank of England
10 December 2012

From the FDIC Paper Executive Summary:

In the U.S., the strategy has been developed in the context of the powers provided by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Such a strategy would apply a single receivership at the top-tier holding company, assign losses to shareholders and unsecured creditors of the holding company, and transfer sound operating subsidiaries to a new solvent entity or entities.

As a depositor, you are an unsecured creditor.  Think about it.  What is your tolerance for risk?

See: http://www.fdic.gov/about/srac/2012/gsifi.pdf