Servias Ministries Blog

Yes, every person in America has a $45,300 liability which does not appear on their personal balance sheet.  Overall, this equates to a $14 Trillion deficit of the United States.  If you included the unfunded liabilities you could easily triple that number.  Is this why this little girl is so disturbed:

The politicians have mortgaged her future by creating a world of entitlement in order to perpetuate their own agendas.  Lust is the benefit of “self” at the expense of others.  This country is experiencing a slow train wreck and everyone is in denial.  Asset prices are propped up by ramped up government spending taking up the slack for the reduction of consumer spending.  Unemployment is high and drug use is even higher.  The Mexican drug cartels have recently expanded their terror to Acapulco and surely more tourist destinations will be affected.  How can we stop them?  Quit buying their product.  I would dare say that every extended family in America has at least one member with a drug problem.

Europe’s debt crisis has been on the front pages in recent days as though the U.S. debt problem is resolved.  Not!  The States budgets are in a mess and they will soon have to start making interest payments on their borrowings from the U.S. Treasury (who created money out of thin air).  Doncha luv it!

Chinese President Hu Jintao has said the international currency system dominated by the US dollar is a "product of the past".  The Chinese are methodically working on a means to ultimately disconnect from the U.S. Dollar denominated trade deals.  Right now, the U.S. Dollar is the best looking currency of the “ugly” sisters.  At some point, I believe everyone will suddenly wake up and conclude that a gold backed medium of exchange is the answer.  If that happens, the gold peg will surely be notably higher than the exchange rates today.

It just keeps getting more complicated!  I think she is possibly sensing the problem:

The financial markets ended the week strong and all the bad news is being discounted.  Gold & silver took a hit as investors locked in profits from the recent rise.  The government deficit has once again taken a backseat to other news.  Nobody is looking at the elephant in the room.  Government spending cannot be cut easily.  Medicare, Social Security, and Medicaid account for 60% of the government budget, Defense Spending and interest on the debt account for 20% thus totaling 80%.  The rest of government spending accounts for 20% of the budget.  Where could a politician who wants to get reelected cut spending enough to make a difference?  The entitlements (Medicare, Social Security, and Medicaid) are untouchable.  I made mandatory contributions into these programs my entire career with an expectation of distributions at retirement.  Being “self-employed” required double the payment.  I want my money back (with accumulated interest) just as every other worker wants his or her benefits.  The problem is that the government took my money and spent it in other areas without my approval.  If a private entity had done this, they would be prosecuted and in prison today.  Many recipients have received substantially more than they paid in.  The food stamp program has supported more recipients than its original intent.  It has been reported that one in six are on food stamps in the U.S.

Oil prices may hit $120 per barrel by summer.  2011 is paralleling 2008 with one exception: the economy is weaker going into the year.  $147 oil in 2008 caused the economy to stall whereas this year I expect the same impact at $120.  I hope you bought that fuel efficient vehicle, we did.  If the oil prices gather steam and approach $120, then the stock market will head back south again.

Gold prices are correcting again.  Over the last 10 years of this bull market, I have heard naysayers call the end of the rise of gold.  Each time they were wrong.  Are they right this time?  From a macroeconomic view, one would expect gold to continue its rise relative to the fiat currencies.  Right now, the U.S. Dollar is the best looking house on an ugly street but it is still ugly!  Nothing has changed from a fiscal point of view.  Government spending is propping up the economy and true unemployment is still high.  It will be several years before unemployment and housing can be corrected.  Don’t forget the toxic debt on bank balance sheets.  The banks are still misrepresenting their financial health.  If interest rates rise, the Fed could become technically insolvent.  If that happens, the U.S. taxpayer would be the lender of last resort.  Is the U.S. economy unsinkable?

The Scripture makes it quite clear the commerce should be guided by the principles of Love: equal weights and measures, the Golden Rule, Love your neighbor as yourself…  Today, that is not the American standard.

See: http://www.huffingtonpost.com/2011/01/04/federal-reserve-rescission-regulation_n_804334.html

The large corporations and banks continue to focus on serving the “elite and wealthy” at the expense of the average person.  Our Heavenly Father will judge the situation and cleanse the system as He has done so many times in the past.

Many Investors are optimistic about the stock market for 2011.  Many think the market will grow by 20% this year and very few believe the market will go sideways.  For whatever reason, all of the problems of 2009-2010 seem to no longer matter.  The states have a funding problem.  Housing prices are not expected to improve in the foreseeable future.  Quantitative easing which causes inflation seems to be acceptable now.  The government deficit and liabilities are astronomical and nobody has a solution to a resolution that will not decimate our children and grandchildren.  How quickly do we forget and deny these structural flaws in our system.

Denial and blindness are taking hold once again.  Logical conclusions do not apply when the masses are addicted to leverage and spending.  In the early ‘90’s I was working for a company where I earned a healthy salary.  I knew I would be leaving in early 1993 and start my own business again.  We had become accustomed to the standard of living supported by my salary.  It was extremely difficult to curb our spending prior to my departure.  There was such an emotional tie to spending money and there were many “corrective” discussions concerning our monthly spending habits.  Once I departed, we suffered an emotional “hit” adjusting to a new lower level of spending that comes with starting a new business venture.

Currently, the U.S. Dollar is the least ugly of the ugly sisters.  The Euro crisis caused the relative strength of the Dollar but the ultimate test was to compare the Dollar to hard assets.  Short term volatility masks the underlying problem of Dollar depreciation.  A sovereign debt crisis could move all currencies in a downward spiral.  The FDIC closed 157 banks last year and 2 were closed yesterday.  Most of these banks were smaller but since the Fed provided funding for the “too big to fail” group, the closures misrepresent the health of the financial system.  The amount of toxic debt on the banks’ balance sheets is still a mystery to most of us.

Oil prices are firming around the $90/bbl level.  Oil consumption is on the increase and will place upward pressure on the price.  $100 oil is an easy target.  If the price advances too quickly, the current economic recovery could quickly stall out.  China’s actions to slow their economy will impact the price of oil by restricting consumption.  The global connectivity of commodity prices make it impossible to project short term directions of prices.

The U.S. Dollar has achieved a purpose of extracting true wealth from around the globe.  By being the world’s reserve currency, it has been used to trade for the productive capacity of other countries and direct those resources to those who hold the Dollar.  For example, when I was in Romania in 1993, I could buy a 12 course meal for about $5.  An ice cream cone was five cents.  My Dollars were well received in that country.  With the consistent policy of inflation of Dollars, we buy goods and services then pay for them with a lower value.  The problem is that in Kingdom economics this is a sin of unequal weights and measures.  At some point the Dollar will be judged and found lacking.  The timing will be according to Our Heavenly Father’s perfect plan, will, and purpose.  I trust that HE will prepare HIS sons and daughters for this event.  As each of us dwells in HIS Word and Presence, we will be led to make preparations for such an event in whatever form it takes.

People are addicted to drugs, things, making money, achieving stardom, and any other thing that would strengthen and support pride, ego, and the flesh.  This causes them to be blinded from the truth, wisdom, and understanding.  What is so obvious to those who are not blind has been withheld from those who are.  Our prayers should be for Our Heavenly Father to lift the veil from those who are blind (including our own partial blindness).  We cannot know just how HE would do that but throughout history HE has removed any distractions such as their temporary wealth, houses, and other trappings.  It would not surprise me to see HIM perform another “cleansing” as HE has done so many times for the Kingdom economy will not be run in the same fashion as the current system.  As always, HE will raise up a people to lead others toward HIS Kingdom.  May the readers of this blog be in that company.

It is not “Business as usual”.  We are in the midst of epic government intervention with Quantitative Easing by the Federal Reserve at the forefront.  Mal-investments are not allowed to fail and cleanse the system.  Instead, the government claims that they are too big to fail and prop them up with our money.  On the other hand, you and I are in the “too small to care about” category.  This is why unemployment is officially 9.8% with the true rate much higher.

Why aren’t we seeing the same results as the 1930’s?  It is because our infrastructure is more advanced and people who are still working have sufficient assets to help those without.  This reality does not change the fact that we are at risk.  Complexity evokes a more severe contraction once it fails.

Alternative energy is not working.  The concentration of energy contained in oil and gas are much greater than most of the alternatives.  More agencies are admitting peak oil occurred between 2005 and 2006.  The cost of energy will continue to rise and unless there is a global depression, expect gasoline prices  to remain strong.  Rail base transports will do well.  Government subsidies of ethanol are simply throwing away money that could be used for better purposes.  We all love the farmers but subsidizing ethanol will only delay the inevitable.

Ben Bernanke will continue to depreciate the Dollar and he will defend an inflationary path.  This means that he must keep rates low to encourage consumer spending.  Absent that, the government must spend which is occurring at an epic pace.

Christmas spending was up but I believe it was do to pent up demand by families holding off until the Christmas season.  Now we are back to removing debt from our balance sheets.  Everyone needed a breather over the Christmas holidays and many of the restaurants were full again.  After New Year’s Eve, the restaurant lines had vanished, once again.

Oil will be the hot topic among the press.  A former Shell exec is making the rounds on the TV circuit laying the groundwork for expected higher oil prices.  We have been warning about  this for some time now.  Prepare yourself for $3-$4 gas at the pump.  See: http://www.washingtontimes.com/news/2011/jan/2/dramatic-spike-in-gas-prices-forecasted/

Nobody knows how to manage this global economy except Our Heavenly Father.  It is simply too complex.  In the meantime, expect volatility of commodity prices.  The gold bull market is still intact and will try to shake off all timid investors.

Good money must have a number of unique characteristics.

(1) It must be durable, which is why we don’t use wheat or corn.
(2) It must be divisible, which is why we don’t use a Picasso painting or jade statues.
(3) It must be convenient, which is why we don’t use lead or copper or real estate.
(4) It must have value in itself, which is why we don’t use paper.
(5) It must be transportable, which means that large values must be contained in a small area (a gold coin weighing only one ounce can be worth far more than fifteen hundred dollars).
(6) It must have a long history of being accepted as a store of value. Gold was considered valuable as long as 5,000 years ago in the age of the Egyptians.
(7) It cannot "disappear" or be used up in manufacturing as is copper and even silver. Thus, the gold coin that you have in your hand may have been part of Cleopatra’s earrings centuries ago. Almost all the gold that has ever been discovered is still available in one form or another.
(8) It must not be the liability of any sovereign nation, nor should it require governmental law to make it money. For instance Gold requires capital, talent, risk, sweat and courage to recover or to accumulate.

Hmmm! That’s why gold just won’t go away.

John Williams’ website www.shadowstats.com provides an “apples to apples” comparison for historic government statistics.  Over the years, politicians have redefined inflation, the deficit, and any other statistic the market follows.  Why?  To improve the perception of the people that all is well.  I guess they think we are too stupid to comprehend the facts and respond prudently.  This website is all about serving mankind, not manipulating man for self serving motives.  Wouldn’t it be nice if politicians had this epiphany?  In the mean time, it would be prudent to stock up on non-perishable food items as you are led.  Buying a can of beans for 50 cents now versus 75 cents in twelve months is equivalent to a 50% return on investment.  Banks are not offering that kind of return!  Let the truth and facts speak for themselves.

In the pharmaceutical business, death is an “unintended outcome”.  What a polite expression!  Sanitizing events is done with positive and negative words.  In the political world it is called putting “spin” on the situation, spin the facts around to make a negative look like a positive.  This methodology is intended to sway the psychology of the masses into following the desired path of those in power.  It has generally worked in the past.  It is well known that the national media “sanitizes” the news to fit an agenda of the owners.  The term “politically correct” comes to mind.  Wikileaks upsets the status quo and paints a different picture of those in power.  When secrets are revealed, we now see the “character” of those involved.  It is interesting that attempts to hide the truth of any matter ultimately fails.  Ben Bernanke used his interview on "60 Minutes” to further the agenda of Quantitative Easing, or printing more money out of thin air.

What are the ramifications of quantitative easing?

Higher inflation, especially the essentials such as food and energy

Devaluation of you life savings, your dollars will buy less

Lowering interest rates, your life savings will not earn enough to support your retirement years

Allow big banks to continue their huge bonuses by giving them 0% loans to invest in 3% Treasury securities.  (Why can’t I get in on that lovin’?)

Risk of Hyper-inflation, Bernanke is in uncharted territory and there is no positive example that can guide him through this money printing efforts.

A meltdown in the Bond Market, if nobody buys U.S. debt, interest rates will rise rapidly and create serious losses.

Currency failure, history is sprinkled with similar attempts that have resulted in this outcome.  Are we smarter than all the historical figures of the past?

Gold & silver, energy, and food related investments provide the best “insurance” against loss of value if these rounds of quantitative easing continue to pump up the money supply.  Do not leverage yourself in these times.  Be safe.  Reduce your liabilities and monthly cash flow requirements.  Be nimble.

The most recent unemployment report set the rate at 9.8%, an understated number.  However, the stock market shrugged off this report because Ben Bernanke has promised to keep the market up.  How will he do this?  By printing as much money as is needed.  This is why gold and silver are moving into new highs.  As those of you who have been reading this site for some time, I have been preaching about hard assets and the need to protect yourself against the Fed’s loose money policy.  We are seeing the effects of this policy in the precious metals market.  Some sliver mining stocks were up notably this week.  The mining stocks are in “catch up” mode trailing the bullion prices.  These companies are generating huge amounts of cash and profit at these price levels and they appear to be at the early stages of this secular bull market.

Each of us probably has friends who are unemployed or underemployed, or we may unemployed as well.  The media continues to paint a rosy picture about the economy but it is not consistent with what we see at the local level.  Restaurant waiting lines are minimal versus two years ago.  Prices are soft for capital goods and houses.  Those flat screen TV’s are getting cheap.  However, the perceived wealth of the citizens of the U.S. is dwindling.  The equity in the home is shrinking on a monthly basis.  A million dollars in the bank will only yield up to $35,000 in a year versus $50,000 thirty-six months earlier.  Inflation is eating away the purchasing power of the retired.

For the past 60 years, the growth formula has included leveraging your future earnings in order to acquire an asset today.  Remember the 36 month new car loan?  It then went to 48, 60, and finally 72 months.  Unfortunately the buyer’s asset depreciated quicker than the loan balance.  I’ve known families who have been making perpetual car payments, unable to get out of the leverage spiral.  Dave Ramsey has built a business (or ministry) on counseling families in the area of debt reduction.  “Act your wage” is a great reminder that we should not buy what we can’t afford.

If you are out of debt and the stock market crashes, you will not lose sleep the next night.  But, if you are in debt and your future earnings may be at risk thus placing your house and cars at risk, then you can look forward to some sleepless nights.  For the last 30 years, I have been preaching that “cash is king” relative to personal money management.  During that time I have seen people suffer bankruptcy, businesses evaporate, and once wealthy people live in the past and in denial of the present.  Look in the closet and find those things you could not live without.  Were they really that important to your life?

“Relationships” is what life is all about.  It is not about your house, your car, your position in the community, your job, it is about blessing others.  Look around and see if there is someone hurting and in need.  Let the Love of Our Heavenly Father be seen in your face.  Give with an attitude of gratitude.

Though we have often looked at the economic crisis in the U.S., Europe has it own challenges as well:

Man’s attempt at a one world government is not working well.  Our Heavenly Father has a better answer!