Servias Ministries Blog

What’s wrong with this picture:

“The love of money is the root of all evil.”  Money represents physical resources, our labor, inheritance, and other forms of tangible wealth.  For most of us, our savings represents our past labor converted and stored as a means to pay for future goods and services- retirement.  Money in itself is not evil for it provides a means to store our current labor for the future, a noble cause.  The problem arises when you leave Love for mankind out of the equation.  When you disregard “your neighbor” then you have broken the most fundamental Biblical Law:  Thou shalt love thy neighbour as thyself.  This is where the problem lies.  When you sacrifice your fellow man’s wellbeing to satisfy your own lusts, you have become lawless.  When you are empowered to continue the lawlessness, those who have power and authority over you also open themselves up to judgment.  The current system is giving rise to a destructive force that will ultimately place the citizenry in peril.  A house divided against itself cannot stand.  The 2010 elections will continue to uncover the primary culprits but it is not known if the electorate will finally respond with “enough”.

President Obama has cancelled the “National Day of Prayer Service” this year: http://latimesblogs.latimes.com/washington/2009/05/obama-cancels-national-prayer-day-service.html  This continues to speak of the corporate departure of the nation as a “Christian” nation.  For those who study history know that this direction ultimately yields destruction to nations who depart from their Biblical roots.  The government is to serve the people, not the opposite.  We have people who have lost their jobs, lost their homes, lost their dignity, to a system that once protected the average family from special interests.  I pray that the revelation of Love permeate the hearts of the people before long.

The following 12 minute video clip summarizes what I have been writing (and warning) about for the last few years:

Visit msnbc.com for breaking news, world news, and news about the economy

The problem is so large that only Our Heavenly Father’s intervention will actually “fix” the problem.  Otherwise, “We’re toast”!

The benchmark global borrowing rate is based on the 10 year U.S. Treasury Bond.  On March 1st, the yield was 3.61% whereas on March 26th, the yield was 3.91%, up 30 basis points (.3%). See: http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml  That may not seem much to the average person but in global finance, this is a major move that could affect sovereign borrowing costs in the billions.  Washington’s optimistic views on healthcare costs are based on low borrowing rates, optimistic healthcare needs, and healthy economic expansion. “Not gonna happen”.  Expect the 10 year cost of healthcare to run $3 Trillion and will add an unhealthy extra $1 Trillion to the U.S. debt level.  I’m not the only one who knows this, the bond market is beginning to flex its muscle.

California is worse off than Greece.  Being the most populous state in the Union, California may be the first domino to fall.  The State Treasurer is once again warning about the re-instatement of IOU’s.  The housing crisis continues to be a drag on their economy and the commercial real estate crisis will reach full swing this year.  The Federal stimulus dollars are drying up and the jobs bill may not be enough to keep Congressmen in office this November.

Illinois’ bond rating has been lowered by Fitch.  See: http://www.bondbuyer.com/news/-1010228-1.html .  This does not bode well for the other states who are also heading for the cliff.  Schools around the U.S. are being downsized or closed.  Teachers are being cut from the payrolls and schools are looking for ways to cut expenses, even going to a 4 day week.  City, state, and local municipalities cannot run budget deficits like the Federal Government can.  They have no printing presses.

What puts the Federal Government in check?  Interest rates in the Bond market.  Interest rates on Sovereign debt is what the market uses to assess risk.  The higher the risk, the higher the rate.  The U.S. has been able to recklessly respond to its woes by printing money and creating more “Debt”.  A U.S. Dollar is the debt of the country since it is not backed by gold.  If the bond market concludes the U.S. debt is out of control, interest rates will rise when the Treasury attempts to refinance its debt through the bond market.  Who are the largest foreign holders of U.S. debt?  China ($889B) and Japan ($765B).

The U.S. is in a mess and everybody knows it.  The bond traders are watching each other to see who leaves the dance first.  If a major player decides not to participate in a Treasury auction, remaining players will demand higher rates.  Higher rates will negatively impact a U.S. economic recovery.  If the bond market gets chaotic, a global depression could develop.

Where could the U.S. Treasury get funds to support its addiction to debt?  You and me.  Your 401K looks mighty yummy to the Treasury.

Inflation in the emerging markets will force rates up.  The savers in the U.S. will be rewarded with higher interest income after several years of low rates that favored the banks and borrowers.  However, that lost interest income will not be offset anytime soon.

There is no real  protection for investors in any financial instrument if the sovereign debt crisis comes home to roost.  The Federal Reserve has an incentive to devalue the Dollar to deal with the huge debt bubble.  The investment community knows this reality and will demand higher interest rates to offset risks.  A showdown is coming at the OK corral.  The one who flinches will lose.

More and more people are jumping on to the bandwagon:

We have mentioned the precarious position the U.S. is in: high unemployment, artificially low interest rates, heavy use of stimulus dollars, and over-leveraged consumers.  Everyone in the investment community is expecting a “tipping point” to occur in the U.S. bringing forth the next financial crisis.  The only question is “when”?  Have you noticed the influx of movies about Greek mythology lately?  Could a U.S. sovereign debt crisis rise to mythical proportions?  This video is as much about the U.S. as it is the Greeks:

Before it’s over, people will once again seek Our Heavenly Father.  After all the promises of man have evaporated and there is nothing left, men will repent and seek the wisdom from Above.

A fundamental law of life is that growth uses energy.  This is true of an individual as well as a nation.  If you take away the energy supply of a person, they will cease to grow and begin to use any stored energy (fat) to sustain life until all the energy is gone.  Once the energy source is depleted, death arrives.  There are immense amounts of energy stored everywhere but the wisdom, knowledge, understanding, and skill to tap into those sources is not yet available to us.  “Atomic” energy is plentiful throughout the universe.  The sun is a great example.  However, mankind’s current paradigm depends on fossil fuels to support growth- oil & gas.  Current depletion rates of conventional oil fields is at an effective rate of 4 million barrels per day annually.  In three years, this is equivalent to Saudi Arabia’s total output.  We are not finding additional oil to offset this depletion rate.  Conventional oil peaked in May of 2005 and has never attained that level since.  Unconventional oil such as the tar sands in Canada have helped offset the decline.  Unconventional oil is much more expensive to extract than conventional sources.

Other sources of energy are being developed but the time it takes to bring them online is beyond the decline curve of the current energy consumption curve.  Price will make up the difference.  Increased energy costs will drag down economic growth and if the price spikes become severe, another recessionary dip is all but guaranteed.

World leaders continue to seek out “credible” sources that agree with their current view of an adequate supply of oil.  Those who do the research always seem to come to a different conclusion- peak oil.  Constituents do not want to hear “energy conservation”.  However, a shortage of oil will cause price spikes to occur and the oil companies will once again be demonized.  Let’s not be confused with the facts!

The U.S. will finally respond to the energy crisis by legislating less red tape for nuclear power.  Additional nuclear plants will be built and a bubble will form in the uranium mining sector.  Once again, the U.S. and China will be competing for resources.  With the world population anticipated at 9 billion by 2020, the resource wars will heat up to a fervor.  Legislators will give incentives for the citizenry to get rid of its gas guzzling SUV’s and further increase the deficits.  High speed rail powered by electricity will finally be at the forefront of national infrastructure spending while the airline industry will be focused on the wealthy and their travel plans.

The resource rich nations will draw the wealthy to their borders.  Those with depleted assets will see a dramatic shrinkage in their middle class populations.  in a paradigm shift of this magnitude, denial is the first phase of the shift and we are currently here.  I suspect another jump to $150 oil will bring us out of this phase.  The next phase is acknowledgement of the problem but people will attempt to operate under the old rules in an attempt to function using the previously successful methods of energy development thus wasting valuable resources. The third phase brings innovation and development of new ways of living and generating energy.  Embrace change, it’s coming.

Jesus brought a paradigm shift when He walked the earth.  Our Heavenly Father brought a paradigm shift when HE removed HIS glory from Shiloh, then Jerusalem.  The Scripture is full of paradigm shifts so we should not be caught off guard with the current shift in process.  This is one of the reasons for this website.

The following says it all:

John Smith started the day early having set his alarm clock

(MADE IN JAPAN )

for 6 am.

coffeepot
(MADE IN CHINA)

 
was perking, he shaved with his
electric razor
(MADE IN HONG KONG)

He put on a
dress shirt
(MADE IN SRI LANKA),

designer jeans
(MADE IN SINGAPORE)

 
and
tennis shoes
(MADE IN KOREA)

electric skillet
(MADE IN INDIA)

he sat down with his
calculator
(MADE IN MEXICO)

watch
(MADE IN TAIWAN )

to the radio
(MADE IN INDIA )

car
(MADE IN GERMANY)

 
filled it with GAS
(from Saudi Arabia )

and fruitless day
checking his
Computer
(made in MALAYSIA ),

He put on his sandals
(MADE IN BRAZIL),

poured himself a glass of
wine
(MADE IN FRANCE)

TV
(MADE IN INDONESIA),

 
and then wondered why he can’t
find a good paying job
in AMERICA

A ratings agency lowered its rating on Portugal by one notch to AA-.  In 2009, Portugal had a deficit representing 9.3 percent of its national income.  How does the U.S. compare?  The following charts would indicate that the U.S. is in worst shape than Portugal:

Our total government debt(excluding unfunded liabilities) is at 90%+ of our GDP and rising:

Expect the ratings agencies to lower the credit rating of the U.S.  I suspect there has been pressure by those in power to delay this eventuality.  This is no different than compelling the Financial Accounting Standards Board (FASB) to delay its rules concerning worthless debt on the books of banks carried at the original cost.

If sovereign debt’s rating is lowered, the interest costs increase.  The rating reflects risk.  The Federal Reserve has managed to keep the borrowing costs of the U.S. at an artificial low.  If the borrowing rate of the U.S. went up by 1%, the annual borrowing costs on the U.S. debt would increase by $140 Billion.  Last month alone, the U.S. deficit increased by $221 Billion, the largest monthly increase on record!  This will push the annual deficit above Portugal’s percentage.

Everyone knows that the globe is headed for another financial crisis, bigger than we have ever seen before.  Nobody knows when it will occur but once the music stops, the big money will quickly grab a seat and leave the rest of us standing.

U.S. bonds will have pressure placed on them by the bond market.  Inflation will  ramp up with commodity prices heating up.  Wages will not keep up since the unemployed workers will give up increases just to keep their job.

The Administration is inadvertently helping those of us investing in hard assets.  Their inflationary spending policy increases the price for commodities at a faster rate than other sources of income.   This is reflected in stock prices, dividends, and the price of the commodity itself.  All gold producers are making money at $1,100 gold.  $17 silver generates notable profits for the producers as well.  What other sector is receiving a premium for its product?  If you bought gold 265 days ago, your investment is up 17%

Sovereign debt downgrades will act as a warning signal of the impending crisis.  Be vigilant.

If Milan is successful, this could be the beginning of the domino effect: