Servias Ministries Blog

Depreciation is a decrease in value.  There is a normal decline in value of a physical asset because it simply wears out.  Depreciation can occur when a product is no longer in demand relative to its supply.  On a global basis, when a currency is excessively created, its supply outstrips demand is depreciates in value.  The Federal Reserve is creating a large supply of the U.S. Dollar

Deficits in the U.S. are running at historic highs at an anticipated $1.2 Trillion for 2009.  On the balance sheet, a deficit reduces owner equity relative to the liabilities.  If the liabilities outstrip the ability of income to service the outstanding debt, insolvency will occur.  The assumption that the government has the power to create money is applicable to the degree that the rest of the world is confident in the valuation of the U.S. Dollar.

Debt accumulated by consumers has forced a reduction in consumption in order to pay down the accumulated liabilities.  With the consumer accounting for 70% of the Gross Domestic Product (GDP) of the U.S., the economy must contract to allow for a re-balancing of the consumer’s balance sheet.

Dwellings or housing is normally the largest asset held by a consumer.  Most of those who purchased houses in the last seven years may have lost a sizable value of the personal net worth.  If the asset value declines with the liability still in place, net worth evaporates.  When the emotion kicks in that your net worth has declined substantially, your spending habits change drastically.  Depending on your leverage (assets divided by net worth), you may have to liquidate holdings in an adverse market thus perpetuating a deflating asset price.

Deflation of goods and services adversely affects accumulated wealth of the individual stock portfolio especially when there is monetary inflation occurring at the same time.  When demand decreases relative to supply, prices deflate.  However if those goods and services are discretionary, then the price deflation does not help the consumer.  If you own a hotel stock in your portfolio but the public has reduced travel plans, you lose.  The price for a room goes down, the value of the stock goes down, but you are still dealing with monetary inflation decreasing the value of your purchasing power as you attempt to buy food and energy.

Demographics is a huge issue for the developed countries.  Like a broken record, I keep referring to the “baby boomer” generation.  The current paradigm of social security will not handle the liability commitment to this generation.  Over the last forty years, Congress has misappropriated the social security funds and placed IOU’S in their place.  I believe this issue is the reason many legislators have opted to leave public service when there was no apparent reason to step down.  Whoever is in power when this issue arrives at the breaking point will suffer the wrath of the baby boomer generation.  We worked throughout our adult lives paying into the system while being assured of retirement funds at the age of 65.  This backdrop assured the less fortunate of a subsistence level of living.  See: http://www.usdebtclock.org/

Derivatives are bets against the future.  There is a buyer and seller of the derivative and the seller receives a “time” premium for selling the derivative.  The buyer’s incentive is that he wants to cap his risk in the underlying investments.  The problem lies in the seller’s financial strength that backs the derivative instrument.  If the seller sells more derivatives than his capital structure can support, the derivative’s value becomes worthless thereby resulting in the buyer having no real insurance supporting his investment.  Derivatives are now in the quadrillions and a substantial portion of that total cannot be supported by existing capital.  As derivatives unwind the losses must be realized on the balance sheets and when this happens capital evaporates and moves the entity toward insolvency.

Devaluations of asset values has an emotional impact on the owner of these assets.  As the devaluations move toward a minimum operational level, the equity owner will change their spending pattern.  For example, if you have an equity of $1 million you will spend as though you are a millionaire because you have plenty of buffer if you have a negative economic event occur.  You will take nicer vacations, make home improvements, and eat at restaurants more often.  In other words, your consumption goes up.  If you lose $600,000 in equity, you will cut back in all discretionary spending and move to a defense posture.  You will defer spending thus increasing deflation of consumption based goods and services.

Dollar, that is the U.S. Dollar, is in serious risk of default.  The long term decline (3 t0 5 years) is expected to be 50% of its current value.  This translates to an equivalent decline in purchasing value to the average U.S. citizen.  Those on fixed incomes will suffer the greatest loss of purchasing power.  Workers may have a small buffer by demanding greater wages to offset inflation but will lag behind the dollar decline.

Depression is becoming a real global possibility, mainly for the developed countries.  Those economies who shipped their manufacturing jobs to cheaper jurisdictions in favor of a service-based economy will suffer the greatest contraction.  Anytime you have a decline in revenue, services get cut first.  There is a battle between the government protecting the current paradigm and the reality of the consumer-based de-leveraging requirement.  The de-leveraging requirement will win.

Destruction may result from man’s attempt to defy realities created by greed.  Resources are being consumed at record rates and the global population growth cannot be supported by the current infrastructure.  When this happens war results, maybe a world war.  Each country believes it is entitled to resources and when that country becomes desperate, they will take desperate measures.

There are more D’s we could cover but the above provides us a clear view of the current environment.  Filled with negatives, the D’s are a result of man’s best attempt to manage the globe without the Wisdom from above.  As men become desperate, they will shift their focus from the mirror to the Heavens and seek Our Heavenly Father’s face.  Could this be the major paradigm shift many of us have been looking for?  The smoke and mirrors of government rhetoric will not bail us out of this time of extended greed.  A new era is coming whether it be natural or supernatural!

The Internet bubble burst back in 2000 and was followed by the housing bubble.  We are now facing the biggest bubble of them all: the Monetary Bubble.  This bubble is a precursor to hyper-inflation and this environment will take no prisoners.  The megabanks have operated as drug addicts and the Fed has become their “enabler”.  Their actions moved them to insolvency and the Fed has endorsed their actions by funding their addiction.  Bankruptcy of these institutions was the best solution in order to cleanse the system of unfruitful works.

The following is an example of insolvency:

Mat 21:19  And when he (Jesus) saw a fig tree in the way, he came to it, and found nothing thereon, but leaves only, and said unto it, Let no fruit grow on thee henceforward for ever. And presently the fig tree withered away.

We are not to judge the heart of man, only the fruit.  Jesus became a fruit inspector of Israel and found it lacking.  It was bankrupt.  Our Heavenly Father had been longsuffering with the sins of Israel and had once “married” Israel only to divorce later.  The people no longer loved The Lord and chose to live according to fleshly desires.  They gave lip service to serving The Lord but their actions communicated a different direction.  Revelation was converted to tradition and the Glory of The Lord had left the Temple.

Today, the financial industry is no different.  Rather than serve the public, these institutions are exploiting their customers with predatory practices of high and hidden fees, high interest rates relative to their cost of money (nearly 0%), and misleading information about their financial status.  Effectively, they have exploited customers and the government at the same time.

Irresponsibility-a form of untrustworthiness; the trait of lacking a sense of responsibility and not feeling accountable for your actions.  The last fifty years has seen the monetary system go from a conservative, stable system to a casino-style system of greed.  Don’t get me wrong, greed was always there but was in check until Congress lifted the restraints.  Those restraints had been in place since the Great Depression.  Once again we have confirmations that man’s sin nature is alive and operational.  Community banks generally did not participate in the instruments of greed because they knew that they are too small to save.  They simply had to make money through normal, prudent lending and investing practices.

The economic environment is changing.  Baby boomers will swing to the ultra-conservative side by curbing consumption, cutting back on luxury goods, and looking for more secure investments.  It is no surprise that Home Depot and Lowe’s home improvement centers are topping Wall Street estimates.  People will repair and enhance their current homes rather than increase their square footage.  The repair industry will show signs of life.  Homebuilders will shrink to pre-1990’s levels.  Commercial real estate will be the next topic of the network nightly news anchors.  The contraction is rapidly reducing the retail space needs around the country.  Some of the large mall operators have already been mentioned in the financial news media as having serious cashflow problems.

Credit card companies are attempting to keep the current paradigm intact by raising rates and fees while reducing credit limits.  Many of us have received notices of a reduction in credit limits due to lack of activity on the account.  The credit card companies have abused many cardholders with these changes and will force Congress to respond with new regulations.  Leadership maintained the status quo of consumer exploitation until the cries became too loud.

When you add up all of the woes in the current system, you find no good fruit.  The summation of Irresponsible actions over the last forty years has produced the current perfect storm.  Leaders around the world are desperately trying their best to keep the current paradigm intact.  “Hot” money is smelling blood in the currency arena and is now making large investments in precious metals expecting notable appreciation in gold and silver in the coming months and years.  Purchasing power of the U.S. Dollar will substantially decline in coming years with the current economic policies in place.  Stockholder rights have been shredded by the current government intervention in publicly held companies.  Mankind will hold on to recent history as their hope to restore things back to the way they were.  Is the writing on the wall?

Daniel 5:25 “This is the writing that was inscribed: MENE, MENE,TEQEL, and PHARSIN. 5:26 This is the interpretation of the words:  As for mene– God has numbered your kingdom’s days and brought it to an end. 5:27 As for teqel – you are weighed on the balances and found to be lacking. 5:28 As for peres  – your kingdom is divided and given over to the Medes (middle land) and Persians (pure).”

A toxin (Greek: τοξικόν, toxikon, lit. (poison) for use on arrows) is a poisonous substance produced or consumed by living cells or organisms.  My close friend Dr. Vince Speckhart, a highly successful oncologist who practiced medicine for forty years, once told me “the human body is designed to live forever”.  His success rate for treating cancer improved dramatically when he found a methodology that detected “toxic” interferences in the body thus allowing him to isolate a remedy for their removal.  Once the toxic substance or “signal” was removed, the body began to heal itself.  If you get a splinter in the finger, it will not heal until the splinter is removed.  The needle and tweezers used for the removal are not the cure, they simply facilitate the cure by removing the “toxic” substance.  In Dr. Speckhart’s practice, this simple understanding led him to an alternative way of treating his cancer patients.  Rather than promoting consumption of a toxic pharmaceutical, he focused on the removal of what appeared to be “triggers” or precursors to cancer.  Once he began to focus on toxin removal rather than “treating the symptom”, his success rate notably improved.

I had a friend who served as a medic in Vietnam and was exposed to Agent Orange (dioxin).  Within twenty years he was diagnosed with cancer in the lung area where his lungs were fusing with the wall around them (a layman’s description).  He went through the standard treatments and the doctor confirmed that Agent Orange was the trigger.  His immune system ultimately became overloaded and those “rebellious” cells began growing as cancer.

Dr. Sherry Rogers, another physician who began to search for alternatives to the current medical traditions, became deathly sick from her exposure to chemicals used on her parents’ farm.  Like Dr. Speckhart, she found that “detoxification” methodologies were her only solution.  Once she detoxified her body, her health returned.  She has written several books on using detoxification methodology to restore your health.  In her writings, she provides proof that chemicals ingested through commercially supplied means are poisoning our bodies on a daily basis.  Plastics are leached into our drinking bottles and are being stored in our bodies causing abnormalities.  Herbicides and pesticides used around the house are adding to the immune system burden of the body.  At some point, sickness and disease spring forth.

“Toxins” are occurring in our society as well.  Gradual introduction of perversity in society promotes illicit sex, violence, and destruction of the family unit.  With this path comes the consequences of death and destruction to society.  With the hippie movement of the 60’s and 70’s came open sexual relationships.  The 80’s brought unbridled greed.  The 90’s ushered in the demise of business ethics.  The “I’m OK, you’re OK” attitude meant that any act can be redefined as being acceptable.  This lawless attitude is promoting cancer to form and mastisize where only major surgery can remove it.

In the economics picture, removal of restrictions in the area of finance created a toxin-rich environment.  In the Great Depression, leaders found that the absence of regulation and allowing banks to be both commercial and investment banks created an environment conducive to lawlessness.  In 1933, in the wake of the 1929 stock market crash and during a nationwide commercial bank failure and the Great Depression, two members of Congress put their names on what is known today as the Glass-Steagall Act (GSA). This act separated investment and commercial banking activities. At the time, “improper banking activity”, or what was considered overzealous commercial bank involvement in stock market investment, was deemed the main culprit of the financial crash. According to that reasoning, commercial banks took on too much risk with depositors’ money. (See: http://www.investopedia.com/articles/03/071603.asp)  Under the direction of President Clinton and Treasury Secretary Lawrence Summers, the Glass-Steagall Act was repealed in 1999.  This was the first step to lifting protection of risky banking practices that have led to the current crisis.

The Bush’s administration continued to provide an environment that would lead to a toxic environment by removing or reducing regulation of the financial industry.  This photo from 2003 shows two regulators: John Reich (then Vice Chairman of the FDIC and later at the OTS) and James Gilleran of the Office of Thrift Supervision (with the chainsaw) and representatives of three banker trade associations: James McLaughlin of the American Bankers Association, Harry Doherty of America’s Community Bankers, and Ken Guenther of the Independent Community Bankers of America.

Once you remove the rule of law from any subset of society, greed and self interest will prevail.  Lawlessness and rebellion will prevail until the organism becomes toxic and ultimately perishes.  Only by removing the toxic origin will the organism repair itself.  By feeding the organism with an opiate, you simply provide it with a temporary “high” while it continues to die.