Servias Ministries Blog

Hyperinflation is monetary inflation occurring at a very high rate and the result is much higher prices for food, shelter, energy, and clothing.  When a country has a very large debt load as is the case of the U.S., there are three ways to deal with this burden:

1.  Grow your way out which would reduce the debt as a percentage of Gross Domestic Product (GDP).  Thus additional tax revenue from the growth would help pay off debt.  The U.S. is not in a position to grow its way out of a paper sack.

2.  Default on the outstanding debt thus causing a crisis in the bond market which would spread globally and cause the global economy to crash.

3.  You can print your way out of this debt with the monetary printing presses.  Historically, this has been the preferred option for many countries.

Politicians know these three options and have chosen #3.  Unless they pull a rabbit out of the hat, hyperinflation is on its way.  Believe me, they are looking for that rabbit.

The voters do not want their benefits touched but the politicians have schemed throughout the decades to bankrupt programs like social security by replacing the cash with IOU’s.  In the private sector these actions would come under the heading of fraud and theft, both felonies.  The current system shields politicians from accountability for their actions.  Only blatant, reported crimes put the politicians’ future at risk.

What is needed is a group of statesmen who are willing to be “one term” politicians and would be willing to do what’s right for the people.  The media wouldl attack those politicians who are willing to sacrifice themselves and do the right thing thus self interest prevails.

The 600 lb. gorilla in the room is our foreign creditors, they own half of our total debt.  Do you think that they will allow their holdings to be eaten up by the Fed  hyper-inflating those dollars they are holding?  The continued issuance of U.S. Debt requires someone to buy it.  In walks the Fed.  They are buying U.S. Treasury debt with newly created dollars that have absolutely no backing of any kind other than the future promise to pay.  The Fed is the lender of last resort.  The foreign creditors hold our future in their hands.  That’s not good.

Where are the baby boomers putting their money now?  In the bond market.  This is the current bubble that is expanding and will burst soon only to leave many baby boomers with even less wealth to sustain them through the retirement years.  Their house value is down, the lost money in the tech bubble, and soon they will suffer more losses in the bond market.  It is ugly out there.

The current “official” inflation rate is around 3.2%.  If the investor is buying a 10 year Treasury at 3.05% and pays a 30% tax rate on the interest and nets a little over 2%, how much money would the investor need to live on to receive an annual cashflow of $75,000?  He would need to have $3,750,000.  Most of us will suffer in the foreseeable future.

How can we respond?  Reduce complexity.  The less we have to manage, the less money we have to spend to support the complexity.  Improve energy efficiency on a personal basis.  Most of all, seek the Face of Our Heavenly Father!

The most important unemployment rate is that of the politicians.  With the election cycle upon us, you can be sure all financial issues will be pushed into 2013 if possible for their purpose in life is to be re-elected.  The question remains: How far can they kick the economic crisis can down the road?  There are more issues around the globe than any one person can deal with.  The banks have been quietly writing off toxic debt as a percentage of their earnings but still have too much on the books.  The true unemployment rate continues to hold in the double digits.  “Financial Repression” is the means by which the Fed keeps low interest rates in place thus helping the Federal Government’s borrowing at the expense of its population.  Once again I have the question, “Who determines the greater good?”  We know it is good for politicians but not for most of us who earn a living in the private sector.

How can we protect ourselves from the excessive spending and deficits that are not at epic proportions?  By revelation from Our Heavenly Father.  If information was all we needed, we could all surf the Internet and be in great shape.  Technology enables but does not create a thing.  Technology will not increase the amount of oil left in the ground.  It may facilitate its extraction but will not expand it.

Our Heavenly Father is the only source of information about the future of us individually or mankind as a whole.  HIS revelations often appears to challenge our human logic.  Human logic has the greed/fear attribute embedded in it as a survival instinct.  The ego would not go to the cross to save mankind.  It would devise another strategy and throw the success point out in the future and force us to constantly perform in pursuit of the end result, almost like leading a horse around with a carrot.  The mind is all about control.  Politicians want to control the masses in order to carry out their agendas.  Our Heavenly Father operates by Love and does not need to control us, simply guide us into all truth.

Truth in the political arena has been obscured by the cunning manipulation of the primary support systems of the political machinery.  The support systems are funded by wealthy interests who are intent on perpetuating their agendas in order to expand their power base and increase their wealth.  The ego would tell you that you never have enough money and you must pursue more at all cost.  On the other hand, money is simply a commodity to Our Heavenly Father.  Jesus acquired money as needed but never focused on its acquisition for the sake of accumulating more.  When you can multiply bread and fishes, why do you need a lot of money?

As we continue to seek Our Heavenly Father’s Face, our resources will expand in order that we may become part of the blessing to others.  Most people focus on “me and my four and no more” rather than the needs of those they encounter.  There is plenty of productive capacity on earth even though it appears that we are running out of resources.  The current paradigm of energy, food production, and growth are based on a hydrocarbon supported infrastructure.  Yes, there is a limit of hydrocarbons on earth but there is a lot of untapped energy from other sources.  The current Babylonian system will not be blessed with the revelation of tapping into the other energy resources.  In the meantime, hearing the voice of Our Heavenly Father is your defense against management by deferral.

If you live in Illinois, you may want to move (and not to California).  As stated by the State Treasurer, you are on the line for $42,000 of state debt.  Add $129,171 of U.S. debt per taxpayer not including unfunded liabilities and you are up to $171,171.  Uh-oh!

See: http://www.usdebtclock.org/

The Federal Reserve is removing the wealth from an entire generation of savers at an alarming rate.  How are they doing this?  By forcing short term interest rates well below 1% at the same time inflating the currency by printing money thus pressuring prices for food, energy. and healthcare up by double digits (6-15%).  This results in confiscation of savings over the long haul.  The problem: “What alternatives can they invest in and protect their principal?’”

The U.S. will continue to issue a substantial amount of debt.  An American family’s largest debt is normally their mortgage debt which is supported by the asset value of their home.  The problem is that the housing market continues to weaken thereby driving housing values down and an increasing number of borrowers are upside down on their mortgage.  Couple this with the fact that the baby boomers are now wanting to downsize and get out of their mcmansions and you have a long-term trend of lower housing prices.  In order to stay competitive, homebuilders are seeking lower bids from subcontractors.  Some of those subcontractors are hiring illegal aliens from across the border to lower their costs.  In many cases the quality goes down faster than the price.  Also, the career construction subcontractors who obey the law are penalized and lose work.  Nobody can calculate the underlying cost of the dynamics of the current situation.

Social security payments are not an entitlement but are “insurance” payments obligated by the Federal Government in most cases.  Yes, there are those who paid in very little and have reaped much from the system.  However, most of us have paid in for 40+ years and some of us paid double as business owners.  We simply want the payments we deserve.  There are entitlement programs such as food stamps but social security is not one of them.

In order to prop up an unsustainable paradigm, the Fed will continue to print money and politicians will continue to promise entitlements at the expense of multiple generations.  Pain is coming.  The only question is how much pain will each of us suffer?  This pain will transition us into a new era.

Will this new era be the time that the overcomers take command?  I hope so.  There is a lot of cleanup work to do in the global arena.  Death and destruction are the methods used commonly around the world.  There is talk of removing excess population because of overcrowding and scarcity of resources to accommodate the current population.  We need wisdom from above to solve the problems we are currently experiencing.  Each of us needs to draw closer to Our Heavenly Father and seek HIS face.  The closer you are, the easier it is to hear and respond.  The answers are a whisper away.

The fundamentals of silver continue to be strong but were due for a correction.  $36 silver is the next support level.  A major reason for the rapid and steep decline was a change in margin requirements for the paper market.  This tends to remove under-funded speculators and the weak at heart. 

Margin is collateral(stocks and/or cash) that the holder(speculator) of a financial instrument(silver contract) has to deposit to cover some or all of the credit risk of his counterparty (most often his broker or an exchange).

For instance, if the margin requirement is 25% then the speculator can buy $10,000 in futures contracts with a minimum of $2,500 in cash or stock in the trading account to cover the margin.  However, if the trading exchange increases margin to 50%, then the speculator must come up with another $2,500 to bring his balance to $5,000.  Often the trader will begin closing out his outstanding contracts to cover his new margin requirement.  With more sellers doing this, the market drops as it did last week.

A trading exchange will protect itself by increasing margin requirement to the borrowers of assets.  Margin can go to 100% if the volatility is too risky for the exchange (management) or if they want to temporarily move the market down(manipulation).  The good news for those of us who believe that the long term fundamentals support higher prices is that soon we will have another buying opportunity for metals and their underlying stocks.  When will be the optimum time to add to positions?  Only Our Heavenly Father knows for sure.

The news: CME Group, operator of the Comex division of the New York Mercantile Exchange, announced a pair of margin increases late Wednesday, the first of which goes into effect after Thursday’s close and another on Monday. Additionally, the Shanghai Gold Exchange raised the margin requirement for silver contracts. “This has prompted many investors to withdraw from the silver market, reflected in outflows from silver ETFs,” Commerzbank says. “Yesterday, the world’s largest silver ETF, iShares Silver Trust, reported the second-largest daily outflow since the fund was launched, at 522 tons. The price correction is likely to continue.”