Servias Ministries Blog

The International Swaps and Derivatives Association (ISDA) is the “regulatory” body who determines when a default occurs for a financial instrument backed by credit default swaps (CDS).  Why is this so important?  The five largest banks in the U.S. control 97% of all CDS’s.  If a default on a Greek Bond occurs, the CDS or “insurance” must pay up.  Each bank’s liability of credit default swaps exceeds their capital structure.  They would owe more than they could pay thus they would have to file for bankruptcy.  Therefore, it is in the banks’ best interest for there to be no “default” proclaimed.  Get the picture?

Who is the ISDA?  From their brochure:

Since its founding in 1985, the International Swaps and Derivatives Association (ISDA) has focused on making the over-the-counter (OTC) derivatives markets safe and efficient.

Who is the current Chairman of ISDA?  Stephen P. O’Connor is global head of the Counterparty Portfolio Management division at Morgan Stanley. O’Connor also serves as a member of the board of directors of the International Swaps and Derivatives Association.  It was announced that he would be named chairman of ISDA on Apr. 14, 2011 at the organization’s annual general meeting in Prague.  Mr. O’Connor is charged with oversight of the very institution he works for?

Here’s the short story of the problem.  Greece is in dire straits and it is negotiating with the bondholders of its national debt to take a 50% haircut (loss) on the bonds they hold.  These bondholders bought insurance (CDS) for this very reason.  They wanted to be insured in case Greece defaulted and they paid their premiums for these swaps.  The issuers (large banks) booked the profit and took bonuses for the money they made on issuing the swaps.  Sweet!

All is well with the banks unless a default of the Greek bonds is declared.  Who determines this?  The ISDA Determinations Committee.  Who makes up the Determinations Committee?  Generally the banks who issued the swaps!  Here is a recent decision made by the Determinations Committee:  http://www.isda.org/dc/docs/AEJ_Determinations_Committee_Decision_01052012.pdf  If a default occurs, the insurance pays and makes the bondholder whole on the investment.  Otherwise, the bondholder assumes the loss even though he paid his insurance premiums.

From the outside looking in, this is the epitome of unbalanced weights and measures AND partiality of judgment, both acts of sin from a Scriptural standpoint.  If the Determinations Committee who is charged with deciding the fate of Greek Bonds will not declare a default at 50%, at what level will a default occur?  It may have to go to 0.  By that time, we will be in full global meltdown of the financial house of cards.  Complexity will give way to simplicity.

Do you think the wolf will really guard the hen house?

1. The next phase of problems will come about because of a loss of confidence in currencies themselves.

2. Regulators are totally ineffectual in dealing with what is occurring.

3. If we have a failure of Greek debt it will be catastrophic and you and I will pay. If Greece does not fail, we will have money printing (quantitative easing is the buzz word) to infinity.

4. China is actively seeking control of the resources of the world.

5. To balance the US balance sheet, gold would have to go to insane numbers. The mechanism is in place to drive gold to incredible numbers.

6. Sovereign debt is the next bomb to implode.

7. The only currency that will sustain what is coming is gold.

8. We are headed for a one world currency with a central bank of central banks. The world is going to change dramatically.

9. The individual states in the US, which are bankrupt in many cases, will be attacked next. Big money is already hugely short of state debt. Ultimately this will take down the US dollar as well.

10. A one world government is coming.

11. Hyperinflation is a loss of confidence in paper currency.

12. Gold is money without liability on the other side. It stands alone. Make your balance sheet as good as it can be.

13. Gold is an insurance policy.

14. Focus on simplicity in your personal life. Be focused, balanced, and go back to basics. This is not a time to get fancy.

15. Hold any stocks you happen to own in certificate form in your hand, and don’t lose the certificate. If you are a stock player, check out true custodial accounts. Make certain that your holdings are in fact yours and NOT on the books of the bank.  Direct registration is an alternative.

16. Expect mining company consolidations to greatly accelerate.

The Federal Reserve Bank has provided us a roadmap for gold to move to $2,100 and $4,500 and it isn’t that far off.  The global debt problem is as big now as it was in 2008.  If a default is declared that affects the credit default swaps, five major U.S. banks will go under as well as three Euroland banks.  This is why those in power are trying to avoid the legal trigger of “Default”.  We are extremely close to the  edge of financial mass destruction.  In an election year, do you think that the Fed will simply hold back printing of money?

The Federal Reserve committed to low interest rates through 2014.  What was the impact?

My Yahoo Finance tracking screen went green:

UXG was up 12.45% in one day.  for those who recently bought the stock at 2.99 in mid December.

Wealth brings with it a great challenge.  The ego especially feeds on greed whereas greed is the root of all evil.  Hoarding is the ugly sister to greed.  When people find their value of identity in possessions the outworking is to get more and more.  What you have is never enough.  Consider all of the offsite storage buildings in the U.S.  Many are full of possessions that are slowly deteriorating.  Don’t get me wrong, the size of your house, car, or bank account does not mean that you are greedy.  Each of us has a ministry that requires different assets to fulfill.  We all don’t need to be driving a Smartcar to show we are not being led by greed.  We are also to be good stewards over what we have been given.  Lack of stewardship isn’t a good testimony to those who are watching your walk while you are “talking your talk”.  In Luke 18:22 Jesus said:

So when Jesus heard these things, He said to him, "You still lack one thing. Sell all that you have and distribute to the poor, and you will have treasure in heaven; and come, follow Me."

What an unpopular thing to say in America, the wealthiest country on earth.  This affluent society has elevated itself to the point where it no longer needs GOD in the center of its society.  The children no longer recite The Lord’s Prayer in school.  Since this happened, the discipline problems in schools have risen exponentially.  Those children, now adults, are no longer restrained in their behavior.  Corporate greed is at an astronomical high.  The loyalty to the employee is all but gone.  Defined benefit plans designed to reward long term service by employees have been disemboweled by corporate greed.  Politicians bought off by lobbyists have thrown the average man and woman under the bus.  The moral fiber of this country is in dire straits but not for long.

This year I expect an awakening of men and women who are called to be the “elect”.   I expect this awakening to bring forth a new paradigm of business thinking.  Many in the past have given lip service to serving mankind.  As this awakening materializes into a Kingdom structure. men and women will be given the opportunity to be a part of this new paradigm.  No longer will greed and self interest dictate the direction of an organization.  Kingdom principles resulting from the revelation of Love will be the guiding force.  Serving mankind will be the burning desire in the bellies of the people who are called to participate in Kingdom companies.  Accumulated wealth will be mobilized as men and women see that their calling is being summoned by the Most High God.  Dysfunction of the masses will no longer be exploited by those who have been in power by exploitation.

As the Body of Christ is fitly joined together, each part will truly supply the other parts… really!

In 1978, the total debt in the U.S. was $719 Billion.  Today it is $56 Trillion. This is a 77X increase.  How much more debt can we handle?  Hyperinflation is moving closer and it will be a time of great change.  We must muster up the courage to face change.  Having faith in Our Heavenly Father will see us through any upheaval before us.  If we think outside the box.  We can soar to new heights just as Jetman in the video below:

In these days of leverage, any interruption in the flow of cash can be disastrous.  Often, your bank’s signature card will include a statement whereby they have 30 days to respond to a cash withdrawal request.  Though they rarely exercise this stipulation, it does exist.  What would happen if you could not get to your cash for thirty days?  Selah!

MF Global claims the JP Morgan Chase slowed down their cash which helped move them into bankruptcy.  See http://finance.yahoo.com/news/mf-global-jpmorgan-again-center-002846254.html 

The strong get stronger, the weak fall by the wayside.  Be careful with your assets.

From the Securities Investor Protection Corporation website, http://www.sipc.org/pdf/HSPY_English_2011.pdf :

“Terms of SIPC help. Customers of a failed brokerage firm get back all securities (such as stocks and bonds) that already are registered in their name or are in the process of being registered.”

Securities registered in the “Street Name” of the brokerage do not appeared to be covered.  Beware!  Do not delay or fail to insure your stocks are placed in your name.  If a large scale financial event were to happen, the reserve funds of the SIPC could be depleted and you would be at risk of notable losses.