Servias Ministries Blog

Now that the Mayan Calendar has reset for another 26,000 years, we can get back to the business at hand.  This astronomical event captured the interest of many but failed to bring the catastrophic zenith that Hollywood had predicted.  The illusion is once again exposed.

Gold and silver were attacked this week just as the Fed created the next installment of Quantitative Easing… as expected.

The facade of economic growth continues and it will be interesting to see how the Christmas season will be reported.  With 8 to 10% inflation and a possible stated improvement of 3%, the true growth rate will be –7% based on raw statistics.  We’ll see how the numbers are reported by the spin doctors.  The busiest store at the mall was the Lego Store.  We will not deny our little ones!  After all, they are the future.  The rest of the stores were not too busy and allow for crowd-free shopping.  Heavy discounting reduced our overall cash requirements for this season.  The billfold was happy.

Our long awaited EDS beta machine might be delivered today… finally.  This month marks ten years since Dr. Speckhart decided to retire from active practice.  I hope that 2013 will see a dramatic improvement in the development of this technology.  Mankind could use a break from all the challenges that prevent a healthy life.

Our Bible study has maintained 100 to 150 views for each broadcast.  We are thankful for those who share our desire to mature in Love.  I have now completed seven years of focusing on this aspect of Our Heavenly Father and will continue until the fullness comes.  Our Heavenly Father is definitely patient with me.

Now that we survived the end of the world, I hope many of you will focus on producing good fruit by serving others who are less fortunate.  Acts of kindness and words of gratitude are “presents” to those who are struggling.  You don’t have to be wealthy to be a give, just willing.

Join us tomorrow as we continue the discussion of the Judgment of Love.  I am going to share the prophetic aspect of my trip to Canada last year that subtly dealt with the swallowing up of death, the ultimate judgment of Love.

For the last year and a half, gold has been in a trading range of consolidation.  I expect a violent move up and it will not be expected by the market.  Paper gold in the futures market is risky since there is not enough gold to satisfy delivery.  The paper market has been manipulated by the agents of the Fed.  Just like clockwork when the Fed announces a new program of Quantitative Easing, the price of gold and silver get smacked.  These are times when those who believe in gold and silver as insurance against epic money printing can add to their positions.

These price manipulations play into the hands of the Chinese.  They continue to acquire more gold reserves at these prices.  It reminds me of Great Britain’s sale of gold at the bottom of the current price cycle- “Between 1999 and 2002, Gordon Brown, Chancellor, ordered the sale of almost 400 tons of the gold reserves when the price was at a 20-year low.”  This single decision cost British taxpayers Seven Billion Pounds at today’s prices.

Acquisition of gold and silver and their related stocks is not for the faint of heart.  Price swings have been substantial and will prove to be wild in the future.  Macroeconomic factors support hard asset investments over the long term but it will not be without some heart stopping moves.

On a six month basis, gold looks like it may of peaked out:

However on a ten year basis, the trend is intact:

Note the similar consolidation phase in 2008.  At $875, many were calling the top in gold then.  They now hope that everyone has forgotten their market calls.

Production in the mining sector is in serious decline.  India is being strong armed into selling gold reserves but it is not working.  Governments can put up barriers but the people will continue to protect their families.  The “gold cartel” is now desperate and China will be happy to buy up all the cheap gold they can.

Silver has even greater volatility which requires even greater courage to stay the course:

During the last days of the year, the cartel can manipulate the price with greater ease since many traders are on holiday.  They attempt to “paint” the charts to dissuade technical traders from buying.

The need for manipulation speaks volumes.

Disclaimer:

This website contains the ideas and opinions of the author. It is a conceptual exploration of financial and general economic principles. As with any financial discussion of the future, there cannot be any absolute certainty. What this article does not contain is specific investment, legal, tax or any other form of professional advice. If specific advice is needed, it should be sought from an appropriate professional. Any liability, responsibility or warranty for the results of the application of principles contained in the article, website, readings, videos,  books and related materials, either directly or indirectly, are expressly disclaimed by the author.

The “fiscal cliff” is another attempt to shift the attention of the public from huge problems to small ones.  The automatic spending cuts and tax increases were intended to reduce the deficit but instead it will be only by an insignificant amount over next ten years.

The problem is that you cannot legislate austerity to a faltering and recessionary economy.  This provides the setting to turn the Great Recession into the Great Depression of the Century.  The fiscal cliff is small compared to the Derivatives tsunami, Bond market bubble, or Dollar market bubble. (See previous blogs)

The fiscal cliff requires that the federal government cut spending by $1.3 trillion over ten years.  This means the federal deficit has to be reduced about $109 billion per year or 3 percent of the current budget.  The Derivatives tsunami and the other bubbles are of a different magnitude.  According to the Office of the Comptroller of the Currency’s fourth quarter report for 2011, about 95% of the $230 trillion in US derivative exposure was held by four US financial institutions: JP Morgan Chase Bank, Bank of America, Citibank, and Goldman Sachs.  The commercial banks became casinos, like the investment bank, Goldman Sachs, betting not only their own money but also depositors money on uncovered bets on interest rates, currency exchange rates, mortgages, and prices of commodities and equities.

The exposure of the 4 US banks accounts for almost of all of the exposure and is many multiples of their assets or of their risk capital.  Today these four US banks have derivative exposure equal to 3.3 times world Gross Domestic Product.

The entire economic policy of the United States is focused on saving four banks that are too large to fail.  The purpose of QE1,2,3… are to keep the prices of debt, which supports the banks’ bets, high. The Federal Reserve claims that the purpose of its massive monetization of debt is to help the economy with low interest rates and increased home sales.  But the Fed’s policy is hurting the economy by depriving savers, especially the retired, of interest income, forcing them to draw down their savings.  Real interest rates paid on CDs, money market funds, and bonds are lower than the rate of inflation.

Moreover, the money that the Fed is creating in order to bail out the four banks is making holders of dollars, both at home and abroad, nervous.  If investors desert the dollar and its exchange value falls, the price of the financial instruments that the Fed’s purchases are supporting will also fall, and interest rates will rise. The only way the Fed could support the dollar would be to raise interest rates. In that event, bond holders would be wiped out, and the interest charges on the government’s debt would explode.

With such a catastrophe following the previous stock and real estate collapses, the remains of people’s wealth would be wiped out. Investors have been deserting equities for “safe” US Treasuries.  This is why the Fed can keep bond prices so high that the real interest rate is negative.  If the “bond vigilantes” finally surface, it will be all over but the shouting.

In the meantime, under the disguise of the threat of the fiscal cliff, lawmakers will try to destroy the social security safety net.  There is no substantial job creation, real family incomes have been declining for decades, and wealth and income have been concentrated to a few.  Historically, this environment produces major changes in a society.  Change IS coming!

“On December 12, 2012, the Federal Reserve expanded QE3 (Quantitative Easing) to begin monetizing U.S. Treasuries, once again.  This renewed monetization of Treasury debt likely will become perpetually expansive, providing unlimited liquidity to a system that already is dependent on, and addicted to the Fed’s stimulants.  With no economic recovery in place or pending, and with the financial system and markets unable to survive withdrawal symptoms, ever-expanding QE3 likely will continue until such time as the U.S. dollar collapses in a hyperinflation.”  -John Williams 12/13/12

Rather than accepting the fact that the Federal Reserve Bank  experiment could not work forever, the U.S. is destined to suffer the consequences of the collapse of this experiment.  In an attempt to break the natural economic cycle of expansion and contraction, the Fed has only served to expose us to a much greater risk of severe contraction.  The populace has been “drug induced” with the addiction of TV entertainment mixed with 24/7 news.  Instead, we all need to be on our faces before Our Heavenly Father.

By committing to keep the rates low for another three years, the Fed has telegraphed the seriousness of the problem.  The U.S. has structural unemployment and, students have been misled into getting degrees in subjects that don’t matter to the future of the country while racking up astronomical student loans.  The Federal Government then gives them a break on their interest rate agreements so as to send the message that justifies their original decision.  There are so many guilty parties to all the shenanigans that we do not have enough room in the system to put them all in jail.  What a mess!

There is a chance of the U.S. to pursue to “two currency” system- one for domestic use and the other for international trade payments.  This would be devastating to our seniors who live on Social Security.  Their payments would quickly move lower in purchasing power thus evoking “attrition” to their ranks.  Think about it.  The true inflation rate is running much higher than the stated rate.  We are reminded of that when we go to the market or restaurant.  The economic impact to the overall family structure will be devastating.  Just how many people can one wage earner support?

The Fed waited until after the election to announce additional stimulus.  They attempted to “paint” a better picture just before the election so as not to put the current economic conditions in a more negative light.  Three more years of zero percent interest rates will push investors to riskier alternatives thus exposing them to loss of their retirement principal.  So much for the guaranteed 5% passbook savings rate that we all became accustomed to over a couple of decades.

The Fiscal Cliff issue is not solvable with a tax hike:

All of the drama surrounding the tax hike is designed to take our focus off of the real problem…. as though it will go away.  The risk to the current system is epic.  Japan will be the next player to enter into the money printing game.  Will they be the tipping point to global economic chaos?  If we didn’t have a severe problem, the Federal Reserve would not be taking these drastic steps.  Think about it.

On 12/12/12, Ben Bernanke announced a continuation of Quantitative Easing (aka money printing).  John Williams at shadowstats.com made the comment:

“The problem remains banking-system solvency; 2008 still is playing out.  The Fed’s purported effort at attacking the weak economy (specifically unemployment), with debt monetization is nothing more than political cover for helping the banks.”

John further stated:

“With no economic recovery in place or pending, and with the financial system and markets unable to survive withdrawal symptoms, ever-expanding QE3 likely will continue until such time as the U.S. dollar collapses in a hyperinflation.  Effectively, this was a decision that was made at the time of the panic in 2008, in an effort to avert an immediate systemic collapse, to buy some time.”

I recommend a subscription to www.shadowstats.com for all of you economists that want to keep abreast of the uncooked government statistics.