Servias Ministries Blog

I strongly urge you to stay vigilant concerning unusual emails and websites.  Antivirus software is usually in response mode to new hacking methods.  This means that some people will get hacked and report it, then the antivirus software providers fix the newly found weakness.  I received an email this morning from an associate:

To some of my addressees:

My personal AOL account address list has been hacked bypassing Norton that should have blocked it.  You may have received an email from me with the subject "confidential document."  Do not open, or if you do open, absolutely don’t follow the instructions to click on links and/or log in with your email address using your personal password.  Delete immediately! 

I am so sorry the bounced scam was sent to you.  AOL and Norton has assured me the prevention of further invasion is fixed.

These three physical assets are set to rise in price.  Just when you thought the U.S. couldn’t handle another war, here we go again.  Oil is now pushing $110 per barrel, gold is poised to break through $1,600, and silver is ready to catapult to the $40-$50 range, and beyond.

I have maintained that oil reached its global peak supply back in the 2005 time frame.  The price has reflected that conclusion for the most part.  There were expectations of $30 oil but it never materialized.  A global depression could bring the price of oil to $30 but I don’t think anyone wants to see that happen.

Silver has been leading the charge in the precious metals group.  Those who were betting against silver are now covering their losses.  Those who were buying the metal below $20 (excluding premium) are smiling now.  Related stocks are recovering nicely.  It was emotionally tough to keep buying as the prices were falling, but now we are being rewarded for our convictions.

I still contend that the silver/gold ratio should be 16/1 in price terms.  For this to happen, silver must skyrocket in price.  Silver’s industrial use will increase as the global population demands technologies requiring this metal.  Long term gold prices are suggested to be between $10,000 and $50,000 per ounce in U.S. Dollar terms.  Devaluation of fiat currency will help move gold to these heights.  People will lose purchasing power but the Federal Debt will get paid with depreciated Dollars.

When the precious metals soar to new highs, the derivative investors who bet on gold prices declining will take a financial bath.  There will be some significant bankruptcies take place.  Only then will we know how much “betting” was happening without any real regulation occurring.

The markets are already expecting the U.S. to lead an attack in Syria.  An attack may be scheduled after the market closes on Friday.  This allows the investing public to absorb the emotional shock of war before the market opens on Monday.  War tends to remove the focus from the economic issues at hand.  These issues are sizeable to say the least.  This may provide the central planners with a plausible reason for gold, silver, and oil to reside at higher levels even though they are heading that way already.  Isn’t it amazing how much energy is spent managing the masses!

Map by Deadspin.com

My Comment:  How sad!

Based on Generally Accepted Accounting Practices (GAAP), The United States is broke.  One can argue that if you can print money, then you are not broke.  That is only true to a certain point.  When your money is no longer accepted as payment for goods and services, then printing money no longer satisfies the payment of obligations.  A country’s overall production creates wealth and that wealth is really what pays the bills going forward.

When you go to a bank to borrow money, they look at your ability to repay both the principal and interest.  They look at your past performance, the stability of your employment, and any assets you have that can be converted to loan payments.  Your interest rate is consistent with the inherent risk of repayment.  Your loan is consolidated with a basket of consumer loans of similar risk.  The bank’s expectation is that not all of the loans will underperform and that the additional interest charged will cover any loan losses of the portfolio.  This assumes a stable currency.

What happens when the nation’s currency is no longer wanted as payment for goods and services by other countries?  Before August of 1971, they could demand payment in gold and get it from the U.S.  When Nixon closed the “Gold Window” and ceased the convertibility of Dollars to gold, a whole new experiment began.  How could the U.S. get away with mandating a fiat currency policy?  The U.S. Dollar had been the “reserve” currency for use around the world and it was so interwoven into all commercial transactions, there was no feasible way to disconnect from the Dollar.  The U.S. also had the most advanced military in the world.  Nobody was willing to challenge the decision.

Other countries have spent the last 42 years thinking about how to do international business without the U.S. Dollar.  Iraq tried an “oil for gold” program bypassing the U.S. Dollar.  Suddenly, events occurred that caused the U.S. to invade Iraq and remove that plan.  Other countries have been dissuaded from bypassing the Dollar.  Little by little, China, Russia, Brazil, and India have been creating partnerships to bypass Dollar-based transactions.  They have been accumulating gold which in turn could allow them to have some type of gold-backed currency as a guarantee for international transactions.  Where is the gold coming from?  The Western vaults.

For the first time in history, all nations are printing large amounts of money without any gold backing.  The current system will fail.  If you watched the video from yesterday, you can see that there has never been a successful end to this scenario.  Pain will come.  People will cry out for a new system, quickly.  The Chinese know it, the Russians know it, and others who are accumulating gold and silver know it.  Wealth can be attained a couple of ways.  One way is for your investment to appreciate.  The other way is for everyone else’s money to depreciate.  The goal is to retain purchasing power in a medium that will continue to be accepted no matter how the collapse plays out.  For most of us, silver plays that role.  For some of greater means, gold will be acquired.

The U.S. may never admit it is technically broke.  However, when interest rates go up by creditors demanding additional payment for greater risks, there will come a day that those in charge must do an accounting.  When that happens, 401K’s, IRA’s, Pension Funds will all be targets for cash to “bail out” the government.  You will be told a plausible reason for you to hold government bonds in your account.  You will once again pay for the poor decisions of the central planners.  However if you see what is coming, you can at least minimize the pain by safeguarding what little you have from the depreciating currency and its impact.  This is why I have been warning you for the past several years to downsize your exposure to unexpected events.  Most of us don’t have a lot of wealth but if we reduce our leverage, simplify our monthly needs, and focus our attention to what Our Heavenly Father is saying, then we will be the least impacted when this day of reckoning arrives.

The following graph provides some detail of China’s direction:

This last week, Nasdaq Stock Exchange shut down for 3 hours.  See: http://dealbook.nytimes.com/2013/08/23/after-mishaps-nasdaq-loses-standing-to-rivals/?_r=0

Google, Amazon, NY Times, and Microsoft went down as well.  What is the probability that all five of these entities would suffer a loss of system communications in the same week?  Nearly 0%

Some of you may not know that I have held IBM Technical Certifications continuously for about the last twenty years, ever since they started their certification program.  I should know something about industry system redundancy.  These companies have spent millions to billions of dollars to insure they are online 24×7, 365 days per year.  They have multiple redundant sites, mirrored databases to allow a split-second cutover if there is an outage at one of their several locations.

As I wrote in a previous blog, if you want to take control of the population, you must take over communications first.  Can you see now why I prefer to keep a manual checkbook versus doing all of my transactions online?  The probability of planned interference of communications among these five giants is high.  This could have been a “field” test to verify the ability to execute a selected communications blackout.

What is the other plausible explanation?  As I have written in other blogs, the system is getting so complex, it is moving to the point of failure due to over-complexity.  Either way, don’t put all your eggs in one basket.  You may not get access to them one day.  If and when that day comes, be prepared to live a simple life without the Internet.  Do you have any cash on hand?  Does your pantry have a little extra food?

The CEO of the Nasdaq was quoted by others: ““A number of people have recounted sales meetings in which Bob led with the slogan ‘our customers are our hostages,’ ” Mr. Cummings’ letter said.”  Has the Internet made you a hostage?  Not me.