Servias Ministries Blog

In an interview with the Mayor of Detroit, he commented that there were 100 more cities in the same shape as Detroit.  There are many counties in the same predicament.  Historic assumptions for pension funds are no longer valid.  Interest rate increases are sure to damage the bond market which is a notable portion of the pension fund strategy.  What option does the Fed have but to continue the Quantitative Easing unless they want to burst the “pension” bubble as well.  There is not a plausible alternative without damaging “value” whether it be the U.S. Dollar, real estate perceived equity, stock market, bond market, etc.  The Fed hopes to allow slow inflation i.e. depreciation of the Dollar to fix the problem.  Holders of the Dollar may not let that happen.  Just how much more can the Fed create out of thin air before the market finally says “no more”?

The following graph provides perspective on cities that have shrinking populations:

Cities and counties base their revenue projections on perpetual growth.  Oops!

Is Our Heavenly Father setting the globe up for a transition?

GlobalEurope Anticipation Bulletin believes and reported that the 2008 crisis as a warning before that of 2013. All of the world’s regions won’t be affected the same way but all will suffer. According to LEAP/ E2020 the stages of this second crisis  as follows:

-end 2013, financial impact: collapse of financial markets especially in the US and Japan. Banks can no longer be saved by the states and BAIL-Ins are put in place;

-end 2013 / 2014 spreading to the real economy: The financial impasse causes / reveals a major world recession and the reduction of international trade;

-2014, social impact: The economic deterioration causes unemployment to explode, in the United States the dollar’s decline lowers the standard of living, riots mushroom everywhere;

-2014 political crisis: the governments of the most affected countries are under fire for their handling of the crisis, forced resignations and early elections are expected, if not coups;

-2014-2015, international management of the crisis: together Euroland and the BRICS impose a new international monetary system and lay down the basis of new global governance;

-2015: The least affected regions have exited the crisis definitively;

-2018: It will take the United States, the United Kingdom and Japan five years to purge themselves of the crisis with, ultimately, a greatly reduced standard of living and a considerable loss of global influence (resulting from their refusal to participate in the re-casting of global governance on new bases).”

To subscribe to http://www.leap2020.eu/English_r25.html , go to:  http://www.europe2020.org/spip.php?article25&lang=en

Each of us needs to be personally prepared.

Pension Funds attempt to look out 50 years in their investment horizon.  The problem is that they are just a group of men taking their best educated guess.  In the 1980’s I had a life insurance policy that assumed long term rates to average 9%… wrong!  This was after the Federal Reserve had pushed rates up to 15% and above.  Now long term rates are pathetic and have lasted for 5 years due to another action by the Fed.  Detroit can thank the Federal Reserve in part for its bankruptcy.  Pension Funds are suppose to be self-funding based on the contributions of those who are now receiving checks.  However if you have financial bubbles popping everywhere, how can you properly invest the principal?  Money Managers used to look at “return on investment”.  Now they look at “return OF investment”.  There are no safe paper assets anymore.  You can thank the American Politicians for allowing banks to become casino operations.  The only assets with no intrinsic liability attached are gold, silver, oil, gas, farm land, and other tangible assets.

“Muni Retirees Face 90% Loss Under Detroit’s Pending "Free-Fall" Bankruptcy”

Wouldn’t you hate to wake up to that headline after spending 20-40 years as a city employee?

This is the historical 10 Year U.S. Government Bond Yield.  Get the picture?

The Federal Reserve has painted itself into a corner.  Can you reduce interest rates to a negative level?  The 10 year bond yield has increased and that worries Bernanke and company.  There have been some resignations at the Fed and at the same time Harry Reid is trying to make it easier to get President Obama’s appointees approved through the Senate.  See: http://abcnews.go.com/blogs/politics/2013/07/harry-reid-vows-to-break-filibuster-rule-in-this-new-era/

I do agree with Reid, this is a new era coming but I have a different view of how it will look.  The U.S. is desperately trying to keep the Dollar in demand by initiating trade agreements that are dollar-based, mainly with Europe.  In the meantime, the Kings of the East are putting together a financial infrastructure that eliminates the Dollar as the world reserve currency.  They have had enough of the U.S. exporting devaluation to their shores.

I suspect that we may have one more attempt at a smackdown of gold and silver prices before the bottom of prices is in.  The problem in another smackdown is that most of the weak sellers of gold and silver have already exited the market.  The current buyers are longer term investors who are looking for bargains and are not scared by a price drop.  On the contrary, they hope they get another rock-bottom buying opportunity.  The current prices of gold and silver have put stress on the mining companies.  I am focusing on those companies with zero debt and cash in the bank.  Some of the senior producers will come out with ugly numbers this quarter as they cut away any excess and take the loss.  This should provide a stronger sector in coming quarters.

Bernanke publicly eluded to the fact that the unemployment numbers may be understated.  I wonder if he is now a subscriber to John Williams’ www.shadowstats.com?  We’ve been reporting this reality for some time.  What kind of shape is the economy in?  The following graph from Zero Hedge may tell the story: