Servias Ministries Blog

With about 900 banks expected to fail, the U.S. Economy will move into a second wave of problems.  A recent trip to Ft. Myers, Florida, revealed a substantial glut of commercial real estate properties standing vacant with no expected rental income in the future.  The newest Target store looked like a ghost town.  Needless to say, we did not have to wait in the checkout line.  This is indicative of those areas who enjoyed double-digit growth over the last few years in the real estate bubble.  Prepare for the next bubble to pop.

Bubblenomics

In times like this,new words are created to describe the events being observed.  The word that best describes the current response to our economic woes is “Bubblenomics”.  Monetary policy is being used to address structural issues with our economy.  Money can’t fix a loss of manufacturing jobs by printing more and the average American’s productive capacity is underutilized.  We need to create or build to provide a foundation for a strong economy.  Historically, savings and investment provide the needed capital for new businesses and products.  It will be found that Alan Greenspan failed as the Chairman of the Fed and savings rates should not have been pushed to extreme lows thereby punishing the savers.  He managed to interrupt the natural cycle only to evoke a more severe correction on the bust portion of the cycle.  In the meantime economic policies promoted “globalization” of manufacturing by moving plants offshore and undermining the productive use of our human resources in favor of building a “services & financial” economy which has proven to be disastrous.  That move enriched a few on Wall Street and Washington but hurt the manufacturing states.

Cyclical Realities

The weather is made up of short cycles as well as long-term cycles and when these cycles converge on each other, we tend to get extreme weather.  The same is true in the economic realm.  History shows that we have boom/bust cycles occurring rather frequently.  However there are longer term cycles that have been observed to have more notable effects on the economy and society.  For instance there is a 51.6 year cycle has been studied since the Civil War and has proven to be rather accurate.  We have entered the down cycle and with the convergence of the short term cycles (thereby increasing the amplitude), it sets the stage for $3,000 gold prices.

Reserve Currency

What prompted the world to establish the U.S. Dollar as the world’s reserve currency?  First of all, the U.S. had 76% of the world’s gold in its possession after WWII.  Secondly, we were the world’s arms dealer and food supplier.  Mankind’s thinking runs in cyclical patterns and when one generation begins to die out, the next generation’s self interest kicks in and starts the process over again.  We only need to look at Spain and Great Britain to see what a former World power looks like.

All of the above point to the spiral of Self Interest.  In the 60’s the pressure against the U.S. Dollar began (51.6 year cycle).  It culminated when Nixon closed the Gold Window which was prompted by the action of the French wanting to hold gold over dollars.  Inflation had begun in the U.S. and those dollars were declining in relative value.  Terms such as “greater good” mask the true term of “self interest”.  What then surfaced was the battle of self interest between the government and the people.  Social security is a great example.  Government installed social security as a way of helping the retired people to sustain themselves after their productive years.  All of us were required to withhold part of our wages with the promise we would receive benefits at retirement.  What a noble cause!  Fast forward a few decades and now those funds have been replaced by IOU’s and the threat of insolvency is at hand.  What happened to all of our money as well as the employer matched funds that were deposited with the U.S. Treasury?  That money is gone!  It was used for the “greater good” by the various administrations who “borrowed” our money without our specific permission.  If any of us did that at a private level, we would be put behind bars.  The Rule of Law has given way to the path of Marxism.  “Marxism is an economic political theory by which law is considered an instrument of oppression and control, and which the ruling class uses against the working class.”  The complacency of the average American has allowed government to pursue a path whereby laws prefer the lobbyists of large corporations who fund reelection campaigns.  Have you ever noticed how difficult it has been to have campaign financing reform?  Why is it that Congress has their own retirement and healthcare benefits?  Why do Congressmen get preferential treatment when breaking the law?  The recent judicial decisions upholding the view that imminent domain needs could trump private land ownership is just another example of the issue of self interest.  As the rule of law disintegrates, property laws vanish and people will no longer attempt to hold property, in fear of confiscation.

The rule of law is in the hands of 545 people in Washington.  The recent bailouts of the “too big to fail” corporations and banks have brought to surface the change in the rule of law to the rule of self interest.  Even though the President includes the “rule of law” in many speeches, self interests rule now.  Goldman Sachs has been the indirect recipient of substantial bailout funds authorized by government officials who were former Goldman executives.  Our Heavenly Father will reconcile the books of this path of self interest.  It may not be this Friday or next, but you can be assured HE will!

Continuous expansion is not healthy for any economic system.  Over-expansion will cause the needed contraction to be more severe than otherwise needed.  The current policy of “bubble” economics has been delaying the inevitable.  Further delay could facilitate a collapse just as it did in Rome’s final days.  Contraction allows the system to detoxify from the previous expansion period.  Unprofitable and unsustainable efforts and entities are removed from the system.  Leverage is reduced and equity in investments are increased to prepare for the next opportunity to expand.  Just as eight hours of sleep is a period of contraction and recuperation in preparation of the next day, economic contraction performs the same function.  Economic health requires a rest period after it has been expanded beyond its normal cycle.  Cycles are a part of nature.  Electromagnetic waves are measured as cycles, time is measured in cycles, as all life is measured in cycles.  Biblical cycles of time are well documented and provide us with an anticipated calendar of events.  Jubilee is a time of contraction and all debts are canceled.  Land is to be given a year of rest every seventh year, another form of contraction.  We know that during that year of rest, weeds grow deeper roots and pull up the minerals depleted by the shallower root system of food crops thus creating a natural fertilizing function.  The Sabbath was established as a rest day, another time of contraction.  The Sabbath was made for man, man was not made for the Sabbath. 

Profit is made from innovation at the time of compression.  When the expansion comes, the fruit of the compression is realized and enjoyed.  The harvest is substantial.  The problem arises when we don’t understand the cycle.  Society wants continuous harvest without any additional investment.  During the Great Depression, people were put to work by building infrastructure: roads, bridges, national parks, etc.  When the economy turned around, Americans enjoyed the fruit of all that labor but those efforts could only last so long before it would take another investment in infrastructure.  The U.S. energy infrastructure is in decay.  Trillions need to be invested in pipelines, water, roads, bridges, and rail.  The days of cheap energy are gone in this current paradigm.  Rail is a more efficient method in moving goods and people. 

Profit from leverage is temporary.  Greater leverage can provide short-term profits but the risk goes up exponentially.  The risk/reward ratio becomes unmanageable and puts the organization in peril if some unforeseen event occurs.  Sudden loss of access to capital markets causes businesses who are highly leveraged to contract their balance sheet at all costs.  They do that by selling assets pennies on the dollars to raise cash so that they can meet their cash requirements.  When leverage is taken to an extreme, the slightest change in demand or some event occurring at the wrong time will cause a cascading effect and create an insolvent business.  This is the core problem with the derivatives market.  By definition, a derivative is a leveraged position.  For that matter, insurance is a leveraged event if most of the insured evoke a required distribution at the same time.  Life insurance companies work the odds that we all won’t die at the same time.

Lowering your debt is a contraction based plan.  Do it now.  It will prepare you for the next expansion phase, if and when it happens.  Low or no debt encourages restful sleep, reduced stress, and puts you in a position of helping others.

There are many times in our lives that each of us has to eat our own words.  The U.S. Congress seems to be inciting a riot among the constituents.  At a time when true unemployment exceeds 16%, and most of us are tightening our belts, the U.S. Congress is spending money in reckless abandon.  We are moving towards a $100 Trillion overall liability and nobody seems to care.

The Congress is ordering eight new planes at a cost of $550 Million.  See: http://online.wsj.com/article/SB124960404730212955.html   What adds insult to injury is that these planes will cost $66 million each, $17 million more than the sticker price of $49 Million.  With the soft aviation market, current street prices are about $43 Million.  See: http://blogs.wsj.com/wealth/2009/08/10/why-is-congress-paying-66-million-for-a-49-million-jet/  One of their complaints is that there current fleet of airplanes has to refuel more often.  How disappointing!  Congressmen are taking more trips to other continents (with their spouses) on “fact finding missions”.  C’mon.  How many facts will you find on a three week boondoggle to Europe with the spouses getting in the way?  It sounds like we all need to become public servants to get in on some of that lovin’.

What are they thinking?  At a time when many Americans are trying to pay the rent, 545 people in Washington are rubbing it in their faces.  The tax revolt tea party is being fueled by these less than prudent acts.  Are the lawmakers so disconnected from reality to believe nobody will notice as they take liberties in these times?

Is the mortgage situation getting any better? Deutsche Bank  believes continued declines in home values will increase the number of US mortgagors with negative equity from 14m in Q1/09 to 25m in Q1/11.

See:  http://www.housingwire.com/2009/08/06/deutsche-sees-48-of-all-us-mortgages-underwater-in-2011/  The green shoots the media speaks about may just be weeds.  The financial hole we’ve been digging for years may be too large to fill.  Our children and grandchildren will be the recipients of this generation of reckless spending.

Our Heavenly Father speaks of blindness of men.  Otherwise intelligent people are taking actions that will ultimately come back to haunt them.  As an observer of this blindness in action, I marvel at the preciseness of the Holy Scripture and the unfolding of the end of an age.

The new healthcare bill will be the defining moment of the United States.  If this bill is passed it will be the straw to break the camel’s economic back.  The cost of healthcare will further deepen our trillion dollar deficits.  China is the largest creditor and will not tolerate our expanded deficits.  The future of America is in the hands of China.  Congress is recklessly passing bills that will dramatically and negatively impact the average American because most Congressmen are not even reading the bills they are voting on.  When a country is in a recession, you don’t raise taxes.

Euthanasia is the intentional killing by act or omission of a dependent human being for his or her alleged benefit.  HR 3200 currently under consideration in the House of Representatives will promote euthanasia.  This bill will mandate who gets healthcare, what treatment, and when they should receive it. 

The bill:

• MANDATES a government audit of the books of ALL EMPLOYERS that self-insure (Sec. 113, Pg. 21-22)

• Sec. 122, Pg. 29, Lines 4-16 – YOUR HEALTH CARE WILL BE RATIO

• Sec. 123, Pg. 30 – THERE WILL BE A GOVERNMENT COMMITTEE deciding what treatments and benefits you get.

• Sec. 142, Pg. 42 – The Health Choices Commissioner will choose your benefits for you. You have no choice!

• Sec. 152, Pg. 50-51 – HC will be provided to ALL NON-US citizens.

• Sec. 163, Pg. 58-59 beginning at line 5 – Government will have real-time access to individual’s finances & a National ID health care card will be issued!

• Sec. 163, Pg. 59, Lines 21-24 – Government will have direct access to your bank accounts for electronic funds transfer.

• Sec. 201, Pg. 72, Lines 8-14 – Government is creating an HC Exchange to bring private plans under government control.

• Sec. 1121, Pg. 239, Lines 14-24 – The government will limit and reduce physician services for Medicaid. Seniors, low income and poor are the ones affected.

• Sec. 1162, Pg. 335-339, Lines 16-25 – The government mandates establishment of outcome-based measures. Rationing.

• Sec. 1233, Pg. 425, Lines 4-12 – Government mandates Advance (Death) Care Planning consultation. Think Senior Citizens and end of life. END-OF-LIFE COUNSELING. SOME IN THE ADMINISTRATION HAVE ALREADY DISCUSSED RATIONING HEALTH CARE FOR THE ELDERLY.

• Sec. 1233, Pg. 425, Lines 17-19 – Government WILL instruct and consult regarding living wills and durable powers of attorney. Mandatory end-of-life planning!

• Sec. 1233, Pg. 425-426, Lines 22-25, 1-3 – Government provides approved list of end-of-life resources, guiding you in death.

• Sec. 1233, Pg. 427, Lines 15-24 – Government mandates program for orders for life-sustaining treatment (i.e. end of life). The government has a say in how your life ends.

• Sec. 1233, Pg. 429, Lines 1-9 – An “advanced care planning consult” will be used as patient’s health deteriorates.

• Sec. 1233, Pg. 429, Lines 10-12 – “Advanced Care Consultation” may include an ORDER for end-of-life plans – from the government.

• Sec. 1233, Pg. 429, Lines 13-25 – The government will specify which Doctors (professional authority under state law includes Nurse Practitioners or Physician’s Assistants) can write an end-of-life order.

• Sec. 1233, Pg. 430, Lines 11-15 – The government will decide what level of treatment you will have at end of life, according to preset methods (not individually decided).

• Sec. 1711, Pg. 764 – The government will require preventative services – including vaccinations (no choice).

SEE: http://www.lc.org/ and read the bill for yourself.

Members of Congress will be exempt from this healthcare bill.

The fundamentals of education historically have been Reading, wRiting, and aRithmetic, known as the 3 R’s.  We have been conditioned to believe that growth is always good, the one exception being “weight”.  Most of us do not want to grow our weight anymore and would enjoy a decline in weight.  Zero growth in weight once I left high school would have been ideal based on the current insurance tables.

Most people do not understand the exponential growth curve.  This may be one of the most important concepts you, your children, and your grandchildren should understand because it will affect every person on this earth unless of course Our Heavenly Father intervenes soon.  Actually, this concept supports Divine intervention soon.  Prophets have been anticipating a change on earth.  The Mayan calendar projects an end of the current eon.

The following 8 part video provides one of the best explanations on why I believe that commodities are one of the best long term investment strategies.  Don’t be concerned about the mathematics other than understanding that the arithmetic is accurate and adequately explains where we are going with the current growth rates and consumption rates.  Our motto of “simplify” may be forced on us sooner rather than later.

Part 1 of 8

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On Friday, September 26th, 2008, I post a blog stating that the bailout could reach $25 Trillion.  The last projected numbers place the commitment at roughly $24 Trillion, or roughly $80,000 for every man, woman, and child in the U.S. See: http://www.msnbc.msn.com/id/32010841/ns/business-us_business

If the FASB (Financial Accounting Standards Board) decides to force the issue of toxic assets being valued at market value, this $24 Trillion will rise further and it won’t be a pretty sight.  See:  http://www.bloomberg.com/apps/news?pid=20601039&sid=a5BsXz90CMso

Perception in the financial arena can make or break an economic recovery.  It has been expedient to report what people want to hear rather than the ugly facts.  Perpetuating a counterfeit reality will only work until Our Heavenly Father exposes the truth.  What will happen on that day?  It is hard to tell.  I’m sure those in power have contingency plans if the populace were to go ballistic about the hidden truth.  What most people don’t realize it that the truth has been reported but is difficult to assimilate with all of the perceptions being reported as well.  Too much data hides the truth and truth surrounded by half-truths is difficult to recognize.

The citizens of the U.S. have been promised transparency but it would appear that the promise is either being broken or those in charge do not understand how serious the problem is.  The following video provides an unfortunate chronology of Ben Bernanke:

I have strongly recommended that individuals pay off debt in order to improve their sleep cycle.  Individuals ultimately make up a nation.  In the past, different nations were in different stages of development somewhat independent of the rest of the world.  This is no longer true.  With telecommunications reaching every nook and cranny around the world, all countries are interconnected in some way.  Money easily flows around the globe in milliseconds now.  American depositors can now have a bank account denominated in other currencies with a click of the computer mouse.

It has been reported that the world GDP (Gross Domestic Product equivalent) is $60 Trillion.  See:http://siteresources.worldbank.org/DATASTATISTICS/Resources/GDP.pdf

The following graph indicates that governments around the world will need $5 Trillion in new money to fund their 2009 debt issuance:

This graph indicates that governments around the world need to attract funds equivalent to 9% of the world’s GDP.  HOUSTON, WE HAVE A PROBLEM!  This year the amount of funding needed is three times the five year average!

With much of the globe fighting off a recession, where will these funds come from?  Increasing interest rates to compete with other investments is not plausible.  It would appear that the monetary printing presses will heat up to take up the slack.  This will be bullish for commodities including oil, gas, gold, and silver. 11+ states in the U.S. are dealing with the potential of bankruptcy with California in the lead.  Official Unemployment will probably exceed 11% soon.  Tighten your belts, things are getting interesting!