Archive for June, 2009

Economic Responsibility and Accountability

Monday, June 22nd, 2009

The Old Covenant in Scripture was a conditional covenant.  It was based on “if” and “then”.  IF you will turn from your wicked ways, THEN I will…  Both Our Heavenly Father and Israel made commitments.  As we know Israel failed and Our Heavenly Father mercifully pulled them out of the fire many times.

The New Testament was based on the unconditional commitment of Love with Jesus going to the cross on behalf of mankind for all generations.  This Love did not rely on our performance but relied solely on Jesus and His blood.  As a display of His economic responsibility, Jesus fed the multitudes by focusing His Love on the fish and bread to multiply them to meet the economic needs of the people.  The mind has a hard time grasping this Kingdom principle.  And when the mind cannot grasp something, it will direct you away from this reality.  What the mind doesn’t understand, it tends to rationalize to alternate area of understanding.

On June 17th, 2009, President Obama delivered a speech concerning Financial Reform.  The following is an excerpt:

“As a result, the failure of one firm threatened the viability of many others. The effect multiplied. There was no system in place that was prepared for this kind of outcome. And more importantly, no one has been charged with preventing it. We were facing one of the largest financial crises in history — and those responsible for oversight were mostly caught off guard and without the authority needed to address the problem.”  See: //

Timothy Geithner, the current Treasury Secretary, was previously the president of the Federal Reserve Bank of New York, the most influential of the twelve Fed Districts.  The New York Fed implements monetary policy, supervises and regulates financial institutions and helps maintain the nation’s payment systems.

Current functions of the Federal Reserve System include:

  • To address the problem of banking panics
  • To serve as the central bank for the United States
  • To strike a balance between private interests of banks and the centralized responsibility of government
    • To supervise and regulate banking institutions
    • To protect the credit rights of consumers
  • To manage the nation’s money supply through monetary policy to achieve the sometimes-conflicting goals of
    • maximum employment
    • stable prices, including prevention of either inflation or deflation
    • moderate long-term interest rates
  • To maintain the stability of the financial system and contain systemic risk in financial markets
  • To provide financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system
    • To facilitate the exchange of payments among regions
    • To respond to local liquidity needs
  • To strengthen U.S. standing in the world economy

Secretary Geithner was in the middle of all the action while the problem was brewing.  How can we expect him and others in leadership to fix a problem that President Obama claims they were caught off guard?  In a subtle fashion, he has judged his own cabinet members.  This is a serious issue!  We need wisdom from above to solve these problems.  The solution may not be what we expect but we must rely on our Covenant with Our Heavenly Father to bring us through this mess.  The current path leads to destruction.

Congressman Paul from Texas understands the issue:

World War III is in progress: "It’s the world economy, stupid"

Friday, June 19th, 2009

Bill Clinton coined the phrase in the 1992 Presidential Election- “It’s the economy, stupid!” and stayed focus on that issue which helped win him the election.  Now there is a greater issue at hand- the world economic system with the U.S. Dollar as the reserve currency.  For decades the U.S. Dollar has been the medium of exchange for global transactions thus creating a consistent demand.  Times are a changin’!  The U.S. supremacy is coming into question and those in power are attempting to keep the wheels on the wagon by expanding power without oversight.

The following interview was conducted during the Financial Services Subcommittee on Oversight and Investigations hearing of May 5, 2009. Rep. Alan Grayson asks the Federal Reserve Inspector General about the oversight responsibilities:

This interview makes us wonder just who is in charge?  Further, as we all know that the Federal Reserve is a private entity, how can there be no accounting to the people of the United States whose money is being spent?  The country may be becoming “too big to survive” instead of too big to fail.


A primary battle front is the price of gold in U.S. Dollars.  The following graph shows an interesting technical formation:



Notice from Mid February thru the current session that there is a reverse head & shoulders pattern forming.  This is a power pattern if and when it is confirmed.  The following is a historical example of this pattern:


Notice that once the price moved above the “neckline”, the stock headed upward.  For gold, the neckline is $1,000 and if it penetrates that price with strong volume, technicians expect a strong price move to $1,300 and that does not bode well for the U.S. Dollar.  This is why the battle is on between central government intervention and the investment community.  Over the last nine years, gold has yielded 16.4% return on investment but you hear very little in the press about that performance.  Gold is the “canary in the mine” for the fate of the U.S. Dollar.  $5,000 gold is no longer an unreasonable peak price.

Have you noticed how many U.S. officials are making trips to China these days?  China has a huge investment in Dollar holdings and must be reassured that the dollar isn’t going to tank.

At a recent trip to China by Timothy Geithner:

“Chinese assets are very safe,” Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

His answer drew loud laughter from his student audience, reflecting skepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home.  See:

Gold acts as “insurance” against a declining U.S. Dollar and there is not really too much anyone can do about the decline except to try to slow the descent.

In a recent speech, economist John Taylor from Stanford told the Atlanta Fed that with the current spending policies in place, the U.S. Government will need to increase taxes of the American people.  A 60 percent tax increase across the board would be required.  Otherwise to cut the debt being created, an inflation rate of 10% for 10 years will be required.

Take your pick!

You can better understand why the BRIC countries are signing bilateral trade agreements thus removing the U.S. Dollar from the mix.  BRIC or BRICs is an acronym that refers to the fast-growing developing economies of Brazil, Russia, India, and China.  Russia is the only country with sufficient internal problems that may slow down the move away from the use of U.S. Dollars to settle trade among those countries.

History tells us the every country whose currency was used as the world’s reserve currency and became a debtor nation to the extent of the U.S., their economy ultimately collapsed.

The Coming Energy Storm

Wednesday, June 17th, 2009

Oil surpassed $70 per barrel last week, up from $37 back in December.  The unwinding of speculative positions forced the price down from $147.  In the intermediate term of six to twelve months, I expect the stock market to show signs of life which will help support higher oil prices.  The real issue is supply destruction in the oil industry and this reality is known as depletion.  All you hear about in the news is “demand destruction” but supply destruction is outpacing demand destruction thus forcing the price upward.

As in many markets, energy prices spiked to new highs and then subsided causing the average consumer to think the price spike was an aberration in the market.  We have maintained that peak oil occurred in 2005.  The peak is where new production does not exceed actual depletion of existing fields.  There have been some who believe that massive undeveloped oil deposits in various locations have been withheld for suspicious reasons.  I disagree.  It is true there are massive deposits but they are expensive to extract or they are in formations that do not easily give up the hydrocarbon.  The low hanging fruit has been developed.  The greed of man does not believe in patience when resources can easily be extracted and converted to cash.

Why do you think that the Obama Administration is making such a big deal about alternative energy?  They see the writing on the wall.  $200 oil is in the cards for the near future and will arrive sooner not later if the economies around the world heat up thus requiring more liquid fuel.  China is at the point of exceeding the U.S. as the #1 consumer of new autos and the demand appears to be strong.

The U.S. Dollar must decline in order for the U.S. to survive this economic crisis.  The Fed cannot raise interest rates without extending this “recession” or depression depending if you have a job or not.  By depreciating the U.S. Dollar, the current debt will become worth less, hopefully not worthless.

I now believe that one should increase their position of gold and/or silver bullion if possible.  5-10% is not enough insurance to weather the potential decline of the U.S. Dollar.  20% of your investment portfolio is not an unreasonable percentage.  The commodity bull market is alive and well around the globe.  If the U.S. Dollar declines by 5%, oil will increase by 5% without any change to the other fundamentals.  The opposite is true as well.  However, I do not believe that a strong dollar is sustainable given the quantitative easing by the Fed and the unfunded liabilities of the U.S.  Inflation is a currency event, not an economic cycle event.

Natural gas is cheap right now.  Its price is being set at the trading desks of hedge funds and investment banks rather than the economic supply/demand criteria of end users and suppliers.  Of course this is true for all commodities.  Perceptions of the moneychangers provide a perverted pricing function thus are ultimately stealing from the rest of us who consume commodities.  The world continues to consume more energy each year independent of the economic downturns and as the global population grows, this will be the reality.  All sources of energy must be tapped to keep up with the demand.  Right now, natural gas is cheap relative to the alternatives.  You can expect the price to be pulled up by the market in the coming months.

Mexico is in deep trouble.  Mexico’s Cantarell Oil field, The second Largest oil field in the World Is Dying.  In July 2008, daily production rate fell sharply by 36% to 973,668 barrels per day from 1.526 million barrels per day a year earlier.  Mexico may soon be an importer of oil rather than an exporter to the U.S.

Canadian Oil Sands extraction is unprofitable below $75-$80 per barrel.  This provides a floor for supply from this resource.  Venezuela’s exports are being committed to China.  In Colorado, new permitting requirements make it extremely difficult to drill for oil & gas.

I suggest that you prepare yourself for this coming storm.  Anything you can do to become more energy efficient now will reap rewards in the near future.  If you have a gas guzzler, you may want to trade for a more efficient vehicle.  There are little things you can do around the house to improve its energy footprint.  There are now energy tax credits for approved upgrades in the U.S.  You can grow a vegetable garden and start with the simple- tomatoes, onions, lettuce, radishes…  Yes, right now it seems like more trouble than it is worth but as energy prices go up, there will be less fresh produce to buy at reasonable prices.

If you own two or more vehicles, I would recommend that one of them be energy efficient with a notable range (gallons x mpg).  If we have an gasoline shortages, the impact will be less on those with energy efficient vehicles.

When will the storm arrive?  You can be sure that leadership will not forewarn us since they do not want the masses rising up in fear.  If everyone topped off their gas tanks at once, we would have a gasoline shortage immediately.  That is how tight supplies really are.  What would happen if people began to hoard gasoline because of being told of a coming energy storm?

Proverbs 6:6-8
Go to the ant, thou sluggard; consider her ways, and be wise:

Which having no guide, overseer, or ruler,

Provideth her meat in the summer, [and] gathereth her food in the harvest.

Managed Chaos in America and the Last Bubble

Tuesday, June 9th, 2009

Abrogation: To abolish, do away with, or annul, especially by authority.

The Obama Administration has abrogated contracts in private industry “for the greater good”.  Contract Law is the basis of free enterprise and once you begin to tamper with contract enforcement you will see the demise of free enterprise.  As this is written, Chrysler is attempting to survive with Fiat’s assistance.  However, three of the secured bond debt holders felt that receiving 29 cents on the dollar was not enough.  The Administration has clearly demonstrated that contract law is subservient to presidential desires.  The President, a former law professor, must have forgotten about the need to honor contracts.

China is not happy with the U.S. Administration’s economic policies.  In a recent trip to China, Timothy Geithner was laughed at by Chinese students as he was attempting to give a speech on Monetary Economics.  The Chinese are creating trade agreements with Brazil, Russia, Indonesia, and other countries bypassing the U.S. Dollar in the settlement of trade.

True Unemployment is 16.4% when you include discouraged workers and those working part-time wanting to work full-time.  Officially, 345,000 jobs were lost last month but 200,000+ jobs were added by the “birth/death” model which hardly ever loses jobs.  “Liars figure, figures lie”.

The Administration has blown off the Tax Tea Party.  In an attempt to protect the current paradigm, Obama will attempt to raise taxes in any area he can.  The facade will be put in place to lead us to believe that only the wealthy will be taxed.  Not so.  The wealthy provide the capital for business creation which in turn benefits the average citizen by providing jobs.  Obama wants to change the tax laws for small oil & gas companies.  The net effect of this move will be to wipe out many of the independent exploration companies and thus lower oil output.  This in turn will push oil prices up toward $200 per barrel and ultimately will tax the public at the pump.  What are these guys in Washington thinking?  Expect a national value added tax (VAT) to be implemented, one similar to England.  Notice that they’re in worse shape than we are!

Most people were against the bailouts but the Administration did not care.  GM threatened bankruptcy months ago and received billions.  Now they are in bankruptcy and are receiving additional billions.  What a deal!

The little people are being squeezed, you and I are in that category.  Most of us are in the “too small to save” category.  Have you ever noticed how the government “gives” money to the large entities and loans money to the average citizen, if they qualify?  Giving a bank $5 billion at 0% interest allows them to invest the money and receive interest income without any expense.  Once they are done, they simply return the money to the government.  Why can’t you and I get in on some of that lovin’?

The printing of money is simply to relieve the symptoms, just like a pharmaceutical.  The U.S. needs to contract and rid itself of unworkable and unprofitable businesses.  If a bank can’t manage its business properly, why prolong poor management?  If a car company can’t make a profit, why prolong its poor management or business model?  How long do you think it will take GM to pay back $50 billion to the government out of its profits?  Forever!

The greed, mistakes, and criminality of Wall Street gang is being protected at the expense of the average citizen.  As our family members grow older, it becomes critically important to retain family wealth for their care.  The current system is designed to extract wealth by taxation, inflation, and any other means to keep the current system going.  Only the elite will be assured of asset protection.

The Bailout Bubble by definition is the last bubble of this current series of bubbles.  A nation’s currency is that last bubble to inflate.  History tells us that the bursting of this bubble will not be pretty.  How long can this bubble continue to inflate?  Only Our Heavenly Father knows.  With the continued global population growth, commodities will be in greater demand.  As I see it, ownership of food, water, oil, gas, gold, and silver is the only possible insurance policy the average person can have.  Paper assets will continue to depreciate as the Fed tries to save Wall Street.  As we proceed forward, chaos is at hand for the average citizen.  When men become desperate, they will justify any action to feed their families.  The nations of the earth will then turn toward Heaven and seek guidance from above… finally!

Two Types of Leadership: Sheep versus Cattle

Wednesday, June 3rd, 2009

You lead sheep and you drive cattle.  Jesus made it clear that we are to be likened to sheep, not cattle.  Sheep and fish are the two species that accept newcomers without reservation or critical review.  Flocks of sheep can grow into the thousands on the way to market because of this reality.  Sheep also know the voice of their leader.  On the other hand, cattle must be driven by “force” and rounded up by experienced cowboys on equally experienced horses.

Love leads and Ego drives.

The ego must control and manipulate to move its agenda of lordship.  When you put two strong egos in the room, you create competition.  The ego must dominate to sustain its relative position thus you have the cattle driven by the egos of “leaders”.  In recent years with the access to information provided by the Internet, private individuals have been able to uncover the manipulation of data by those in power.  Whether it be the local banker who was paying low rates on CD’s or inflation rates with hedonic indexing, the proverbial cat is out of the bag.  Long-term promises were made to the American people by short-term leaders who knew they would not be around when delivery of those promise came due.  With the unfunded liabilities in the ten’s of trillions, there is no alternative but to devalue the dollar.  In order to do this and survive, the cattle drivers must prop up the current paradigm for as long as possible.  At its core, the ego knows that competition is a core method of misdirection.  Why do you think that we have so many different professional sports in the U.S.?  As Joe Sixpack focuses on the latest game or motor race, the dollar is crumbling away.

Have you ever noticed that politicians seem to enter politics as a middle class citizen then shortly after leaving politics they seem to become independently wealthy in a short period of time?  They receive “consulting” revenue from the very companies and industries which fared well during their political office.  The system perpetuates itself.  There are a few exceptions and they are called leaders.  Ron Paul from Texas has understood the perils of a fiat based currency.  His ongoing quest to challenge the status quo has caused people who understand his mission to follow Congressman Paul.  They know that he has their best interest at heart.  That is a sign of a true leader.  In the past we would call these types of politicians- statesmen.  When is the last time you heard that term used?

Cattle drivers create problems and then fix them to convince people of their “calling”.  This leads to domination over opponents by creating a resume that has been fashioned to attract voters and big money to support the “leader”.  It assumes ignorance of the facts by those who are called upon to support this leader.  As an example, how can a person with a law degree and no management experience be thrust into a management position of the largest economy on earth and be expected to make the right decisions?  How can an economics professor with no private industry management experience formulate economic policy that affects millions of small businesses?  The short answer is that they cannot hence the need to drive cattle by utilizing “think tanks” to help sway public opinion to get those theoretical policies in place.  The long term effects of those policies are not known until those who made the policies are long gone.

Recently, Brian Deese, a protege of Dr. Lawrence Summers (Obama’s Economic Advisor),  was assigned to dismantle GM and put it back together again.


Deese is a 31 year old Law student with no automotive, finance, or management experience yet he has been given the task of overseeing one of the largest reorganizations in world history.  See:,Q2AC-bQ2AQ2AQ7BQ51YHbbQ2AbJq.9Q60


What are these guys thinking?  Leadership seeks out those who are called to a position and places them in their calling.  Cattle drivers simply find a warm body to fill a position hoping they can somehow muster up enough luck to complete the task.

When a man is left to his own devices, his path leads to destruction.  When all he has to rely on is his ego which leads him to believe he is qualified to do a job, he will surely fail.

Proverbs 16:18  Pride [goeth] before destruction, and an haughty spirit before a fall.

How many billions of dollars will be lost from poorly informed decision making?  I suspect we will not found out the extent of the damage from placing a 31 year old inexperienced law student to do a seasoned leader’s job.

Leaders are moved by love to serve people, cattle drivers are compelled by ego to serve self.