Archive for April, 2012

The Current Depression

Wednesday, April 4th, 2012

In 1968, the U.S. has $1 Trillion in debt.  Today the U.S. debt is now estimated at $50 Trillion.  Money had gold backing back in 1968 but today it is only a credit instrument, no different than a Treasury Bond.  Gold restrained credit from being created and minimized bad investment decisions since there was a limit on what could be lent.  With a restriction in lending, only the best opportunities would be funded.  Risk was therefore minimized by the lender.  Borrowers had to qualify and their projects had to prove they could cash flow the loan.

Debt and credit are two sides of the same coin.  One person has an asset and the other person has the offsetting liability.  The dramatic expansion of credit caused the strong pace of globalization.  The financial sector has become the largest borrower within the U.S. debt structure.  In 1945, it accounted for 1%.  Now it accounts for over 30%.  In the 1950’s the U.S. was a manufacturing based economy but now we are a service-based economy.  China now has many of our manufacturing jobs.

Over the last 45 years, this transition was accommodated by rising home prices and Americans were extracting “equity” from their homes to fund their lifestyle.  This minimized the pain of transition from a manufacturing-based to a service-based economy.  But now, the environment is changing.  Housing is no longer assumed to be forever growing in value.  The Fed is desperately wanting to keep inflation alive but the average American is no longer buying into the plan.  This 4 1/2 decade sustained expansion brought about by credit expansion is now at the end of its cycle.  A bust cycle is needed to cleanse the system.  Generally speaking, the bust must be similar in breadth to the boom cycle.  Either the length or depth must compensate for the extended boom cycle.

The private sector can no longer handle any more credit and this began in 2008.  Inflation is currently masking the reality by distorting the numbers.  The transition of the market to globalization brought forth a 95% drop in labor costs.  This is a one-time event and it impacted the prices of manufactured goods during the transition.  This is why the price of a PC has moved from $2,800 to $500.  The labor factor is the major ingredient in the decline of the price.  American workers built the first PC’s and now those same PC’s are built in China at 5% of the labor cost thus the consumer price index (CPI) has appeared to be reasonable but does not reflect the future challenges.

If we weren’t in dire straights, the Fed would not keep the interest rates at 0% through 2014.  Global stock and asset prices have been the beneficiary of the credit expansion policies of recent years.  Last year’s budget deficit of 8% kept the economy looking better than it would have with a balanced budget.  This deficit is keeping the U.S. economy on life support.  As long as the government spends on consumption, the hole will only get deeper.  The constituency does not want their consumption payments to drop and Congress will accommodate that request.

Low interest rates can only be supported by massive money printing.  This cannot be sustained forever.  Unless honest money arrives on the scene soon, Our Heavenly Father only knows how ugly this will get.  We must get back to honest money that cannot be manipulated.

The Battle for Control

Sunday, April 1st, 2012

The move toward making money all electronic is the essence of control.  This computerized environment enables a select few to control the masses in very short order.  Without personalized money, i.e. currency and coinage, those in control of the banking system can evoke stifling power at a moment’s notice.  An all electronic environment can control communications by shutting down cell towers, the Internet, and major telecommunications trunk lines.  When people conduct business with currency and checks, they bypass the controlled system hence the move to eliminate those mediums of exchange.

Creation of money is now done on a pure electronic basis.  In a stroke of a key, money is created out of nothing and this allows those in control to do what they think is best even though they do not have the perspective of Our Heavenly Father.  How much money is enough?  Only Our Heavenly Father knows.

The control of money can now be administered from a central location.  Commerce could be shut down in a matter of minutes or hours.  Emergency Executive Orders are in place to initiate such an act in the U.S.  What are we to do, move to another country where there is more individual freedom?  The answer lies in the Heavenlies.  We must pray for Thy Kingdom come, Thy Will be done.  The physical will ultimately line up with the spiritual.  The less money you have, the less control man can have on you.  Jesus’ ministry was not known for the size of His ministry funds.  If He needed to feed the multitudes, He expressed enough Love over a small sample of food to multiply it enough to satisfy the thousands.  He was in command of the “GOD” particles and those particles cannot be controlled or manipulated by man.  The Kingdom economy looks like a more efficient system to me AND it eliminates man’s quest to control.  Selah!