You may have heard that the Balitc Dry Index has collapsed by 90% over the last two months.  This is the index that tracks the cost to ship goods around the globe.  Most pundits are saying it is due to a collapse in demand for commodities and retail goods.  Others say that it is simply due to the inability of companies to obtain letters of credit to guarantee payment of goods when they reach their destination.

Certainly it is a combination of the two, however one has to be the dominant force.  While retail sales were down 2.8% this month, this does not support a “collapse in demand” theory.  Furthermore, China has decreased imports of commodities by double digits percentage wise.  And while this is indeed significant, it id not Armageddon.   I believe that the 90% collapse is primarily due to lack of credit.  The ships are empty, not because of demand destruction, but because of supply constraints.

Goods are piling up in warehouses all over the place because they cannot be exported.  Inventories of raw materials are growing, not at the end user’s site, but at the producer’s site.  This situation will produce a whipsaw effect in the market place, once credit starts flowing again.

Eventually the supply constraint could begin to produce shortages of goods at the production and retail level.  This may actually drive prices higher for some goods despite a bad economy.  Oil and gasoline being some of them.  But when credit flows again and the ships load up, the flood of goods moving into the pipeline could cause a dramatic drop in prices as a glut of production hits the market.  More volatility in an already unstable environment.  I know this is contrary thinking, however if the BDI collapsed due to credit and not demand, this would make sense.

Quantitative Easing is another term you are likely to begin hearing about.  This is a policy that the Fed has undertaken without fanfare, and for a good reason.  The result of QE is an explosion of “assets” (if you want to call the junk they are buying assets) on the Federal Reserve’s balance sheet.

“At the beginning of this year, the assets on the books of the Fed totaled $960 billion,” said Dallas Fed chief Richard Fischer on Nov 4th. “Today, our assets exceed $1.9 trillion. I would not be surprised to see them reach $3-trillion, roughly 20% of GDP, by the time we ring in the New Year. The composition of our holdings has shifted considerably. Previously, almost 100% of our holdings were in the form of US Treasuries, today, it’s less than a third. The remainder consists of claims deriving from our new facilities,” Fischer revealed.

Japan’s balance sheet swelled to 30% of GDP during the 90’s as their economy hit 0% interest.  We are headed in the same direction. This leads many to believe that we will enter a Japan style deflation.  However, the most overlooked variable in this analysis is the most obvious one.  The Yen was not the world’s reserve currency.  The world did not hold trillions and trillions of yen in reserve.  They do hold dollars, and as we inflate the Fed balance sheet with bad assets, this is making many countries mighty nervous about their dollar holdings.

Every country knows that we are debasing our currency in a major way, yet, until now, none have wanted to be the first to stampede to the exits.  Asia and the middle east are not so quietly buying gold in large amounts.  Iran, Saudi Arabia and Russia have let it be known they have shifted significant percentages of their reserves to gold. China has signaled it is doing the same.  The first steps are being taken toward the exit of the US dollar.  Nobody has yelled “fire” yet and began running toward the door, however, how long can that hold out?

Gold and silver have traded very quietly over the last two weeks.  When $10 and $750 are approached they are stuffed back down again.  But rather than collapse after they did at such rebuffs at $850, $800 and $15, $12, they simply drop back a bit and resume quiet trading.

My gut says that something is up.  Gold and silver are set to make another stunning move.  I just don’t know which direction.  Could gold collapse to $600 and silver to $7?  Or will they make their runs to $850 and $15?  I really can’t say now.  With the above purchasing by foreign nations, swelling of the Fed’s balance sheet, and falling supply, my hunch is that they will rise.  However, over the last 60 days I have learned a painful lesson in just how much control the PTB still have over the PM markets.  If they want prices to collapse in a flush out, they will make it happen.  I don’t think we will have to wait long to see.

Just a quick note on the auto debate.  Bailout or bankruptcy?  My take is that if they allow bankruptcy, it will be another Lehman Brothers.  They will wish they hadn’t.  Their finance arms are much to entangled in the global credit mess and derivatives.  They don’t want to open another of those pandora’s boxes.  My guess is that is exactly what they will do.

The homebuilding sentiment index fell to 9.  That’s right, a single digit.  It would take a reading above 50 to indicate positive sentiment.  The home builders know that housing is far from a bottom.  They know the glut of inventory is going to rise for quarters, if not years to come.  And in the board rooms, they know that when it is all said and done, 1 in 5 home builders is likely to be left standing and still in business.  That is what a 9 index means.

Meanwhile, Moodys has said that because consumer spending has fallen off a cliff that 14% of all companies in the US are facing bankruptcy.  That is not a misprint.  And this coming from an agency that has had nothing but rose colored glasses on for the last decade. 

People, I do not mean to be alarmist about what is happening.  However, you must face reality.  I am concerned that many of you do not believe just where we are headed.  We are headed for a testing of this nation that does not come once a century, but quite possibly once a millennia.  Now if that does not have biblical implications I don’t know what does.

I ask you this however.  Would you rather live in a perpetual state of the 1990’s where everything seemed just grand - where money was being made and the geopolitical climate was relatively stable?  And by the way, where the church was losing its saltiness and was becoming more like the culture that surrounded it? Or would you rather live in a time when God is on the move.  Where Christ’s church is about to be purified and made holy, quite possibly for His return to gather her unto Himself?  Wouldn’t you like to be part of the army that goes to war to take back from the enemy the ground he has made over the last 40 years? 

You see, the 90’s was a spectators time.  It was easy to sit on the sidelines and not engage in the war.  There didn’t seem to be much at stake.  However, now it is evident that the enemy was at work the entire time, making advances.  It is now evident that every Christian must join the battle.  Sure, there is danger.  Certainly the outcome is unknown by all but God.  But I can tell you from experience that playing offense is far more rewarding than playing defense.  Ask God where He wants you to join Him!  I promise you He does, and will use you to bring Him glory as He prepares this world for the return of His Son.

My postings may be light over the next few days as I finish some much needed outside work and prepare for my seminar on Saturday.  There is a great group of guys working in Lawrence getting ready, so I am already blessed.  If something major happens I will post.  I probably will anyhow as it is in my blood.  Just please forgive me if I miss a day or two.

There are some troubling noises in the media today.  Many high profile people are coming out with statements to prepare the public for some big event after Obama takes office.  It isn’t just one or two, but many.  This type of coordinated messaging is not done without forethought.  Something is up.

Former Secretary of State Colin Powell even gave a date.  On an interview with Meet the Press Just before the election he said we will have a crisis “that we do not even know about” January 20, 21 next year.  With a date given, it must be somewhat predictable. What could it be?  Here is a possible list, not in particular any order:

• Israel war with Iran (I highly doubt this)
• US dollar devaluation (possible)
• Constitutional crisis of some sort? (who knows?)

There are lawsuits underway to force Obama to prove he is a naturalized US citizen.  Could it be a smoking gun there?  Who knows.  As I said last week, nothing would surprise me today.

In other news, GM’s bankruptcy - or talk thereof - is going to be very unsettling to the markets. If GM goes down, 1 million jobs are effected.  The contagion would spread throughout the auto industry, effecting Ford and Chrysler and another million+ jobs.  Even with a bailout, GM is insolvent.  A bailout would simply shift the liquidation of assets and downsizing of GM from the bankruptcy courts to the government.

We continue to run headlong into a depression scenario.  Will it be a decade long “great depression” or something short but very painful?  Not sure at this point, however I can see no scenario where we avoid one.  The debt bubble collapse is too strong of a force not to cause extreme economic hardship.  That much is already baked in the cake as they say.

With so many international variables at play, the path we will take there has been obscured.  World leaders, led by the US, are giving inconsistent messages, which makes predicting the path difficult.  I continue to watch what they do and try to ignore what they say.  That strategy has helped in the past. If current trends continue, I will soon have to move up my dates of implementation of a regional or global currency.  Unless the brakes can be applied to the downward economic spiral fast - and I mean fast - a global currency crisis will erupt well before 2011, possibly as early as next year. This will open the door for draconian action of some sort.  The powers that be have at most 60 to 90 days to get the situation under control. Frankly, I do no believe they will be able to do it.

Market Overview

What a week.  Another whipsaw in the broader markets as we saw manic selling met with manic buying, met of course with more manic selling.

The markets through the end of the year are facing very tough head winds.  While the main stream media wants to call a bottom in stocks, I believe we have not seen that yet.  Sales, profits and guidance for nearly every sector of the economy are being guided lower - much lower - than anticipated.  Christmas sales are headed for the largest decline year over year since they started keeping statistics on it.  Layoffs by the hundreds of thousands are being announced.  This is not a backdrop for a market rally.

However the biggest obstacle facing the markets is one that is not being discussed in the MSM.  Hedge fund redemption deadline was on Friday.  This means anyone wanting to get money out of their hedge fund investments by the end of the year had to make the request by Friday.  Now, these hedge funds have 45 days to raise the cash to meet redemptions.  This means thousands of hedge funds will be selling assets in order to raise cash between now and the end of the year.  If that were not enough, hundreds, if not thousands of these hedge funds will fail as a result of becoming illiquid due to these redemptions.  This will increase forced selling into a falling market.

Congressional leadership had several hedge fund managers in this week discussing the state of the hedge fund industry.  George Soros (yes the same one who funds Moveon.org) has stated he believes 6,000 hedge funds may fail in the next year.  He was invited to this powwow, so you know they are concerned about this potential problem.

If hedge fund liquidation continues to accelerate between now and the end of the year, every asset class is going to have trouble holding any value.  That includes precious metals. Only if there is a crisis flight to precious metals will we see them gain strength between now and the end of the year.  That is certainly a possibility, however I do not believe it is highly likely.  Another scenario that would cause precious metals to rise in the face of a market sell off is if the world catches wind that a US dollar devaluation is in the works in order to level the playing field for a new global currency structure.  If that is the case, foreigners will begin to sell the dollar and that would support precious metals.

My suggestion is that if you hold precious metals, do not sell them!  Rather, place a hedge against their falling value over the next two months by investing in a reverse ETF that gains in value as the broader markets fall.  I suggest the DOW reverse ETF, symbol DOG, and the Ultra Short Consumer goods ETF, symbol SZK.  If you put 10% of your investments into these two ETF’s, it will provide some protection in the event of a market meltdown.

401(k) Confiscation

Several people emailed me regarding discussions about the government taking over management of retirement accounts.  I had seen these reports and was pondering their validity. For now, I believe these are just trial balloons.  Yes, the socialists see the need for a revenue stream to keep feeding their socialist beast.  Will they take 401(k) and IRA accounts? Probably at some point, however they won’t get this through quickly. The opposition to it would enormous. Now, if we have a dollar currency crisis, all bets are off, however in normal circumstances, don’t look for this to be passed in the new Congress’ first session.

End of the Consumer Age

“The American consumer” is a term you hear a great deal of in the media.  And rightfully so.  Consumer spending makes up 70% of our GDP.  That is an abnormally high percentage and was destined to fall.  And fall it will.  The age of consumerism is dead in the US.  Retail sales fell 2.8%.  This is a very accurate measure of fear in the broad economy and it is signaling a huge amount of fear.  People are pulling in their horns and hunkering down for a tough storm.  Sadly most do not know just how raging the storm will be, but they are at least beginning to feel the winds of change blowing.

As evidence, American Express applied for, and was granted in one day, the right to become a bank. Normally this process takes months, but was approved almost overnight.  Why?  AmEx is heavy in the consumer debt market, and it is the next one to go belly up.  This move allows AmEx to grab taxpayer money at the Fed begging bowl to keep them from failing, triggering another Lehman Brother’s debacle.  Yes, the consumer is in deep trouble, and with $14 trillion in outstanding consumer debt, the markets have a right to be nervous about this.

Ten or twenty years from now, the stories of vast American consumption will be just that - stories.  We are going to be a nation forced to produce and save, just like we did when this country was built. Learning to save again will be forced upon us because the middle class is about to have their entire savings wiped out by massive inflation.  We will have no choice but to start the process over again.

Asia - Our Debt Masters Speak Out

Asia is getting more vocal about how they feel we need to handle our economic woes here in the US.  Being our debt master, we had better listen to what they say.  If we arrogantly turn a deaf ear, they can and will use the markets to gain our attention.

From The Economic Times of India:

“We must…have a genuine international currency as the international reserve currency… As a one-time measure, the dollar will be devalued by a large margin…”

If this/when this comes to pass, it will happen in one of two ways.  Either as a one-time devaluation with US cooperation and agreed upon by the G20.  it will include revaluation of all currencies and possible creation of regional ones. Or this will happen without US cooperation as the market forces it upon us due to the immense money and debt creation that the US is about to embark on in 2009 in order to fund the trillions in bailouts we have committed to.  Either way, this will happen.  It is simply a matter of time and whether it is through cooperation and controlled, or via a currency crisis.

Seminar In Lawrence, KS

On a final note, next Saturday I have been invited to speak at a seminar in Lawrence, KS on global economics through a biblical worldview.  This is what God has laid on my heart - to get in front of people and bring them up to speed on the nature of money and the evil we are seeing manifest in our world because of man’s hijacking of God’s perfect plan.  And, to help them prepare for the difficult times ahead.  The purification process this nation is about to face is going to shape His church into something beautiful.  But it will not be without much trial. Once church leaders accept this fact and begin shepherding their flock accordingly, it will help their flock move through these trials in a manner that will reveal Christ in the heart of believers and thus bring glory to God the Father.

I can use your prayers during the preparation time and on Saturday.  I have never had such clarity of thought before preparing for a presentation than I do now, nor have I experienced as much resistance from the enemy as I am now experiencing.  Something must be up.

My heart is to begin organizing “Gideon’s army” to take this battle to the money changers.  Believe me, after the last two weeks, it is something I look forward to with mixed emotions.  Without my trust in the Lord, I would have long since walked away from this fight.  But I see the Lord working and He has called me to this for a season.  Whether this season is months, years or decades I do not know.  I simply must be obedient and keep moving forward.

Once again, I have a standing offer to speak at any venue that you readers may wish to make available.  The seminar in Lawrence is the result of a private email from a reader of this blog. If you too are intersted, simply email me and we can work out the details.  I am called to do this.  I simply need you to give me a time and place.  This is made possible by the donations of those supporting the ministry and the good people who are sponsoring this event.  Thank you and God bless you! Your continued support is appreciated.

Was out most of today. There is a lot to comment on and I’ll be working it up tonight and tomorrow morning.  Look for updates late day tomorrow.

• G20 summit.
• Precious Metals and markets commentary.
• Big picture overview - time line.
• more.

What we are witnessing today is the US waking up to the fact that it has been moving toward a socialist society for some time now.  The government handouts over the past two months have brought that reality into sharp focus.  Corporation after corproation is positioning themselves to feed from the trough.  American Express is the latest in a long line.

AmEx Asks Fed for $3.5 Billion

Very soon now, a divided country is going to have their fill of it.  Those who have a desire for personal responsibility and personal consequences are going to get fed up and demand action.  Those who see the government as the answer to all their problems are going to realize how much money is going to corporate America, and are going to demand their fair share.  These two world views are going to collide in a powerful way.  When they do, the division in the country is going to become more tense.

This is what happens when the final move toward socialism is undertaken in a country that was once free.  Those asleep at the wheel will find that they have waited too long and will try to take action.  Those who have been waiting for it will see the prize right in front of them and will become ruthless in their actions as they “finish off” a free, capitalist society.  The war that ensues (not fought with guns - yet) is sure to be a big one.

When all of my words have been written and read, it is the Word of God that the Holy Spirit will use to speak to your heart. The following is not an exhaustive list of Scriptures used to support the foundation of the message that our monetary system is a dishonest weight and measure, and thus an abomination to God. It is merely representative of biblical principles regarding money and what the Bible says our response to this abomination should be.

Let the Word of God speak…

“All scripture is given by inspiration of God, and is profitable for doctrine, for reproof, for correction, for instruction in righteousness: That the man of God may be perfect, thoroughly furnished unto all good works.” 2 Timothy 3:16

“He stood, and measured the earth: he beheld, and drove asunder the nations; and the everlasting mountains were scattered, the perpetual hills did bow: his ways are everlasting.” Habakkuk 3:6

“And a river went out of Eden to water the garden; and from thence it was parted, and became into four heads. The name of the first is Pison: that is it which compasseth the whole land of Havilah, where there is gold; And the gold of that land is good: there is bdellium and the onyx stone.” Genesis 2:10-12

“The silver is mine, and the gold is mine, saith the Lord of hosts.” Haggai 2:8

“The land shall not be sold for ever: for the land is mine; for ye are strangers and sojourners with me.”
Leviticus 25:23

“For every beast of the forest is mine, and the cattle upon a thousand hills. I know all the fowls of the mountains: and the wild beasts of the field are mine. If I were hungry, I would not tell thee: for the world is mine, and the fullness thereof.” Psalm 50:10-12

“There is treasure to be desired and oil in the dwelling of the wise; but a foolish man spendeth it up.” Proverbs 21:20

“Then Job arose, and rent his mantle, and shaved his head, and fell down upon the ground, and worshipped, And said, Naked came I out of my mother’s womb, and naked shall I return thither: the LORD gave, and the LORD hath taken away; blessed be the name of the LORD. In all this Job sinned not, nor charged God foolishly.” Job 1:20-22

“Behold the fowls of the air: for they sow not, neither do they reap, nor gather into barns; yet your heavenly Father feedeth them. Are ye not much better than they?” Matthew 6:26

“And he said unto them, Take heed, and beware of covetousness: for a man’s life consisteth not in the abundance of the things which he possesseth. And he spake a parable unto them, saying, The ground of a certain rich man brought forth plentifully: And he thought within himself, saying, What shall I do, because I have no room where to bestow my fruits? And he said, This will I do: I will pull down my barns, and build greater; and there will I bestow all my fruits and my goods. And I will say to my soul, Soul, thou hast much goods laid up for many years; take thine ease, eat, drink, and be merry. But God said unto him, Thou fool, this night thy soul shall be required of thee: then whose shall those things be, which thou hast provided? So is he that layeth up treasure for himself, and is not rich toward God.” Luke 12:15-21

“Lay not up for yourselves treasures upon earth, where moth and rust doth corrupt, and where thieves break through and steal: But lay up for yourselves treasures in heaven, where neither moth nor rust doth corrupt, and where thieves do not break through nor steal: For where your treasure is, there will your heart be also.” Matthew 6:19-21

“Not that I speak in respect of want: for I have learned, in whatsoever state I am, therewith to be content. I know both how to be abased, and I know how to abound: every where and in all things I am instructed both to be full and to be hungry, both to abound and to suffer need.” Philippians 4:11-12

“Because sentence against an evil work is not executed speedily, therefore the heart of the sons of men is fully set in them to do evil.” Ecclesiastes 8:11

“And he said unto them, Full well ye reject the commandment of God, that ye may keep your own tradition… Making the word of God of none effect through your tradition, which ye have delivered: and many such like things do ye.” Mark 7:9,13

“For they will turn away thy son from following me, that they may serve other gods: so will the anger of the LORD be kindled against you, and destroy thee suddenly.” Deuteronomy 7:4a

“Then Jesus said unto them, Take heed and beware of the leaven of the Pharisees and of the Sadducees.” Matthew 16:6

“For among my people are found wicked men: they lay wait, as he that setteth snares; they set a trap, they catch men.” Jeremiah 5:26

“And the LORD said, I have surely seen the affliction of my people which are in Egypt, and have heard their cry by reason of their taskmasters; for I know their sorrows;” Exodus 3:7

“For men shall be lovers of their own selves, covetous, boasters, proud, blasphemers, disobedient to parents, unthankful, unholy,” 2 Timothy 3:2

“Ye adulterers and adulteresses, know ye not that the friendship of the world is enmity with God? whosoever therefore will be a friend of the world is the enemy of God.” James 4:4

“For many walk, of whom I have told you often, and now tell you even weeping, that they are the enemies of the cross of Christ: Whose end is destruction, whose God is their belly, and whose glory is in their shame, who mind earthly things.” Philippians 3:18-19

“Ye shall do no unrighteousness in judgment, in meteyard, in weight, or in measure.” Leviticus 19:35

“But thou shalt have a perfect and just weight, a perfect and just measure shalt thou have: that thy days may be lengthened in the land which the LORD thy God giveth thee.” Deuteronomy 25:15

“Diverse weights, and diverse measures, both of them are alike, an abomination to the LORD.” Proverbs 20:10

“Thy silver is become dross, thy wine mixed with water” Isaiah 1:22

“But they that will be rich fall into temptation and a snare, and into many foolish and hurtful lusts, which drown men in destruction and perdition. For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows. But thou, O man of God, flee these things; and follow after righteousness, godliness, faith, love, patience, meekness.” 1 Timothy 6:9-11

“The rich ruleth over the poor, and the borrower is servant to the lender.” Proverbs 22:7

“Ye are bought with a price; be not ye the servants of men.” 1 Corinthians 7:23

“Bread of deceit is sweet to a man; but afterwards his mouth shall be filled with gravel.” Proverbs 20:17

“A prudent man foreseeth evil and hides himself, but the simple pass on and are punished” Proverbs 22:3

“To every thing there is a season, and a time to every purpose under the heaven…” Ecclesiastes 3:1

“And all that believed were together, and had all things common; And sold their possessions and goods, and parted them to all men, as every man had need. And they, continuing daily with one accord in the temple, and breaking bread from house to house, did eat their meat with gladness and singleness of heart, Praising God, and having favour with all the people.” Acts 2:44-47a

“Bear ye one another’s burdens, and so fulfil the law of Christ. For if a man think himself to be something, when he is nothing, he deceiveth himself.” Galatians 6:2-3

“Withhold not good from them to whom it is due, when it is in the power of thine hand to do it.” Proverbs 3:27

“And I heard another voice from heaven, saying, Come out of her, my people, that ye be not partakers of her sins, and that ye receive not of her plagues.” Revelation 18:4

“Beware lest any man spoil you through philosophy and vain deceit, after the tradition of men, after the rudiments of the world, and not after Christ.” Colossians 2:8

“Thus saith the LORD, Stand ye in the ways, and see, and ask for the old paths, where is the good way, and walk therein, and ye shall find rest for your souls.” Jeremiah 6:16a

This was an excellent point made by Jim Sinclair.  The artificially high US dollar is actually running contrary to what the Fed would like to see, as they are fighting deflation tooth and nail.  The US dollar short covering due to huge purchases of the dollar as funds worldwide are liquidated has given the Fed more fits than help. It is putting downward pressure on prices when the Fed wants prices to stabilize, and even rise.  While inflation was a concern in the summer, the “correction” is a bit overdone and it isn’t helping them.

Mr. Bernanke gave us his playbook in 2002 in his now famous “It won’t happen here” talk.  Here are some excerpts from that talk which give us a look see into the Fed’s thinking and their thoughts about a “strong” US dollar during a deflation.

What this means is, when the market short covering/deleveraging is over, they will gladly welcome a falling US dollar in order to re-ignite the flames of inflation. They had better be careful what they wish for…

Pertinent comments are underlined.

Remarks by Governor Ben S. Bernanke
Before the National Economists Club, Washington, D.C.
November 21, 2002

Deflation: Making Sure “It” Doesn’t Happen Here

Of course, the U.S. government is not going to print money and distribute it willy-nilly (although as we will see later, there are practical policies that approximate this behavior). Normally, money is injected into the economy through asset purchases by the Federal Reserve. To stimulate aggregate spending when short-term interest rates have reached zero, the Fed must expand the scale of its asset purchases or, possibly, expand the menu of assets that it buys. Alternatively, the Fed could find other ways of injecting money into the system–for example, by making low-interest-rate loans to banks or cooperating with the fiscal authorities. Each method of adding money to the economy has advantages and drawbacks, both technical and economic. One important concern in practice is that calibrating the economic effects of nonstandard means of injecting money may be difficult, given our relative lack of experience with such policies. Thus, as I have stressed already, prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.

I need to tread carefully here. Because the economy is a complex and interconnected system, Fed purchases of the liabilities of foreign governments have the potential to affect a number of financial markets, including the market for foreign exchange. In the United States, the Department of the Treasury, not the Federal Reserve, is the lead agency for making international economic policy, including policy toward the dollar; and the Secretary of the Treasury has expressed the view that the determination of the value of the U.S. dollar should be left to free market forces. Moreover, since the United States is a large, relatively closed economy, manipulating the exchange value of the dollar would not be a particularly desirable way to fight domestic deflation, particularly given the range of other options available. Thus, I want to be absolutely clear that I am today neither forecasting nor recommending any attempt by U.S. policymakers to target the international value of the dollar.

Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it’s worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt’s 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.17 The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt’s devaluation.

Today we remember the millions who served our country to make and keep it free.  Countless millions served.  Tens of millions died.  To them, we say “thank you” and at the same time ponder the future of our nation and the freedoms they fought to secure.  While reflecting on this, one might just consider how they might serve to do the same.

Today we also give thanks for the shed blood of Christ.  Why? Because we should give thanks for that every day.  Whether freedom from tyrants, oppression, or sin, freedom has, and will always, require the shedding of blood.  That in itself is a sobering thought.

“Greater love hath no man than this, that a man lay down his life for his friends.” John 15:13

I don’t like it when I feel like I do today.  It doesn’t happen that often, and when it does, it isn’t always correct - but often it is.

It just “feels” odd out there again.  This is a different kind of “odd,’ as certainly what is happening in our world today isn’t like anything we have ever experienced.  This “odd” is a feeling that something very unexpected is about to happen.

The global financial system and economy is literally falling apart.  Entire nations are going bankrupt, let alone industries.  The news of bailouts, funding increases, money creation, bank failures (two today - bet you didn’t even know that), talk of new monetary systems, etc. etc. etc. is so pervasive that nearly everyone, including myself, has become numb to it.  Articles that I would normally comment on such as these get passed by:

• Fed, Treasury Announce Restructuring of AIG Bailout
• Postal Service Looks To Cut 40,000 Jobs In First Layoff In History
• Latvia mulling IMF loan as crisis sweeps Nordic region
• GM Posts $4.2 Billion Operating Loss on Plummeting U.S. Sales
• GM Says It May Not Have Enough Cash to Operate This Year
• AIG Bailout Swells to $150 Billion as Insurer Reports Fourth Straight Loss
• U.S. Stock Futures Rise on China Stimulus Plan, G-20 Call for Lower Rates
• Fannie Mae Posts Record $29 Billion Quarterly Loss After Asset Writedowns
• Hedge Funds Slide for Fifth Straight Month
• Deutsche Post Will Eliminate 9,500 More Jobs in U.S., Scale Back DHL Unit
• Fed Refuses to Identify Recipients of $2 Trillion Emergency Loans to Banks
• Russia Probes Nuclear Submarine Accident in Pacific That Killed 20 People

Each of these deserves merit and commentary as, alone, they will have an impact on the global economy and/or geopolitical balance of power. Yet collectively, they are too much to comprehend.

This is an untenable situation.

The world cannot go on with these headlines appearing day after day after day. Something draconian must be done to stop the carnage. I believe something will. At least something will be attempted.

Yesterday my posting was on hyperinflation and how it would ultimately defeat deflation. However, that is in a world where there is some semblance of normalcy. That is not our world today.

I mean this when I write it….

Absolutely anything could happen any day - and it would not surprise me. We could wake up tomorrow and the news could report that all banks will be nationalized, closed until further notice, all markets worldwide are closed, and all gold and silver world wide is going to be confiscated by respective central banks. That wage and price controls have been enacted and to expect a global currency to be in place within 6 months. That Martial Law has been declared until order is restored to the country. That the suspension of the Constitution has been declared and that the new president and his team would be required to work along side the current administration during the 6 month transition to a new currency. All this could happen, and it would not surprise me - really.

Now don’t think for a minute that I believe any or all of the above is going to happen. However what is going on around the world is so without precedent that it cannot continue on its present rate of decline.

Already we are faced with the reality that our world will never be the same. Our lives will never be the same (those that don’t know this yet are in denial).  The degree of challenge that each of us will face in the years to come has yet to be determined, however challenge there will be.

The body of Christ had better start pulling together.  That will happen when each member (read “you and me”) starts to fully own the fact that without Christ, none of us have the wisdom or strength to move through the next several years in any manner that would glorify God.  When crisis grips, self preservation will scream for attention.  That is how the world will react.  If we too succumb to it, then we will be relegated to the same life as unbelievers. Sorrow, misery and hopelessness. That is not our life in Christ.

Building your community today is absolutely critical. Building relationships today is critical.  Your relationship vertically first with Christ, then with those around you.  Do it now.  Make phone call.  Write a letter.  Say a prayer.  People, and the love of Christ which we can show them and receive from them, will be our lifeline during the years to come.  Isolation and self sufficiency are the devil’s playground.  Don’t let him draw you into it.

We can look forward to the trials ahead with fear or with anticipation.  The choice is ours.  Whom (what) do you have your trust in? Whom do you have your security in? Give yourself an honest heart check on those questions and get right with God if you need to.  It is critical to the way forward.

“If ye then be risen with Christ, seek those things which are above, where Christ sitteth on the right hand of God. Set your affection on things above, not on things on the earth. For ye are dead, and your life is hid with Christ in God. When Christ, who is our life, shall appear, then shall ye also appear with him in glory.” Colossians 3:1-4