The Crash of 2008 (2) :Peace Amidst the Storm

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The Crash of 2008 (2): Peace Amidst the Storm

As the worldwide financial crisis develops, one word keeps recurring: PANIC.

If not stated that strongly, the emotion millions now feel is variously called fear, anxiety, or worry, and it comes with scary questions: What is going to happen to me and my family? How will I have enough money to live on? Where will I live? Is my job safe? Can I get another job? What about retirement? Is all hope gone with the wind?

Without knowing the answer to any of those questions, I do know that we can live without fear. Indeed, we can have peace in the midst of this ferocious storm. How?

Reflect upon the past

How has my foolishness contributed to my current fear? Have I lived beyond my income, acquiring more than I could afford, going into debt, failing to save? Do I dwell in a house that is too big and too expensive? Am I driving a luxury car, wearing designer clothes, and surrounded by costly technical toys? Have I been eating out at too often, or taking vacations I can’t really afford?

Where have I set my hope for happiness and security? On my 401(K) plan? The fortunes of my company? My investments?

Have I neglected my family in the race to make money?

In my self-indulgence, have I been like the millions of others who have failed to remember the poor?

What about God? Where has He been on my list of priorities? Have I been “too busy” to read the Bible, pray, or go to church?

In short: What have I placed at the center of my life? Possessions, power, prestige, and pleasure, or people? Most of all, Have I sought happiness and fulfillment in this transitory world, or in knowing the Maker of the universe?

Rely on God

Now is the time to turn our trust from bankers, stock brokers, CEOs, union bosses, politicians (above all!), and anything that they can promise or provide. Nor can we put confidence in ourselves and our own intelligent choices – look where that has gotten us!

There is one upon whom we can rely, however: God. He has made the universe and everything in it, including us. He cares enough for us to have sent His Son Jesus to live, die, and rise from the dead in order that our folly, faults, and failures may be forgiven, and we can have friendship with God again.

Through Jesus, God the Father has told us to pray for our “daily bread,” has asserted that He knows our needs before we even ask, and has promised to provide for those who trust in Him (see Matthew 6:19-34, for example). We are of more value than the birds and the grass of the field, over whom He looks with watchful eye, and He will surely care for us as well as He cares for these little creatures.

He has ordered us to be content with what we have, and not to be greedy for more, but to believe His promise never to fail us or forsake us (Hebrews 13:5). Many times in the Bible, God has told us not to be afraid, but to trust in His loving care for those who love and believe in Him (See Psalms 23, 34, 37; Philippians 4:6-7; etc.).

Re-order our priorities

But there are conditions to meet if we are going to enjoying peace with God and serenity in the middle of financial turmoil.

Jesus says that we should “See first the kingdom of God and His righteousness, and all these [material] things shall be added to you” (Matthew 6:33). That means to put God first in our lives – to read His Word daily, pray to Him often, worship Him in church, and follow His commands, relying on His strength to do so.

Conversely, we are urged not to lay up for ourselves treasures on earth, where moth and rust corrupt and where thieves break in and steal, but to lay up treasures for ourselves in heaven, where nothing can touch them. How? By giving to the poor and to the work of the church and by placing our trust not in our own financial assets but in God’s provision.

We must have a “single” eye, focused on God’s Word and His will, not on the things of this world. Even as we work to provide for ourselves and our families, we should do so as unto God, serving Him as our ultimate Boss, seeking to glorify Him and to benefit others, not just to make a living (See Ephesians 4:28; 6:5-9). Since we can’t be loyal to more than one master at a time, Jesus warns us to serve God and not Mammon (the god of wealth and all it represents).

Now is the time to spend more time in Bible reading, meditation, and prayer, not less, as we listen not only to God’s promises to provide for us but also to His commands.

Maybe we need to turn off the TV and spend time with our family members and housemates; give away some of the stuff that fills our storage rooms; eat simply, and at home.

Reach out to others

Remember, you aren’t the only one in this mess! Literally billions of people are being stunned by daily news of default, bankruptcy, market declines, and lost jobs.

This would be a good time to extend a helping hand to those in greater need than we are; to ask our neighbors how they are doing; to pray for the poor, the confused, the desperate.

Rejoice!

Yes, I said, Rejoice! There’s something good about times like these. People come together. Old values are revived. The really important things return to their proper place in our hearts. Most of all, God has “room” to work, now that we really need Him. When the Israelites were between Pharaoh’s chariots and the Red Sea, God told them to stand aside and watch Him work a mighty deliverance for them.

In fact, most of the miracles in the Bible took place when people were at their wit’s end, with no resources, nothing to turn to – except God! That’s when He has a chance to demonstrate both His power and His love.

Maybe something good will come out of this awful Crash of 2008.

The Crash of 2008 ( Part One)

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The Crash of 2008 (Part One)

We are in the mist of an almost unprecedented financial crash. Though others have preceded it throughout history (including the Tulip Bubble in Holland, the 19^th – century Panics in America, and the Great Depression), this one seems about to dwarf all others. The enormous amounts of money involved, the global scope of the crisis, and the numbers of people and companies already affected, or likely to be so, surpass anything we have seen before.

In this article and one to follow, I propose to look briefly at the causes and possible consequences of this disaster, and then to suggest some ways to cope with the troubles that are beginning to befall us.

Causes

Any event as vast as this one must have multiple, and complex, causes. Not being an expert, I can only list a few of the more obvious ones:

- Greed, arrogance, and fraud in the business, and especially, banking sector.

The collapse of Enron some years ago alerted us to the widespread use of dishonest accounting procedures in many of America’s greatest corporations. Now we are finding out just how endemic this corruption has been. Balance sheets have been rendered meaningless by inflated numbers and “notional values” that hide massive exposure to unbacked obligations. Not only so, but CEOs and CFOs have led their firms into crooked policies of various sorts, including drawing upon pension funds to finance operations.

Meanwhile, financial whiz kids have developed investment “instruments” that resemble a Ponzi scheme or a casino more than a rational strategy to steward other people’s money and make a decent profit for oneself. Greed and pride have created the derivatives monster that threatens to devour us.

On the train a couple of weeks ago, I sat next to a lady whose son-in-law works for a hedge firm. This young man describes his colleagues in the field as “incredibly arrogant.” The son of another friend of mine has a boss who made one billion dollars last year; his own income exceeds a million dollars.

According to some analysts, there is evidence that the precious metals markets are manipulated, with the full knowledge of those who are supposed to prevent such abuses. Only time will tell if that charge is true.

- Government intervention in markets

Beginning with the Clinton administration, the U.S. Government put enormous pressure upon banks to extend loans to people with poor credit, thus sowing the seeds of the devastating melt-down in sub-prime mortgages. The semi-governmental behemoths, Freddie Mac and Fannie Mae, were given advantages that effectively skewed the housing market and contributed greatly to the current crisis, with the encouragement of the government. (We shall not discuss what appear to have been criminal acts by the executives of these highly-regulated companies.)

The Federal Reserve Bank, nominally independent of the U.S. Government but in fact a close partner with the Treasury (as recent events have shown), allowed first the dot.com and then the housing bubbles to expand by creating easy credit and huge increases in the money supply.

In the past year, the Fed and now the Treasury, abetted by Congress, have alternately bailed out failing enterprises and allowed others to collapse, creating uncertainty among investors and great doubts as to the fairness and competence of those making decisions. The 700-billion dollar rescue plan, which the markets declared virtually dead-on-arrival, will haunt us for years to come by multiplying both government debt and intervention into the private sector. More of the same comes from Washington with each successive lurch towards virtual integration of the state and the private sector.

- Corporate and private debt

One common theme runs throughout almost every news analysis of the crisis: Debt. Companies and households cannot pay their debts.

Most people may not know that such reliance upon borrowing is relatively recent in American history, only beginning in the first decades of the 20^th century. People used to save and then use cash; now they spend and rely on credit. We are thus all caught in the web of debt.

“The borrower is the lender’s slave,” says the Bible – a sober fact of which we are now becoming painfully aware.

- Covetousness

Much of this comes from our self-indulgence and covetousness. We are not content with what we have, and put our future in hock to purchase present pleasure.

Consequences

- Economic collapse, accompanied by massive unemployment, seems unavoidable.

- Millions have lost their savings for the future; retirement has become a forgotten dream.

- Government intervention and control have drastically altered the nature of our political and economic system. A Republican President signed the rescue plan, despite his avowed free-market convictions. Actually, he had earlier significantly raised the government’s profile by the prescription-supplement to Medicare, along with the No Child Left Behind legislation for education, not to mention the Patriot Act. The Federal government now has full legal powers to act in peacetime (war not having been formally declared) that exceed even those used by Lincoln, Wilson, and Franklin Roosevelt.

Both presidential candidates have enunciated policies that will increase government participation – and control – in the economy. One of them has proposed measures that many economists believe will kill hopes for recovery and lead to a great reduction in almost everyone’s living standard. His anti-capitalist rhetoric at times has resembled that of the ruler of Venezuela.

Therefore, regardless of which man wins the presidency, we can expect more government intervention in the nation’s economy. Ironically, at a time when nominally “Communist” China has done its best to promote a free market economy, and has thereby lifted hundreds of millions of people out of poverty in just a few short decades, the United States appears to be going the way of proven failure.

One consequence of America’s financial fall has been a rapid loss of worldwide influence. The U.S. military has begun to find expensive weapons programs hard to fund, and will soon be hard pressed to pay its troops. The U.S. dollar may lose its position as the world’s reserve currency. U.S. hegemony is a thing of the past. Humiliation is upon us, big time.

Cure

There is no cure. At least, not for the next five, ten, or twenty years. We are in this for the long haul. The Wall Street Journal opined recently that we are in a secular bear market that could last as long as 14 years.

If you have any money left, I recommend that you follow the advice of Martin Weiss in the Safe Money Report (I have no connections with Weiss, but have found him and his team very accurate over the past decade.).

In the next part of this article, I shall offer suggestions on how to cope with this crisis, and how we may enjoy inner peace in the midst of the storm.

The End of the American Empire

The End of the American Empire

For once I agree with the president of Iran, whose name I still can’t pronounce correctly.

At the United Nations General Assembly yesterday, he declared that America’s “empire” was “near the end of its road.” He cited the difficulties of American involvement in Iraq and Afghanistan, but there are other reasons for our country’s imminent demise as the “world’s only superpower.”

Aside from the growing number of unfriendly governments around us (Venezuela, Cuba, and Bolivia; Russia; Iran; North Korea, to name only a few; China could be added to the list without too much provocation), we face an internal financial calamity of catastrophic proportions.

No matter what the currently-proposed bailout turns out to be, or how happily Wall Street will greet its announcement, it will fail in its purpose. Nothing can stave off the collapse of the huge derivatives market, not to mention the “lesser” crises which have prompted drastic government action.

For more on this, see the blog I posted earlier (http://wrightdoyle.wordpress.com/category/money/) and the long essay, “Tsunami Coming?” I wrote in February, 2007 (http://www.chinainst.org/en/articles/personal-reflections/tsunami-coming.php).

What to do?

There is still time to take some moves to protect your assets. For advice which has been very sound so far, go to the Weiss Safe Money Report. (I have no financial connection to Weiss’s organization; I have only used their recommendations to manage my sister’s funds.)

For deeper peace, turn to the Lord, who alone gave calm our hearts and supply our every need (Psalm 23; Matthew 6:33; Philippians 4:6-7).

Just How Bad Is It?

The young woman who asked that question over supper the other night wants to know whether to quit her job and travel the world. But her friends are telling her that we are in a recession, and some are even saying it’s going to be worse than the Great Depression of the 1930s.

Sadly, I had to reply, “It’s going to be really bad, and – yes – possibly worse than the Depression.” Asked why I was so pessimistic, I went on:

“My brother and I manage our sister’s part of the estate (mine having gone into our mortgage, a used “new” car, our daughter’s college education, and then her wedding). To be responsible, we have had to scour the literature for investments that are relatively safe. That has led us to several newsletters that, over the past decade, have proven to be remarkably accurate. So, while others have lost huge amounts of money, her portfolio has gone from $60,000 to $104,000 in the past few years.

“The newsletters we follow all predicted the sub-prime mortgage meltdown, the credit crunch, the looming bankruptcy of bond insurers, surge in the prices of oil and gold, rising inflation, and much more. They say that the worst is not over, and that we could be facing a collapse of the financial system or, at the very least, “stagflation” – the toxic mix of slow (or no) economic growth and rampant inflation. They believe that the truly mammoth pyramid of derivatives will collapse, and the entire financial bubble created by easy credit under Greenspan and now Bernanke will pop, with disastrous results.”

This did not comfort my friend, who asked, “So what should we do with our money?”

“They recommend various strategies, including (1) get out of the U.S. stock market; (2) invest in some socks based in other countries with better prospects for long-term growth; (3) put money into cash (such as short-term Treasuries); (4) get out of the U.S. dollar and into other currencies (such as the Swiss franc); (5) buy gold and silver – either the physical metals or safe substitutes, like an ETF or certificates that have your name and a serial number, stored in a really safe place; (6) buy stocks in commodities, such as oil, wheat, precious metals. They also have other suggestions, depending on their point of view.”

I promised to send her information via this blog, so here I am, passing on to you what my brother and I have found useful for our sister. I recommend that you look first at the Safe Money Report of Martin Weiss(www.martinweiss.com). Supplement that with the newsletter on currencies from Everbank (www.everbank.com); and fill it out with the newsletter on silver from Jim Cook of Investment Rarities International (Call 1-800-328-1860 and ask for Greg Westgaard; tell him I sent you. He knows me as “George” [my first name, which I use for business]). Ignore the hype in Weiss’ publications. He’s been right on, despite all the exclamation marks.

McAlvany’s Intelligence Advisor (www.mcalvany.com) is not for the faint-hearted, but it’s interesting to know that he was against the invasion of Iraq from the beginning, seeing it as a costly no-win boondoggle. He’s quite critical of the government (as are some of the others I’ve mentioned) and very pessimistic, which turns a lot of people off. But he does give news and analysis on the current economic and geo-political situation, with worst-case-scenarios worthy of the best “doom-and-gloom” prognosticators, except that he always ends with a strong affirmation of Christian faith and a reminder that we have no security in this world apart from God’s promise to take care of his people.

The March 16 New York Times carried two articles of interest: On the front page, a story on how Fed chief Bernanke has apparently thrown the “rule” books out the window in a frantic attempt to prevent a total financial collapse – which should tell us something about the seriousness of the situation -and, on the front page of the business section, a scathing criticism of the Fed’s bailout of Bear Sterns this weekend. Apparently, the writer thinks this sends the wrong message to irresponsible risk-takers, and presages the further decline of the dollar, inflation, and a loss of trust in the U.S. government and the U.S. market.

March 18’s Wall Street Journal used terms like worsening chaos, panic, collapse, etc.

Friends, this is the big one people have been warning us about for years now, made incredibly huge by the explosion of derivatives investments whose “value” now exceeds that of the U.S. economy.

Maybe during these coming months we shall have to re-think our priorities in life, tighten our belts a bit, and renew our commitment to seeking God’s kingdom first.

One thing we know: Psalm 23 has not been taken out of the Bible, and Matthew 6:33 is still true. We don’t have to worry. We just have to trust God and do what seems best for his glory and the good of our neighbors.