G20 = global socialism

G20 Meeting

As I said last week, it will be another few weeks before we know what actually came out of the G20 meeting. As second and third tier government officials make their comments in the press, we will get a better picture of what truly was discussed. Also, we will see in the currency and bond markets the true nature of the discussions, and if Friday is any indication, the news for US Treasuries and the dollar was not good.

On Thursday and Friday, treasury bonds fell sharply, and the dollar resumed its decline. These markets are telling us that whatever the real plans were that came out of the G20 meeting, they were not US friendly.

What can be gleaned from the meeting is two fold. 1) Quantitative easing has gone global. How else will the IMF get this trillion dollars, if not through creating it? 2) The socialism that is spreading like wild fire in the US is now being thrust upon the world’s financial markets. The “haves” nations are throwing a trillion dollars at the IMF to give to the “have not” nations. This, by definition is socialism on a global scale.

Now don’t get me wrong, we need to help poor nations. However, whose responsibility is it to help the poor? (Matt 19:21, Matt 26:9, Luke 19:8,9, Rom 15:26, Gal 2:10) It is once again an issue of jurisdiction. If the state (in this case the IMF) gives money, strings will be attached. The IMF has a well known track record of giving loans to developing nations, then when their economies suffer and they are not able to pay the loans, they take the assets that are pledged as collateral. This transfers what little wealth there is in the developing nations to the globalists and enslaves the helpless nations in debt for decades to come. Just follow the IMF loans to African and South American nations.

Regardless of how this money flows to the developing nations, it will have strings attached. There may be a few exceptions. China is considered a “developing nation.” If bonds and the dollar continue their slide, China will be hard pressed not to participate in this dumping. I strongly suspect that a portion of the IMF trillion dollars will go to them as “incentive” to continue to hold their US dollar assets and not dump them. Why should we care about another back door bribe and bailout of foreign nation, using the US taxpayer (or dollar holder) as payer of last resort? It is sickening to see what is happening.

The unconstitutional operation of this government is well beyond the threshold of what “we the people” should tolerate. Here is another portion of the Constitution that is being ignored by our government.

Article I, Section 9

“7. No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.” (emphasis mine)

This is what was written into our Constitution so that “we the people” would know what the government is doing with OUR money. Yet instead, we read this:

Treasury Won’t Disclose Bank Bailout Details

But back to the poor…  If the church were a) in a position to help in a biblical manner because it wasn’t up to its eyeballs in debt (individually and collectively) and b) had the heart to care for the poor around the world, it would enable the people in these nations to escape poverty and enjoy freedom. The globalists do not want this, and if the church were to try to reclaim it, they would put up quite a fight. Sadly the church is not in any position to take back responsibility for the poor from the state. It long ago gave up its jurisdiction in this area to the state, and doesn’t show any sign of wanting to take it back.

Brief Blurb on the Broad Markets and Economy

My take is that the current market rally is a “distribution” rally.  That is a bear marker rally that is engineered in order for the large institutions and hedge funds to pawn their remaining stocks off onto the general public as they come running back in, afraid to miss “the bottom.”  When these rallys top, they turn down with a vengence.  This one could last a few more days or even weeks.  We’ll have to watch and see.

The markets continue to cheer the new “plans”, both by Secretary of the Treasury Geithner in his TARP II plan, and the new IMF trillion dollar give away. Add to that FASB’s caving to political pressure and relaxing the “mark to market” rules on toxic assets, and you have all the ingredients to ignite a huge bear trap stock market rally.

Here is something for you to consider on the jobs front.

1 in 10 People get help with food.

This simply does not square with only 8.5% unemployment.  It does square with the 19.5% unemployment rate that is publisehd by John williams at www.shadowstats.com.  One more piece of evidence that government stats are not accurate and do not reflect reality. 

The Tax Payer Holds the Bag – Again

What people do not understand is that the FASB accounting rule changes do not increase the value of the assets being lied about. The sale of Lehman Brothers’ toxic assets shows the market for them at .12 cents on the dollar. If a bank can show them on their books at 100 cents on the dollar, it helps their capital ratios, however it does not make the underlying assets whole. This is like putting a band aid on an axe wound. It won’t stop the bleeding.

What is even more insidious is that Geithner’s new TARP II plan (see post earlier this week) may allow banks to move these assets off of their balance sheets and into private/govt hands at 80 to 100 cents on the dollar. Either the banks pay for the loss, or the tax payer/dollar holder does. Of course the bankers should – they are the ones who got us into the mess. However it has always been the plan that the taxpayer foots the bill for any once a century banking crisis. Following is an excerpt from my book “Fool’s Gold”:

The implications of what is now occurring in our financial markets are staggering. By allowing Lehman Brothers to fail, the public has now been given a window through which to view the counterparty insolvency problem. This window will reveal trillions of dollars in losses in our financial industry, and the global financial system does not have the capital to absorb these huge losses.

If the Federal Reserve is required to step in and monetize trillions of dollars in non-performing debt, the current fiat system will fail. Such action would trigger a hyperinflation that will destroy the dollar as we know it. When our fiat money is debased to the point it will be worth nothing more than the paper it is printed on, we will then discover who the “lender of last resort” is in reality. It is you and me, the taxpayer. The fact is with all fiat money systems, whether through taxes or inflation, the ordinary citizen bears the ultimate cost of the moral hazard that develops because of its use.

What do those at the Federal Reserve think about this potential outcome? Alan Greenspan, former Chairman of the Federal Reserve, spoke of the taxpayer being asked to bear “some of the cost of [systemic] failure.” He said: “Activating such risk sharing quite appropriately occurs at most two to three times a century.” This is a startling admission. Two or three times a century, the taxpayer can be “quite appropriately” called upon to pay the price for the greed and speculation of the bankers. This is morally wrong and in direct contrast to the teaching of Scripture! Hearing this should cause a moral outrage among the Christian community. Thus far it hasn’t, which leads to the question: “Why?”

The answer is that the vast majority of Christians do not understand God’s principles of stewardship and honest money. For two generations, we have become ignorant of monetary history, what money is, the purpose of money and its function. Consequently, just as the vast majority of Americans have been taken captive by the lure of easy credit, so have our church leaders. The result is they have failed to teach the biblical principle of honest weights and measures.

Because of our ignorance on monetary matters, we have turned a blind eye to the games played by the bankers. We have walked through the front door of their banks and placed ourselves into bondage to them as we take on debt. Then, through the back door, they steal our savings as they devalue our money through inflation. This has made us unwitting accomplices to the crime of theft while simultaneously being the criminal’s victim!

Our own former Fed Chairman admits that the taxpayer will backstop any systematic failure and that it is “quite appropriate” for them to do so. Anyone a bit concerned about this?

Precious Metals Markets

Well, I was wrong.  I thought we would not see sub $900 gold again after the announcement of quantitative easing.  Once again I underestimated the power of the gold price managers to push down the paper price of gold.  It has formed a sizable “head and shoulders” top on the charts.  The breakdown level is $890, just $3 below Friday’s close.

If it breaks down on Monday, look for technical selling to take gold down to possibly $850 or worst case, $825.  I don’t believe there is enough open interest to push it lower than that.  There simply doesn’t appear to be enough specs in the market to flush out to drive it to $800.  Either way, absent a rebound Monday or Tuesday, and we’ll likely see gold and silver trade sideways and chop up and down between $850 and $950 for awhile.  Absent any new major developments, it could trade that way for a few months.  Summer has normally been a poor time for gold and silver to perform, however I do understand that we are in anything but normal times.

Take this opportunity to accumulate more.  As Jim Sinclair has said – gold is your only (financial) lifeline when the world is printing paper by the trillions.

GM Derivatives – The Next Shoe on The Centipede To Drop

Here is a blurb from a site that I subscribe to. It highlights the fact that derivatives are, and will be the reason, that every plan to save the system will fail – and likely in a hyperinflation. GM is set to go bankrupt. The government wants to break them into two companies before that happens. One that can continue to make cars, the other that they can funnel as much money as they need to into it in order to keep GM’s derivative positions from imploding the system.

I came across an old WSJ article by Henry Sender on Feb. 16th., 2006 titled, “GM Debt Poses Challenge to Derivatives Market”. Here is an excerpt from it:

“The financial travails of General Motors Corp. have become a hot topic in the credit-derivatives market, where protection against corporate defaults is bought and sold. That is because a GM default, which isn’t immediately likely, could create severe strain, or
worse, in this unregulated market.

The car maker has about $30 billion in debt. Traders estimate more than $200 billion in credit derivatives are linked to GM. But because such derivatives don’t trade on an exchange, nobody knows for certain how much credit-default swap protection has actually been written on GM. And nobody can say with confidence that they even know who is on the other side of the trades that they have entered into.”

What is important is not only was the danger clearly known three years ago, but their derivatives are STILL the problem. Nobody is mentioning GM’s derivative liabilities, which as this article shows are gargantuan. They in all likelihood grew even larger in subsequent years. Once again we have a situation where we don’t know WHO the counterparties are to their derivatives, or how much of GM’s bailout money they’re getting. This explains the desire to break GM into two entities, the “good GM” and the “bad GM”. If they break out the derivatives portion they can allocate money to the crony derivatives counter-parties, thus avoiding pro-rata bankruptcy distribution. GM, and the world, is only beginning to understand the chaos of derivatives.

Over the next 3 years an absolute torrent of short-term debt comes due. Derivatives are toxically laced into all.
* Short-term commercial debt rollovers.
* Short-term corporate bond rollovers.
* Short-term municipality/utility bond rollovers.
* Business lines of credit renewals.
* Residential adjustable-rate mortgage resets.
*Commercial adjustable-rate mortgage resets.

ALL involve derivatives in one way or another. ALL have serious issues getting accomplished. ALL separately involve trillions of dollars. Anybody claiming we’ve turned the corner is dead wrong. Nobody has a clue how these trillions of rollovers will be feasibly accomplished.

(That is, sadly a statement of fact. – Doug)

The Fed has one card left to play- flood the system with paper. A hyperinflationary collapse at least allows the Fed more wiggle room. Better debtors get the rap in history books than the Fed.

(This I agree with too. – Doug)

Where Our Hope Lies

People, this is a time in history where we get involved, stand for the truth, and watch God work. The task of stemming the tide of this financial collapse is impossible save the grace of God. Stemming the tide of oppression and tyranny is equally as daunting. And I have not even touched on the geopolitical threats to our nation. All it would take would be another 911, and our economy and what is left of our representative republic form of government would likely be destroyed within months.

Yet hope lies in people’s willingness to turn toward God. Throughout history they have risen up and cried out to God. Occasionally it has been before they were taken into bondage. Most often, not until afterward. However in the end, victory was God’s. A nation was set free, and it was stronger because of it.

The church must repent and cry out to God for mercy. Only then will it be in a position to receive the blessing of a destroyed enemy. How many of God’s people crying out will it take before God heals our land? Only He knows. And only He knows if there are enough people who will do it. So meanwhile, how about becoming one of them?  Search your heart as to where you have joined this national sin.  Man’s traditions and cultural influences are deeply embedded in each one of us – myself included. The only way we can see them is to humble ourselves and ask for eyes to see them.  Then have the courage to step away from them regardless of the cost.  It isn’t easy.  But it is the only way forward.

Pray, write your elected leaders, pray, prepare and pray. It is the prudent thing to do. (Proverbs 22:3)

Category: Economics, General Stock Markets, Geopolitical, Global Economics, Hyperinflation, Markets, Precious Metals, Proverbs 22:3, US Dollar, US Economy