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Archive for September, 2019

Financial Crisis

There were at least a three noteworthy events in the financial markets this past week. In the first place there was outgoing European Central Bank (ECB) head Mario Draghi’s announcement of what some are calling QE Infinity (Infinite Quantitative Easing). According to Draghi, the ECB will begin asset purchases at the rate of €20 billon per month for as long as it deems necessary, “to reinforce th accommodative impact of its polity rates.”

Translating all this central bank talk into plain English, Draghi has committed the ECB to counterfeit an absurd about of money on a monthly basis just to make sure the European economy doesn’t collapse. Further, there is no definite stopping point to this program. Draghi’s policy is both sinful and incompetent. It is sinful, because it violates the Bible’s clear teaching that differing weights and measures are an abomination to the Lord It is incompetent, because it fails not only to address the real reasons for the economic problems in the nations that use the Euro currency, but actually makes them worse.


Second was Donald Trump’s calling for the Federal Reserve to lower “interest rates down to ZERO , or less.” This is a remarkable statement by the President, and has left many asking why he made it. The short story is this, the American economy is not as good as what Trump and others have tried to convey and the President is concerned that, if the Fed doesn’t cut interest rates, the stock market will tank and the economy will fall into recession. Neither of these things would be good for his reelection chances.

Of course, neither a Zero Interest Rate Policy (ZIRP) nor a Negative Interest Rate Policy (NIRP) would be good for the country, especially for those who rely on interest income from their savings, but that doesn’t seem to matter to the President.

A third noteworthy item of financial news from last week was the sudden spike in the 10-year US Treasury interest rate. The 10-year US Treasury is considered the benchmark interest rate for the entire bond market. More than that, the 10-year Treasury is the benchmark which goes a long way to determining the price of stocks as well.

When interest rates move sharply upward, this means that the price paid for bonds has gone sharply down. Bond interest rates and bond prices move in opposite directions, much as the ends of a teeter-totter do. If yields are going up, this means that there is a selloff in the bond market.

So bonds are selling off, what does this mean? Peter Schiff and Gregory Mannarino have warned that this could portend a larger bond selloff as holders of US Treasuries become nervous about the financial condition of the US. Mannarino is of the opinion that China may be the major actor here.

Another interpretation is that the Exchange Stabilization Fund (ESF) – the ESF is part of the US Treasury Department – is manipulating the 10-year interest rate to make sure that the yield on the 10-year Treasury stays well above the yield on the 2-year Treasury, thus preventing an inverted yield curve, which is a strong recession indicator.

These moves in the bond market are important, yet most people don’t follow the bond market nearly as much as the stock market. But it’s the bond market that controls what goes on in the stock market, not the other way around. If we ever do get an uncontrolled selloff in the bond market – this would mean sharply higher interest rates, remember when bond prices go down, interest rates go up – you would see a simultaneous crash in all markets that derive their value from debt: stocks, and housing in particular.

Put another way, if the bond market tanks, the whole economy tanks.

One thing all three bits of news above have in common is that they are all related to what I’ve called the Ongoing Financial Crisis of 2008. My contention is that, due to the interventions of governments and central banks, the debt problem that triggered the 2008 global financial crisis not only was not solved, but actually made worse. Calls for QE Infinity, ZIRP, and NIRP together shaky bond markets are all symptoms of this.

In light of the fact that the serious problems with the West’s financial system have never been addresses, and given the foolishness of Western leaders, never will be voluntarily addressed, it seems wise to this author for Christians to take steps to protect themselves from a breakdown in the financial system now.

It is this need to get prepared and stay prepared, together with a conviction that very little has been written for Christians by Christians on this subject, that have prompted me to write this series in the first place.

As part of this series on the financial crisis and on getting prepared for it, I have been examining what the Bible has to say about prepping. As a Scripturalist – a Scripturalist is defined as one who believes that all knowledge is either expressly set forth, or can be derived by good and necessary inference, from the 66 books of the Bible – it is critical to ground all prepping the Word of God.

One question to ask is this, Does the Bible support prepping? The clear answer is, yes it does. This can been seen in the numerous, clear examples in the Scriptures of those took steps to prevent suffering and death, both their own and that of others, by taking preventive measures in the face of oncoming catastrophe. “A prudent man foresees evil and hides himself,” says Proverbs, “but the simple pass on and are punished.”

A second question to ask is, What should Christians do to get prepared? I contend that Christians must answer this question in the same as the first, by looking to the Scriptures. As part of this series, we’ve already looked at two examples, that of Noah and that of Lot. Today, I’d like to turn the reader’s attention to another obvious example from Genesis, the case of Joseph, Prime Minister of Egypt.

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Financial Crisis

A prudent man foresees evil and hides himself, but the simple pass on and are punished.

    Proverbs 22:3

In a recent article titled “The monetary policy endgame,” Rick Rieder argued that central banks have two ways of creating inflation – inflation in this case being defined as rising consumer prices. The first is to create increased consumer demand through demand stimulus (lower interest rates). Secondly, Rieder argues, central banks can engage in monetary debasement. Continuing with his argument, Rieder contends that he believes central banks will turn to monetary debasement to achieve their stated inflation goals.

So what is monetary debasement? As the Investopedia link puts it, “Debasement refers to lowering the value of a currency, particularly one based on a precious metal, by adding metal of inferior value.”

But even though we don’t have a precious metals based monetary system doesn’t mean that governments can’t debase their currencies. As the Investopedia article on debasement goes on to say, “[D]ebasement [in fiat monetary systems] only requires that the government print more money, or since muc hmoney exists only in digital accounts, create more electronically.”

In light of the coming central bank driven currency debasement, Rieder asks the important question, “How should one position for such an endgame?” Rieder’s answer? “[A]ll of this leads one today to consider assets that can participate in an inherent devaluation of the local currency, which is to say, real estate, and even hard assets that have historic value-relevance, such as gold.”

Rieder’s post is remarkable, not just for what he said, but also for who it is that said it. Rieder is not some tin foil hat wearing gold bug, but is a Chief Investment Officer (CIO) at BlackRock, a New York City based investment management firm that is the world’s largest asset manager with $6.84 trillion in assets under management as of June 2019. Put another way, BlackRock is Wall Street royalty. Further, Rieder’s post appeared on BlackRock’s blog, giving his statements the implicit approval of the firm itself.

Given the decades long propaganda campaign of hatred that has been directed at gold and at those who advocate for the return of gold to the financial system, Rieder’s comments are significant indeed.

There’s a lot to unpack in Rieder’s article, more than what can be discussed in this post. Lord willing, I shall return to his post at some point in the future. But I mention in today mainly to let readers know that mainstream financial analysts are quietly warning that the US dollar – and all other fiat currencies – are in trouble and likely to suffer significant devaluation in the not too distant future.

In light of warnings from Rieder and others, the application of Proverbs 22:3 to our current financial circumstances cannot be overstressed. Here we have a highly placed man at a highly respected financial firm going on record to warn us in advance that the Fed is going to debase the dollar. What is more, he provides for us sound advice on strategies savers can use to protect themselves.

In Scripture, we find several examples of men who were given advanced warning by God of coming disasters, and who, in faith, took action to save themselves and others. In last week’s installment, we looked at the case of Noah. This week, we shall continue our look at Biblical case studies in prepping with a review of Lot’s narrow escape from Sodom.

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Financial Crisis

A prudent man foresees evil and hides himself, but the simple pass on and are punished.

    Proverbs 22:3

US Slaps New Tariffs On China; One Minute Later China Retaliates,” was the headline on ZeroHedge this morning. This, of course, is in reference to the US/China trade war which has been ongoing for the past two years.

Just last week, US stock markets rallies on reports that China was going to be “calm” in its response to the trade war. But in this headline we see that China immediately retaliated when the Trump administration imposed tariffs on $112 billion in Chinese imports. Whether China’s response, a decision to place higher tariffs on $75 billion of imports from the US, will be considered “calm” by American financial markets when they reopen on Tuesday after the Monday closure for Labor Day is a matter of opinion.

In the view of this author, come Tuesday the moves by the US and China to impose a new round of tariffs on each other likely will put downward pressure on US stocks, force money into bonds, drop long-dated US treasury yields further inverting the already inverted yield curve, and cause gold and silver to spike. This opinion comes with the usual caveats that things could change between now and Tuesday morning and that past performance does not guarantee future results.

I bring up the trade war, not because it’s the focus of this post, but just by way of warning that there is a lot of uncertainty in the financial markets, a great deal of which is caused by the geopolitical stresses in the world today, none of which seems likely to be resolved anytime soon.

And geopolitical stresses are not the only things that pose a threat to the well-being of private citizens of the US and the West generally. The Western financial system is in a state of collapse. Deficits and debts are out of control, yet there is no political will to address these issues. To date, politicians and central bankers have largely been able to hide the destructive effects of out of control spending government spending has had on the lives of average citizens, but this will not go on indefinitely.

Speaking of debtors, Jesus said in his Sermon on the Mount that, unless they settled with their creditors, they would be thrown in jail and not get out until they paid the last cent. In God’s economy, the books always balance in the end. Put another way, no debt goes unpaid. The once Christian West has managed to rack up the greatest debts in the history of mankind, and these debts most certainly will be paid in full. That payment will come in the form of currency devaluation, loss of standard of living and, probably, a loss of personal freedom as well.

So what are Christians, in particular, Western Christians to do in the face of the challenges facing our nations? In the first place, we must remember who it is we serve. The Lord Jesus Christ is our king and it is in his name we put our trust. Jesus never promised his people that they would have lives of perfect, uninterrupted bliss. On the contrary, he repeatedly warned his hearers that following him came at a cost. But Christ has promised that he will always be faithful and that our Father in heaven will supply our needs.

In the opinion of this author, barring the near-term return of the Lord Jesus Christ, there is no possible way for the West to avoid a major financial and political crisis in the next few years. But in light of the promises of Scripture – for example, “But seek ye first the kingdom of God, and his righteousness; and all these things (food and clothing) shall be added unto you” – Christians have no business falling into despair.

This leads me to my second point. Rather than falling into despair, we Christians need to get to work. That is to say, we need to get prepared for what is coming. We want to be the prudent man in the verse from Proverbs quoted at the top of this post and not as the fool who ignores all warnings signs and is punished for his failure to take reasonable action.

Put another way, recognizing potential dangers and making prudent preparations against them is part of the Christian enterprise.

In today’s post, beginning with Noah I’d like to begin exploring some of the major examples in Scripture of prepping and what applications these examples have for Christians in the early 21st century.

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