Lux Lucet

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

    Proverbs 22:3

It was back in August that we began our look at the ongoing 2008 financial crisis. The immediate occasion for my writing on this topic was the sudden plunge in the US stock indices following the Federal Reserve’s decision to raise interest rates in late July. The market sold off hard, but managed to stabilize, or more accurately, was stabilized by the powers that be after a phone call by President Trump with three major bank CEO’s.

This was a similar situation to what happened around the end of the year in 2018. On December 23, the day before the Dow and S&P indices had their largest ever declines on Christmas Eve, Treasury Secretary Steve Mnuchin placed individual calls to America’s six largest banks – Brian Moynihan, Bank of America; Michael Corbat, Citi; David Solomon, Goldman Sachs; Jamie Dimon, JP Morgan Chase; James Gorman, Morgan Stanley; Tim Sloan, Wells Fargo. When the market re-opened after the Christmas break on December 26, the Dow closed up 1,086.25 points, the largest single day gain in the history of the index. This huge day was after a terrible December and in the absence of any news that would have caused a market surge.

Was there a relationship between Mnuchin’s call on December 23 and the blast off in the stock market three days later? While this can’t be formally proven, in the opinion of this author it is the most likely explanation. In short, I think that Mnuchin told these CEO’s to buy the market and that they obliged.

If my understanding is correct, this means that at least twice in the period of eight months orders came down from on high to rescue the stock markets. What, I would ask you, does this say about the state of our financial system? What are we to think of a system that requires this level of manipulation to keep from crashing?

Of course, calls from Trump and Mnuchin are not the only sort of manipulation in the financial system. In the short time that I’ve been writing this series, we’ve seen additional extraordinary measures taken by the Fed to prop up the system.

First there was the bailout of the overnight Repo market. Originally, this was to be for a few days in September. Next, they extended it to a couple weeks. Then it got pushed out to the second week of November, then it was January 2020. Just last week, Fed President James Bullard expressed his preference for a “standing repo facility.” By this he seems to mean that he wants the current repo market intervention by the Fed to become a permanent policy tool of the central bank.

And that’s not all. Last week on Wednesday, the Fed started QE4. With this latest iteration of what in 2008 was termed an “emergency policy,” the Fed will by purchasing $60 billion a month in T-Bill (T-Bills are short-term US Treasury debt instruments). Where, you ask, does the Fed get the $60 billion per month to conduct QE4? They get it by a process that, were you or I to try it, we’d be arrested. In short, they counterfeit it out of thin air.

Here’s another question you may want to ask yourself. If the economy is doing so great as we’re constantly being told by the mainstream financial press, why is the Fed running simultaneous bailouts of both the overnight repo market and the bond market, both of which are designed to prop up the stock market? The obvious answer is that, far from being the greatest economy ever, the US, and indeed the world’s, financial markets are a mess and getting messier by the day. All the hype you hear about how great the economy is doing is propaganda designed to keep you locked into the system for the benefit of those who run it.

In light of the enormous lies that are being told to the American people by government officials, by bankers, and by the press, in the opinion of this author it is imperative that God’s people hear the truth about the financial state of the country and some sound advice about how to take measures to protect themselves financially. That is the purpose of this week’s installment.

Practical Financial Prepping – Breaking our Debt Addiction

The rich rule over the poor, and the borrower is servant to the lender.

    – Proverbs 22:7

Proverbs 22:3, a verse quoted at the top of this post, has served as a unifying theme for this series on prepping. But there is another nearby verse that speaks quite clearly to the subject at hand for today, practical financial prepping. That verse is Proverbs 22:7, “The rich rule over the poor, and the borrower is servant to the lender.” When people take on debt, the Word of God tells us that they becomes servants to those from whom they borrow. Some translations substitute “slave” for servant, which perhaps better drives home the position of obligation that a borrow occupies relative to the lender.

Jesus underscored the slave making nature of debt in his Sermon on the Mount when, encouraging his listeners to settle with the adversaries, warned that they would be thrown in jail by the judge and by no means get out until they had paid the last cent. In God’s economy, all debts must be paid.

The sin problem you and I face is likewise presented at times in terms of a debt. The only way any sinner can ever hope to escape the infinite debt of his sin is if the Lord Jesus Christ pays it for him.

Commenting on Proverbs 22:7, John Gill wrote, “[B]eing under obligation to him [the lender], he [the debtor] is forced to be subject to him, and comply with his humours, and to do and say as he would have him.” We live and work in a debt-based financial system, and as a result, debt is everywhere around us. It is sometime said that a fish doesn’t know it’s wet. Not that I’ve ever asked a fish to find out for sure, but the point is that a fish, surrounded as it is by water all its life, has no sense of what it’s like to be dry. Immersion in water is the only experience a fish has.

In like fashion, the people in the West, buried as most of them are in debt, don’t really have a sense of the dangerous position they are in, since nearly everyone they know is in a similar position. Being massively in debt is considered a normal part of life. And it’s not just individuals who find themselves drowning in debt. Corporations are carrying record debts as is the federal government.

Now you may expect me to launch into a sermon on the evils of debt and start lecturing people on their foolish and prodigal ways, but that it not what I intend to do at all. While it’s true that many Christians have allowed themselves to become debt-slaves through poor decisions, it’s worth mentioning in the first place that there is a systemic reason for the record debt load that at least partially explains the debt problem many people find themselves in.

Perhaps I’ve mentioned in earlier installments of this series that the dollar is a central bank issued, debt-based fiat currency. I’d like for a moment to focus on the term “debt-based.” When we say the dollar is debt-based currency, what this means is that the dollar, once defined as a specific weight of gold or silver, is now written against the debt held by the Fed. Back in the day when dollar bills were receipts for gold and silver, if the US Treasury wanted to print more dollar bills, it first had to add to its stockpile of gold and silver. Now, with the dollar being a unit of debt, the only way to increase the number of dollars available is for the federal debt to increase. If you would like to read more about this, here’s an excellent article by economist Robert Murphy.

The money quote from Murphy’s article comes at the end. Writes Murphy, “if people in the private sector ever paid off all of their debts, and the federal government paid off all of its bondholders, then the supply of US dollars would be virtually extinguished.” Our current monetary system REQUIRES that debt continually expand, in order to pay the interest on the existing debts. Think of it as a hamster wheel that must spin faster and faster to avoid disaster. The only problem being that, just as there are limits to how fast a hamster can spin its wheel, there are limits to how far debt can be expanded by the central banks. Whenever that debt limit is reached, the entire debt-based edifice will implode in a deflationary collapse, just like what we experienced in 2008, only worse. In my opinion, this is where we ultimately are headed.

Sounds pretty scary, right? Well, it is. But that’s the situation we’re facing today. My point in writing this series is to tell you the truth, not sugar coated lies. But my purpose in telling you the truth is not to drive you to despair, but to drive you to Christ who has promised to provide for his people. As Christians, we must turn to the Word of God to arm ourselves against this destructive and evil financial system in which we find ourselves. The first step in fighting back against this wicked system is understanding what we’re up against. It was the Apostle Paul who, writing to the Corinthians about Satan, said, “We are not ignorant of his devices.” As Christians, let us not be ignorant of the devices of the central bankers, politicians, academicians and crony capitalists who profit from the current Satanic financial system, the very system in which we find ourselves. Let us rather face them, having first put on the whole armor of God.

All that said, perhaps the second most important act of prepping any of us can do, second after making sure we are spiritually prepared with the whole armor of God, is to work to limit and eventually eliminate our financial debts.

As I have pointed out elsewhere in this series, a great deal of prepping is simply doing the things we should do anyway, but often, for one reason or another, don’t. Please don’t misunderstand what I’m saying here. I’m not suggesting that, if you find yourself in debt, somehow you are sinning. The Bible does not present the acts of borrowing and lending as in themselves immoral. That said, there are some debts that make a lot more sense than others. A college student may take out loans to earn a degree that will allow him to get a job paying much more than he could earn otherwise. That’s probably a smart investment. Perhaps a businessman needs a loan to start or to expand a business. Maybe someone drives and old beater of a car that’s always breaking down and making it hard to get to work. In that case, a car loan may make sense. My point is that there are some debts that are entirely reasonable. But even these we should be diligent to pay off.

Here’s something else to consider: The danger of debt in a deflationary collapse such as I mentioned above. This is not just theory either. You may recall seeing old pictures of farmers losing their family farms during the depression of the 1930’s, which was a deflationary collapse. What happened to the farmers is that they took on debt, for example, to buy farm equipment at inflated prices during the boom years of the 1920’s. When the deflationary depression hit in the 1930’s, the debts they had remained on the books in the same dollar terms as they were before the collapse, but the income of the famers dropped as a result of the deflationary depression. This meant that they were trying to service the old debt, which was not reset lower to account for the deflation, with a much smaller income. In many cases, this was impossible and they had to sell their farms. In a deflationary collapse, debt is a stone cold killer. It’s a millstone about a man’s neck dragging him to the bottom of the ocean.

Deflation is death to debtors. This is probably the chief reason the Fed and other central banks are so desperate to keep deflation at bay. If we ever have a deflationary collapse, it will take down not just farmers and small businessmen, but massively indebted large corporations and even possibly governments. This was, for example, what the 2008 bailout of the financial system was all about: Rescuing the so-called too big to fail banks from a deflationary collapse, one that they richly deserved.

To sum up, the less debt you have on your own personal balance sheet, the better off you will be in any financial crisis.

Closing Thoughts

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” This quote, attributed to Henry Ford, does a nice job of drawing together the principle elements of today’s post. We all live and work in a corrupt, wicked financial system designed to benefit a very tiny elite at the expense of everyone else. The basic tool used by the purveyors of this evil system is debt.

Rising debts and the increasing pace at which those debts are accumulated is not a bug in the system, it is a feature. This is another way of saying that those who designed our current system, the banking and political interests, knew exactly what they were doing when they conspired to put it in place. As Christians, we must not be ignorant of their devices.

One way of fighting back against them is to refuse to play their debt game. Christians can do this by limiting and eventually eliminating their debt. Debt is like a great weight dragging a ship to the bottom of the ocean. The less debt we have, the better our chances of staying afloat when next the storms of a financial crisis strike.

On another note, next week I shall take a break from writing this series as I plan to be out of town visiting friends. Lord wiling, I shall have a review of Ron Paul’s book Gold, Peace, And Prosperity for you on 10/27 and return to our discussion of prepping the following Sunday. Until then, may the Spirit of truth guide you in all truth as you read and study God’s infallible Word.