The Plot Thickens
Last month we reviewed the increasingly difficult predicament we face in attempting to position ourselves-and our families-in this volatile world. In addition to the terrorist threats and other geopolitical tensions, the mismanagement of our own national financial scene appears increasingly problematic.
The subprime mortgage mess metastasized into a full-blown global credit crisis last month, crushing stocks in Europe as well as the U.S.
The meltdown began in France and forced the European Central Bank to inject more than $130 billion into the continental banking system so that it wouldn’t seize up entirely. Standard and Poor’s said that move was unprecedented.
The Federal Reserve (which is neither federal nor a reserve) put more than $60 billion into the U.S. banking system. Unlike previous sell-offs, which were concentrated in specific sectors, this one cut across the entire stock market. Investors increasingly seem to fear that the problems among the big investment banks are proving bigger than expected.
International investors now own $672 billion of the $835.4 billion worth of Treasuries due in 3-10 years.1 A record 80% of the Treasury notes due in 3-10 years are foreign owned. Not since the 19th century have foreigners held so much American debt.2
Another way to examine our reserves is to take a look at our checkbook and compare it with others:Rank Current Account Balance3
1 China $179,100,000,000
2 Japan 174,400,000,000
3 Germany 134,800,000,000
4 Russia 105,300,000,000
5 Saudi Arabia 103,800,000,000
6 Norway 63,350,000,000
7 Switzerland 50,440,000,000
. . . . . . . .
159 France -38,000,000,000
160 Austria -41,620,000,000
161 U.K. -57,680,000,000
162 Spain -96,600,000,000
163 United States -862,300,000,000
Out of 163 countries, we rank dead last. In fact, we are nine times worse off than the runner up-Spain-who is recognized as a near-bankrupt nation in the financial press.
(I understand that Spain just sold off 80 of their remaining 90 tons of gold from their national treasury to “stay afloat” a little longer.)4
The Federal Government recorded a $1.3 trillion loss last year-far more than the official $248 billion deficit-when GAAP accounting standards are applied.5
“The gap between future U.S. receipts and future U.S. government obligations now totals $65.9 trillion, a sum that is impossible for the U.S. to reconcile, which means the U.S. is now technically bankrupt.”6
But it gets worse. In fact, our most disturbing predicament is being prepared “under the radar” and deliberately.
The Deliberate Destruction of America
That sounds like a conspiracy theory, doesn’t it? Well, it is. And it is really happening.7 There is no intention of our present administration to enforce our borders.
There is a well-laid-out plan to merge the United States with Canada and Mexico. There are several dozen working groups laying out the administrative regulations. There are extensive construction projects preparing a “NAFTA Superhighway” to expedite goods from Lázaro Cárdenas, on the Pacific Coast of Mexico, through Laredo, Texas, to the Kansas City “SmartPort” (an electronic port of entry to be regarded as Mexican territory), on though Duluth, Minnesota to Canada.
Most of these facilities are being built by foreign investors, so we will have to pay to use them. They are being designed to expedite goods from China to the entire North American Union.
(China and Wal-Mart are investing $300 million just to upgrade the container handling facilities at Lázaro Cárdenas. China already controls facilities at Long Beach, California, and at both ends of the Panama Canal.)
What is particularly disturbing is that this is all being done covertly, without the benefit of public discourse. It is being denied by the administration, and yet it would seem to be treasonous-the very disenfranchisement of the entire electorate and its assets.
The primary whistle-blower on this is our dear friend, Jerry Corsi, whose blockbuster book, The Late Great U.S.A., just came out. It is a must read for any American.
(Jerry will also be a featured speaker at our Annual International Meeting of the Koinonia Institute, November 9-11, 2007, at the Coeur d’Alene Resort. He will also give our KI students a private insider’s briefing on the evening prior, November 8th. Join us if you possibly can. But register early: it will be a sell out and space is limited.)
You and I aren’t likely to change the course of history, but we can exercise prudence in our personal and family preparations.
A prudent man foreseeth the evil, and hideth himself: but the simple pass on, and are punished.
What is your action plan to protect yourself and your family?
Our times are uniquely uncertain and impossible to predict. Will we have a depression? Will we have hyperinflation? Will we experience logistic upheavals? The optimum strategy under conditions of uncertainty is mobility. In financial terms, that’s called liquidity. So that leads us to our basic four-step strategy, which we call “the Vortex Strategy.” It is disarmingly simple, but absolutely essential:
The Vortex Strategy1) Lower your cost of living
2) Get out of debt
3) Guard your liquidity
4) The most important factor of all
1. Lower Your Cost of Living
Don’t count on increases in your income. Live beneath your means so that you have something extra at the end of each month. That will be your ticket to financial freedom.
A useful hint: review the allocations of your time. Are there indulgences that are expensive and yet might not stand scrutiny from a cost/reward relationship? Often our most enjoyable involvements are not necessarily tied up with capitalized indulgences. Simplify in order to win what really counts.
2. Get Out of Debt
Debt is a presumption on the future and is contrary to God’s plan for your life: the borrower is slave to the lender (Proverbs 22:7).
Use the increments from Step 1 to refinance variable rate mortgages and eliminate credit card debt. Establish and control your budget as if your life depends upon it: it does!
3. Guard Your Liquidity
Once debt is under control, use the margin from Step 1 to establish reserves. Diversify your holdings among different asset classes. Straddle industries, borders, and currencies.
Strive to maintain liquidity, not maximize earnings. That’s for later when the horizon is more clearly in focus.
Lastly, get your assets out of reach from your adversaries: know who they are and take precautionary steps before they’re needed. Some tactical alternatives for Step 3 will be the subject of our article next month, “The Vortex Strategy: Part 3.”
4. The Most Important Factor of All
Learn the supernatural elements of stewardship. This is the solution to all financial problems!
The Secret Weapon: The Tithe
Abraham, the “Father of the Faithful,” left us an example to follow. The tithe (or “tenth”) is clearly the ordained pattern in the Old Testament,8 and in the New Testament nothing has changed. Christ did not set aside the tithe.9 The fact that Christ is our High Priest after the order of Melchizedek, not the Levitical priesthood, makes Abraham’s tithing to him an example for each of us.
There appears to be at least four reasons for the remarkable institution of the tithe:
1) It acknowledges the Creator’s rights. The Tenth of all is His.
2) It is the antidote for greed and covetousness.
3) It is a test of our faith.
4) It is the solution to every financial problem.
In fact, it would appear even more binding on us since our privileges are greater:
For unto whomsoever much is given, of him shall be much required.
Bring ye all the tithes into the storehouse, That there may be meat in mine house, And prove me now herewith, saith the Lord of hosts, If I will not open you the windows of heaven, And pour you out a blessing, that there shall not be room enough to receive it.
The only other use of the peculiar phrase “windows of heaven”10 is the “abundant outpouring” of the Genesis Flood!11 Can you imagine that phrase-“the windows of heaven”-being applied to your financial situation?
God changes not. He does not vary the principles of His government. God will not be your debtor! He is asking, “Trust Me.” Do you?
In our next article, we will explore some additional practical steps to take towards faithful stewardship.