Posted by: John Gilmore | September 23, 2006

Babylon – Past and Future

Babylon – Past and Future

The Bible speaks of two Babylons – the ancient empire of Babylon that invaded Israel around 597 B.C. and a ‘Mystery’ Babylon that is mentioned in the book of Revelation. There is no mystery surrounding the Bible’s description of the Babylon empire. The Old Testament speaks of the rise and fall of Babylon and the Israelite captivity that resulted from the Babylonian invasion of Jerusalem. The prophets Isaiah and Jeremiah both gave prophecies concerning the Babylon Empire – all of which came to pass.

The ‘mystery’ here is – who is the ‘Babylon’ of Revelation chapters 14, 17 and 18? As we reviewed in previous posts, I believe that the ‘Mystery’ Babylon of Revelation is the Roman Catholic Church. Since we have already explored Revelation chapters 14, 17 and 18 and related prophecies concerning the Roman Catholic Church, in this post we’re going to examine what the Bible tells us about both Babylons. Does the Old Testament give us any additional information regarding ‘Mystery’ Babylon? Does the Old Testament help us confirm who ‘Mystery’ Babylon is? As we’ve seen before, prophecies in Revelation often relate to Old Testament prophecies – and this prophecy is no different. We’re going to see that the Old Testament description of Babylon gives us additional insight into who ‘Mystery’ Babylon is and what the future holds for ‘Mystery’ Babylon.

Let’s start by comparing Old Testament prophecies concerning ancient Babylon with Revelation’s prophecies regarding ‘Mystery’ Babylon. In addition to their names, does the Bible give us a clear indication that these two entities are related? Absolutely.

Revelation chapter 17 begins the description of ‘Mystery’ Babylon:

“One of the seven angels who had the seven bowls came and said to me, “Come, I will show you the punishment of the great prostitute, who sits on many waters. With her the kings of the earth committed adultery and the inhabitants of the earth were intoxicated with the wine of her adulteries.”
Then the angel carried me away in the Spirit into a desert. There I saw a woman sitting on a scarlet beast that was covered with blasphemous names and had seven heads and ten horns. The woman was dressed in purple and scarlet, and was glittering with gold, precious stones and pearls. She held a golden cup in her hand, filled with abominable things and the filth of her adulteries. This title was written on her forehead:
MYSTERY
BABYLON THE GREAT
THE MOTHER OF PROSTITUTES
AND OF THE ABOMINATIONS OF THE EARTH. I saw that the woman was drunk with the blood of the saints, the blood of those who bore testimony to Jesus.” (Revelation 17:1-6)

To summarize, we see the following regarding ‘Mystery’ Babylon:
1. Commits spiritual adultery against the Lord
2. People of the world are ‘intoxicated’ with the ‘wine’ of her adulteries
3. This Babylon is very wealthy
4. She holds a ‘golden cup’ in her hand
5. The ‘golden cup’ is filled with the ‘filth of her adulteries’
6. She is the ‘Mother’ of ‘Prostitutes’ (false religion/churches) and abominations (unbiblical doctrine and worship)
7. This Babylon is ‘drunk’ with the ‘blood of the saints’ – meaning that it has killed the Lord’s people

Let’s compare the opening verses of Revelation chapter 17 with what the Old Testament tells us about ‘Babylon’.

“Babylon was a gold cup in the LORD’s hand; she made the whole earth drunk. The nations drank her wine; therefore they have now gone mad.” (Jeremiah 51:7)

Here we see a ‘golden cup’ mentioned and that Babylon has ‘made the whole earth drunk’. Because the nations drank her ‘wine’, they have now ‘gone mad’. What is this referring to? The Lord is telling us that Babylon’s worship of false idols (idolatry) has made the people spiritually ‘drunk’ with this intoxicating spiritual ‘wine’. The Lord tells us through Jeremiah that Babylon’s worship of idols causes widespread ‘madness’ – the worship of false gods and idols. We see the same descriptions regarding ‘Mystery’ Babylon in Revelation chapter 17. The Lord is telling us that both Babylons are rife with idolatry and false worship. We’re also told very clearly that much of civilization during the time of each Babylon adheres to these false beliefs. The empire of Babylon included much of the world during its reign. It’s easy to see that this ‘Mystery’ Babylon is also present throughout the world.

What was the result of ancient Babylon’s idolatry? It was judged by the Lord – conquered by Cyrus the Great (Persia) in 539 B.C. The fall of Babylon was foretold by Isaiah and Jeremiah.

‘Babylon has fallen, has fallen! All the images of its gods lie shattered on the ground!’ (Isaiah 21:9)

“For the time will surely come when I will punish the idols of Babylon; her whole land will be disgraced and her slain will all lie fallen within her.” (Jeremiah 51:47)

“Babylon must fall because of Israel’s slain, just as the slain in all the earth have fallen because of Babylon.” (Jeremiah 51:49)

What is the reason for its fall? Its worship of idols and because it killed the Lord’s people. Very clear.

“A drought on her waters! They will dry up. For it is a land of idols, idols that will go mad with terror.” (Jeremiah 50:38)

What awaits ‘Mystery’ Babylon? The same fate.

“Fallen! Fallen is Babylon the Great, which made all the nations drink the maddening wine of her adulteries.” (Revelation 14:8)

“Fallen! Fallen is Babylon the Great! She has become a home for demons and a haunt for every evil spirit, a haunt for every unclean and detestable bird. For all the nations have drunk the maddening wine of her adulteries.” (Revelation 18:2-3)

Your merchants were the world’s great men. By your magic spell all the nations were led astray. In her was found the blood of prophets and of the saints, and of all who have been killed on the earth.” (Revelation 18:23-24)

What is also amazing is that the Lord warns us before the judgment of both Babylons.

“Flee from Babylon! Run for your lives! Do not be destroyed because of her sins. It is time for the LORD’s vengeance; he will pay her what she deserves.” (Jeremiah 51:6)

“Come out of her, my people! Run for your lives! Run from the fierce anger of the LORD. (Jeremiah 51:45)

We see that the Lord gives a very clear warning before the downfall of ancient Babylon. Do we see a similar warning concerning ‘Mystery’ Babylon? Absolutely.

Then I heard another voice from heaven say: “Come out of her, my people, so that you will not share in her sins, so that you will not receive any of her plagues; for her sins are piled up to heaven, and God has remembered her crimes. (Revelation 18:4-5)

I believe Jeremiah 51:9 relates to both Babylons – the Lord would have healed both if they would have humbled themselves. He makes it clear – both refuse to be healed. Both refuse the path of humility and repentance – and both are destroyed because of this.

‘We would have healed Babylon, but she cannot be healed; let us leave her and each go to his own land, for her judgment reaches to the skies, it rises as high as the clouds.’ (Jeremiah 51:9)

Did Ancient Babylon fall quickly or did it take some time. History records that Babylon fell quickly – in one night the mighty city of Babylon fell to the Persians. Was this foretold? Yes.

“Babylon will suddenly fall and be broken.” (Jeremiah 51:8)

“Sharpen the arrows, take up the shields! The LORD has stirred up the kings of the Medes, because his purpose is to destroy Babylon. The LORD will take vengeance, vengeance for his temple. Lift up a banner against the walls of Babylon! Reinforce the guard, station the watchmen, prepare an ambush! The LORD will carry out his purpose, his decree against the people of Babylon. (Jeremiah 51:11-12)

We see that ‘Mystery’ Babylon will suffer the same fate – a quick and final end.

“Therefore in one day her plagues will overtake her: death, mourning and famine.
She will be consumed by fire, for mighty is the Lord God who judges her.” (Revelation 18:8)

“When the kings of the earth who committed adultery with her and shared her luxury see the smoke of her burning, they will weep and mourn over her. Terrified at her torment, they will stand far off and cry: “‘Woe! Woe, O great city, O Babylon, city of power! In one hour your doom has come!’ (Revelation 18:9-10)

It’s also interesting to note that the ancient city of Babylon fell in one night. We also see that ‘Mystery’ Babylon will fall very quickly – and we also see that a ‘city’ is mentioned more than once. This is a clear message to us that the center of ‘Mystery’ Babylon will be destroyed. As I’ve mentioned in other posts – I believe these are references to the city of modern day Rome.

We also see that wealth is taken from both Babylons as a result of these judgments.

You who live by many waters and are rich in treasures, your end has come, the time for you to be cut off. (Jeremiah 51:13)

They will say, ‘The fruit you longed for is gone from you. All your riches and splendor have vanished, never to be recovered. (Revelation 18:14)

‘Woe! Woe, O great city, dressed in fine linen, purple and scarlet, and glittering with gold, precious stones and pearls! In one hour such great wealth has been brought to ruin! (Revelation 18:16-17)

Would ancient Babylon ever rise again? Jeremiah prophesied that it would not – and history records that Babylon never rose again.

Then say, ‘So will Babylon sink to rise no more because of the disaster I will bring upon her. And her people will fall. (Jeremiah 51:64)

Once ‘Mystery’ Babylon is judged, will it ever rise again? The Lord is clear.

Then a mighty angel picked up a boulder the size of a large millstone and threw it into the sea, and said: “With such violence the great city of Babylon will be thrown down, never to be found again. (Revelation 18:21)

Notice that ‘fire’ is mentioned as a method of judgment for both Babylons.

“I am against you, O destroying mountain, you who destroy the whole earth,” declares the LORD. “I will stretch out my hand against you, roll you off the cliffs,
and make you a burned-out mountain. (Jeremiah 51:25)

This is what the LORD Almighty says: “Babylon’s thick wall will be leveled and her high gates set on fire; the people exhaust themselves for nothing, the nations’ labor is only fuel for the flames.” (Jeremiah 51:58)

The beast and the ten horns you saw will hate the prostitute. They will bring her to ruin and leave her naked; they will eat her flesh and burn her with fire. For God has put it into their hearts to accomplish his purpose by agreeing to give the beast their power to rule, until God’s words are fulfilled. The woman you saw is the great city that rules over the kings of the earth. (Revelation 17:16-18)

Therefore in one day her plagues will overtake her: death, mourning and famine. She will be consumed by fire, for mighty is the Lord God who judges her. (Revelation 18:8)

We also see that people are horrified at the aftermath of both judgments.

Because of the LORD’s anger she will not be inhabited but will be completely desolate. All who pass Babylon will be horrified and scoff because of all her wounds. (Jeremiah 50:13)

“When the kings of the earth who committed adultery with her and shared her luxury see the smoke of her burning, they will weep and mourn over her. Terrified at her torment, they will stand far off and cry: ” ‘Woe! Woe, O great city, O Babylon, city of power! In one hour your doom has come!’ (Revelation 18:9-10)

If we compare ancient Babylon with ‘Mystery’ Babylon we see striking similarities:
1. Both are full of idolatry and false religion
2. Both deceive many into believing that idolatry and false religion is the way of truth
3. The Lord considers the beliefs of both to be ‘filth’ and spiritual ‘adulteries’
4. Both are extremely wealthy
5. Both are arrogant and full of pride
6. Both wield enormous worldly power
7. Both kill the Lord’s people
8. Both will be judged because of their evil ways
9. The judgment for both is by fire
10. In both cases, people see this judgment and mourn
11. In both cases, the Lord warns people to ‘flee’ or ‘come out’ of these entities prior to judgment

I would recommend that you read Isaiah and Jeremiah to understand all the Lord has to say about Babylon. It’s very interesting reading. As always, you’ll gain knowledge and wisdom by being in His Word. We should note that the Lord raised up someone to overthrow Babylon (Cyrus). Will He do the same with ‘Mystery’ Babylon? Time will tell.

“Come together, all of you, and listen: Which of the idols has foretold these things? The LORD’s chosen ally will carry out his purpose against Babylon; his arm will be against the Babylonians. I, even I, have spoken; yes, I have called him. I will bring him, and he will succeed in his mission.” (Isaiah 48:14-15)

What is amazing to me is that we all go about our lives – and most of us believe that the events taking place throughout the world are purely random – empires rise, empires fall – religions rise and religions fall. What you are seeing as you read through this blog is that these things are not random. There has been a hidden hand moving human events. Only the Lord’s children can truly see this – by His Spirit. People throughout history have gone their own way – following their own evil ways and then are surprised when their world collapses around them – and this certainly continues today. We are seeing the beginning of this in America. We have gone our own way – and our world is starting to collapse. It is the Lord who lifts us up and it is the Lord who judges those who follow the evil ways of the world. We like to think that we rule the world – but the truth, as you see – is much different. The truth is that the Lord gave us the world – and we ultimately destroy it. I wouldn’t exactly call us good stewards – worthy to rule anything.

Do you think that the rulers of ancient Babylon knew that their rise and fall would foreshadow the future rise and fall of another ‘Babylon’? Not a chance. They were the blind leading the blind – and we see this today with political and religious leaders. Most claim to know God – but few do. There are few in the world who truly overcome this world and find the Lord waiting for them. I, for one, am no longer listening to the lies of the world. I want to hear the truth. How about you? Who are you listening to?

Psalm 26
Of David.
Vindicate me, O LORD,
for I have led a blameless life;
I have trusted in the LORD
without wavering.
Test me, O LORD, and try me,
examine my heart and my mind;
for your love is ever before me,
and I walk continually in your truth.
I do not sit with deceitful men,
nor do I consort with hypocrites;
I abhor the assembly of evildoers
and refuse to sit with the wicked.
I wash my hands in innocence,
and go about your altar, O LORD,
proclaiming aloud your praise
and telling of all your wonderful deeds.
I love the house where you live, O LORD,
the place where your glory dwells.
Do not take away my soul along with sinners,
my life with bloodthirsty men,
in whose hands are wicked schemes,
whose right hands are full of bribes.
But I lead a blameless life;
redeem me and be merciful to me.
My feet stand on level ground
in the great assembly I will praise the LORD.

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Posted by: John Gilmore | September 22, 2006

The ‘image’ of the Beast – Revelation 13

As we’ve already discussed, many of today’s prophecy teachers have bought into the theory of a secret rapture, 7 year period of tribulation and a future evil world leader known as the Antichrist. Because of this, much of the Christian world is looking into the future for the start of the Revelation of Jesus Christ. There is no sense of urgency today because this secret rapture will take all true believers out of here before things get too bad. So, many of us continue to focus on our daily lives – making money, following sports, new houses, new cars, politics, terrorism, etc – and we are not at all prepared for what we will face. I have to say that I never thought our spiritual enemy could be this deceptive. I’m not sure why, the Bible tells us to always be on our guard against him. ‘Put on the full armor of God so that you can take your stand against the devil’s schemes’ (Ephesians 6:11). ‘….in order that Satan might not outwit us. For we are not unaware of his schemes’ (2 Corinthians 2:11). ‘When he [satan] lies, he speaks his native language, for he is a liar and the father of lies’ (John 8:44).The truth is that as long as I relied on John Gilmore and his ability to see and discern, the world looked A-OK to me. Yes, there seemed to be many problems in the world, but they weren’t close to me, so I believed the lie that the world was fine. It wasn’t until I humbly came to the Lord and asked for wisdom that I began to see the world as it truly is. Honestly, I was fearful and depressed….at first. Over time, by remaining close to the Lord and learning from Him, I now know what is happening in the world and why….and equally important, I’m not afraid of it.

We have discussed previously how this secret rapture, future tribulation and future antichrist will be used against us by the enemy. Not only do these doctrines remove a sense of urgency, but they shift our focus from the truth in today’s world to some fantasy in the future. Very few people are looking at what is happening in the world today and how it relates to Revelation. Because of this, our spiritual radar is non-existent and we are allowing ourselves to be deceived on many fronts. We’re going to talk about a possible future deception in this post. This is an issue that I believe the Lord presented to me day’s ago, and at first, I didn’t want to believe it. I’ve found that if I ignore something that the Lord is bringing to my attention, He will continue to bring it back around to my attention until I know that it’s something He wants me to do….this was no exception. We’re going to discuss the ‘image’ of the beast mentioned in chapter 13 of Revelation. The verses that mention this image are Revelation 13:14-15: ‘Because of the signs he [beast ….out of the earth] was given power to do on behalf of the first beast [beast …out of the sea], he deceived the inhabitants of the earth. He [beast …out of the earth] ordered them [inhabitants of the earth] to setup an image in honor of the beast who was wounded by the sword and yet lived. He was given power to give breath to the image of the first beast, so that it could speak and cause all who refused to worship the image to be killed’. In the Left Behind books, this image is portrayed as a huge statue of the Antichrist (Nicolae Carpathia) that seems to come alive. Everyone is forced to worship this ‘image’ or be killed. Is this what the Lord is saying? I believe that the answer is no. If you’ve read all of these posts, then you know that the beast is not a man, but the Roman Church. So, the image can’t be a statue of a man, but an image of the Roman Catholic Church. Before we go further, let’s get a definition of image.

From Webster’s dictionary:
im·age: 1: a reproduction or imitation of the form of a person or thing;

So, the image in the case of Revelation 13:14 is likely a church that imitates the Catholic Church in some way. If you’ve read my other posts to this point, you know some of the differences between official Catholic doctrine and God’s Word. There are significant differences that I won’t go into here, but it is clear that this image will incorporate many of the unbiblical doctrine of the Catholic Church. Why? Because a true church of God would not force anyone to obey its doctrine. Jesus never forced anyone to believe Him. If someone did not or would not agree, He let them go. ‘”Teacher,” he declared, “all these [Commandments] I have kept since I was a boy.” Jesus looked at him and loved him. “One thing you lack,” he said. “Go, sell everything you have and give to the poor, and you will have treasure in heaven. Then come, follow me.” At this the man’s face fell. He went away sad, because he had great wealth’ (Mark 10:20-22). Jesus didn’t force the man to sell everything, He let him go. This ‘image’ in Revelation 13:15 forces everyone to worship it or be killed ‘…so that it [the image] could speak and cause all who refused to worship the image to be killed.’ (Revelation 13:15). It’s clear, this future ‘image’ of the Catholic Church is evil. The question is – in today’s world do we see any kind of an ‘image’ of the Catholic Church? Anything that somehow resembles the Catholic Church? The answer is yes…..and you’ll probably be shocked at what it is. As I’ve mentioned many times, you’ll need prayer to truly understand and believe these things. Why? Because the world and people focused on this world do not see with spiritual eyes. They cannot see into the spiritual and therefore, cannot see God in this world and our enemy working in the world. Through humble prayer, God will reveal the truth to you. Only God can show you the truth, regardless of what you’re told in this world.

I spent most of my life in the Methodist Church. I belonged to a Methodist Church during my High School years and my wife and I joined a large Methodist Church when we moved to Atlanta in the early 90’s. When we moved to Knoxville in 2001, we found another Methodist Church and joined. I met many wonderful, spirit filled people in these churches and I witnessed all of these churches reach out into their communities to spread the gospel of Jesus Christ. In all the time that I spent in these Methodist churches, I never realized that I was, at times, reciting Catholic prayers. The reason is that I never knew anything about the Catholic Church. I never thought about it. The church recited these statements or prayers, so I did the same. What prayers you ask? It wasn’t until earlier this year when I started studying Catholic doctrine that I noticed something that bothered me. If you belong to the Methodist Church as I did, then you’re very familiar with the Apostle’s Creed:

‘I believe in God, the Father Almighty, the Creator of heaven and earth, and in Jesus Christ, His only Son, our Lord:
Who was conceived of the Holy Spirit, born of the Virgin Mary, suffered under Pontius Pilate, was crucified, died, and was buried.
He descended into hell.
The third day He arose again from the dead.
He ascended into heaven and sits at the right hand of God the Father Almighty, whence He shall come to judge the living and the dead.
I believe in the Holy Spirit, the holy catholic church, the communion of saints, the forgiveness of sins, the resurrection of the body, and life everlasting.
Amen.’

If you belong to a Methodist Church, then you’re also familiar with ‘Glory be to the Father’:

‘Glory be to the Father, and to the Son, and to the Holy Spirit. As it was in the beginning, is now, and ever shall be, world without end. Amen.’

Did you know that these prayers are recited as part of the Catholic Rosary? I didn’t. Is there anything wrong with saying these prayers? As I mentioned in an earlier post regarding Catholic doctrine, there’s obviously nothing wrong with stating your beliefs to someone, but the Bible tells us to refrain from repetitious prayers that are said as part of tradition. We’re told in Mathew 6:6-7 ‘But you, when you pray, go into your room, and when you have shut your door, pray to your Father who is in the secret place; and your Father who sees in secret will reward you openly. And when you pray, do not use vain repetitions as the heathen do. For they think that they will be heard for their many words.’ In the Methodist Churches I have attended, these statements are recited every Sunday. Do we need to repeat statements like this in our worship? The Bible says no. If we desire a relationship with our Father in heaven, we’re told to pray in secret – only to Him. He will hear us and reveal Himself to us if we pray and seek him with all of our heart. Praying in church is obviously something that we all should do, but to have a personal relationship with our Father, it is necessary to pray to Him by ourselves. It is up to each of us to establish this relationship – ‘You will seek me and find me when you seek me with all your heart’ (Jeremiah 29:13).

The last stanza of the Apostles’ Creed also bothers me. Every Sunday in Church I was stating that I believed in the Holy Spirit (which I do) and the Holy Catholic Church (which I don’t). I used to think about this from time to time, but not knowing anything about Catholicism, it didn’t seem a big deal to me. It does now. Some will say that they replace ‘holy catholic church’ with ‘Christ’s church’ or something similar, but I have never heard this in all of my years of attending the Methodist Church. Why did the Methodist Church adopt something from the Catholic Church? I honestly don’t know the answer. I do wonder what those who were persecuted by the Catholic Church during the Middle Ages would think. I have an idea – I believe they’d sound an alarm. I believe this is why I was led to this topic. It’s a warning. Is the Methodist (or any other denomination) now the image of Revelation 13? No. No one is forcing anyone to do anything within Protestant churches today. However, we must be aware that the Bible tells us this will change. In the near future, Catholics and Protestants will unite again within a church that is opposed to God. There is going to be a worldwide ‘image’ of the Catholic Church and this ‘image’ is going to force people to worship its false doctrine. Refuse and you will face a death penalty – ‘He [worldwide government – new world order] was given power to give breath to the image of the first beast , so that it could speak and cause all who refused to worship the image to be killed’ (Revelation 13:15). From my own experiences and the knowledge I have received, our enemy never starts by taking down your whole house, he starts with a small brick and works his way up. If we know that the Catholic Church is preaching false doctrine and will someday face the Lord’s judgment, we had better be alert for anything from that church that leaches into our own teaching, however insignificant it may be. Never forget, the devil is constantly scheming to infiltrate and destroy the Lord’s church and he will do it very deceptively. We should not assume that any of us (or any church) is somehow immune to this: ‘Be self-controlled and alert. Your enemy the devil prowls around like a roaring lion looking for someone to devour’ (1 Peter 5:80) The key here is to actually be alert. It appears to me that most are spiritually asleep or not mature enough yet to discern what is happening. I believe that we’re seeing the beginning of the unification of Catholics and Protestants. Many church leaders are becoming more concerned with the world and finding their place in it than with what the Bible tells us. As a result, we’re going to see the formation of the church-state beast once again – just as the Bible tells us.

Did you know that the ritual of infant baptism began in the Catholic Church? Some protestant churches now baptize infants. Obviously, we should all bring our children into church and our church family, but the Bible never mentions a requirement to baptize a child in order to receive salvation. There is certainly no problem with having a dedication ceremony for infants in our churches, but God does not require us to baptize our children. Jesus was never baptized as an infant. We should be baptized, as an adult, as an open acceptance of God’s offer of salvation and the dedication of our lives to Him. We should always follow the example of Christ and He was baptized when He was an adult. The Catholic Church has twisted some verses in the Bible to fit their doctrine of infant baptism, but I see no specific command from our Lord to do this. Think about the logic of this from the Lord’s perspective. At some point in your adult life you come close to the Lord. You overcome the world and believe that Jesus died for you so that you can live in eternity. You seek Him and find Him and follow His plan for your life. You are filled with the Holy Spirit and become Holy as He is Holy. You then die. Do you think that God will not allow you to enter heaven because a religious ritual was not performed on you as an infant? Something that you had no control over? The answer is no. Each of us will be judged individually for our lives, our works and the choices we made. The #1 most important choice is whether we believed and accepted that Jesus Christ died and was resurrected for us. Once we become adults and understand that we must ask God for forgiveness for our sins, it is up to us individually to choose to accept God’s offer of salvation. You do not have to depend on anyone else in this world for salvation.

The final Catholic similarity I’ve seen in Protestant churches is that most Methodist preachers I’ve listened to are wearing formal robes. What makes me uncomfortable with this is that the Lord has made it clear to me that many Catholic traditions have nothing to do with Him. So it may seem insignificant that a Protestant preacher is wearing flowing robes that are similar to what a Catholic priest wears, but it doesn’t seem at all Christ-like to me. When I see the Pope wearing all of his formal attire and jewelry and sitting on some fancy chair, for me it paints a picture about as far from Jesus as you can get. It says that I’m concerned how the world views me, not how the Lord views me. There’s certainly nothing wrong with dressing nicely for Church, but as a teacher of God’s Word, it doesn’t seem biblical to me to wear anything ‘formal’ such as robes. Jesus and His disciples were not concerned with their dress. John the Baptist, a mighty man of God, wore nothing but clothes made of camel’s hair and a leather belt. Simply put, John the Baptist and the Apostles were focused on the Lord and His message, not any type of tradition or ritual.

You may be thinking that this is a stretch – there’s no way that Catholics and Protestants will ever join together again. Really? Have you watched the news recently (December 2006)? Pope Benedict XVI recently traveled to Turkey to meet with both Muslim and Orthodox Christian leaders. He prayed toward Mecca with a Muslim cleric and met with an orthodox Christian leader. Statements were made that alluded to reconciliation with Protestants. Dave Hunt writes in his book, A Woman Rides the Beast – ‘The most significant event in nearly 500 years of church history was revealed as a fait accompli on March 29, 1994. On that day leading American evangelicals and Catholics signed a joint declaration titled “Evangelicals and Catholics Together: The Christian mission in the 3rd Millennium”. The document, in effect, overturned the Reformation and will unquestionably have far-reaching repercussions throughout the Christian world for years to come. The 25 page document acknowledges, without compromise, some key differences between Catholics and evangelicals (such as the significance of baptism and the authority of Scripture). Unfortunately, the most important difference – what it means to be a Christian – is not mentioned. In fact, that such a difference even exists is denied. This compromise of the gospel lies at the heart of the agreement……The key element behind this historic joint declaration is the previously unthinkable admission on the part of leading evangelicals that active participation in the Catholic Church makes one a Christian. If that is indeed the case, then the Reformation was a tragic mistake. The millions who were martyred (during the thousand years before the Reformation and since then to the present time) for rejecting Catholicism as a false gospel have all died in vain. If, however, the Reformers were right, then this new agreement between Catholics and evangelicals could well be the cleverest and deadliest blow struck against the gospel in the entire history of the church.’ Regardless of what you may currently believe, Bible prophecy tells us that world religion is going to consolidate at some point…..and this religion won’t be based on God’s Holy Word. If you are close to God and are spiritually mature, you can see it happening on the news everyday. It’s very important that each of us is alert to what the enemy is doing.

How would you describe the congregation of your church? I believe our answer should be – Full of the Holy Spirit. We should worship and praise God and be led, in all that we do, by Jesus Christ and the Holy Spirit. If I were to describe myself prior to last year in church (and many of the people I’ve seen throughout my years of attending church), I believe the word I would use is….bored. The Methodist Churches I attended always preached from the Bible and were active in spreading the message of Christ, but something was always missing. I remember on many occasions reading about the miracles performed by Jesus – the healings, the prophecy, the service, the knowledge of God and wondering – why aren’t we doing these things? Jesus told us that we would do – even greater works – if we have faith: ‘Most assuredly, I say to you, he who believes in Me, the works that I do he will do also; and greater works than these he will do, because I go to My Father’ (John 14:12). If someone ever mentioned that Jesus told us that we would do all of the things He did, I would usually hear something like, ‘Well, that was in biblical times.’ The truth is that many of us don’t know Jesus or our Father in heaven personally and have not asked for power from God – ‘So I say to you: Ask and it will be given to you; seek and you will find; knock and the door will be opened to you’ (Luke 11:9). Does your church teach how to identify your spiritual gifts and how to strengthen them? Does your church teach prophecy and God’s healing power? The Bible tells us that we all have spiritual gifts and we all have access to God’s power. As you think about your spirtual life and your relationship with God, keep in mind the words of Ezekiel 33:30-33: “As for you son of man, your countrymen are talking together about you by the walls and at the doors of the houses, saying to each other, ‘Come and hear the message that has come from the Lord.’ My people come to you, as they usually do, and sit before you to listen to your words, but they do not put them into practice. With their mouths they express devotion, but their hearts are greedy for unjust gain. Indeed, to them you are nothing more than one who sings love songs with a beautiful voice and plays an instrument well, for they hear your words but do not put them into practice. When all this comes true – and it surely will – then they will know that a prophet has been among them.” It’s as if Ezekiel was speaking the Lord’s message to the United States today. You must ask yourself – “Am I putting the Lord’s Word into practice? Do I listen to a preacher on Sunday and then disregard his words and the Bible and live my life my way?” I believe that most of us are doing this – we hear, but are not listening and putting the Lord’s Word into practice in our lives. This same theme is expressed in Isaiah 29:13-14: “The Lord says: These people come near to me with their mouth and honor me with their lips, but their hearts are far from me. Their worship of me is made up only of rules taught by men. Therefore once more I will astound these people with wonder upon wonder; the wisdom of the wise will perish, the intelligence of the intelligent will vanish”

The apostles lived lives of adventure. Yes, very dangerous adventures, but adventures nonetheless. They traveled throughout the known world spreading the gospel of Jesus. They did this regardless of fierce opposition, prison and even death. They never allowed the gospel to be corrupted in any way. Why? Because they picked up their cross and began carrying it. They did not attend church services for one hour every week while living secular lives – they carried out God’s plan for them everyday. They asked God for His will and then carried it out, regardless of the consequences. It is time for us to do the same. In today’s world, we may be told from time to time that the miracles performed by Jesus and the Apostles are not available to us….that those types of adventures will never happen to us. Why? The Bible doesn’t say this. The truth is that we have believed the enemy’s lies. The truth is that God’s power is available to us and it’s time we stood up and received it. You cannot stand against the enemy without it.

I wrote this post not to scare anyone, but simply to get us to think about what is happening and why. It bothers me that I’ve recited the Apostles’ Creed in church many, many times and stated that I supported the Catholic Church when I knew nothing of this church at the time. It’s almost as if we’re being conditioned for something. I mention these things because the Lord has shown me how deceiving our enemy truly is. Don’t assume that because your church has adopted some Catholic doctrine, that it’s ok, we’re all the same. We’re not. I can’t emphasize enough how important it is to prepare yourself spiritually for what we face. If you don’t know our Father in heaven and Jesus Christ, if you’re not full of the Holy Spirit to guide and instruct you, you will fail to resist the enemy. You will not see the mark coming and you will not be able to resist it. Don’t listen to the lies of the world that tell you not to worry, you’ll be raptured before things get bad. Don’t be deceived. Now is the time to pray to God to make you into a warrior. It’s time to come home. You’ll become someone who is feared by the enemy, because the enemy fears God’s power. You’ll be able to stand against the devil’s schemes. You’ll live a life of adventure and always know that the Lord is with you wherever you go. And when you finally leave this world, you’ll be welcomed into the Kingdom of Heaven where you’ll receive your reward. No more sickness, no more war, no more sin – just peace, love and joy in the presence of the Lord.

….and never forget that many large Protestant denominations today believe and teach the most deceiving of Catholic doctrines – that there will be a secret rapture before the prophecies in the Book of Revelation will take place at some point in the future….that there will be one evil, future world leader who controls the world during a 7 year period of tribulation and that all of the judgments of Revelation will be poured out onto the earth during these 7 years. I don’t believe that any of this is biblical. I do believe that at some point, all religion in the world will be consolidated under the Roman Church. It would make sense that this would happen gradually over time. The truth is that our spiritual enemy has been planning this for centuries…..and he’s making progress. We must check everything in the world today against God’s Word in order to know the truth.

Posted by: John Gilmore | September 21, 2006

Why does God allow misery and suffering?

When discussing God and His relationship to the world, one of the most often asked questions is this: ‘Why does He allow so much suffering and misery in this world?’ It’s a very good question. If you happen to discuss God with someone who doesn’t believe in Him, chances are that you will eventually be asked this question. A standard answer is that human beings invited sin into this world (Adam and Eve) and as a result, the world is in a fallen state. Because we’re living in a fallen world, bad things are going to happen to us. A more specific answer goes much deeper than this. In order to truly understand why God allows suffering and misery, you must begin to understand God’s character. A few months ago I was given a short article written by John Balukian that does an excellent job of answering this question. Who is John Balukian? As you will read, John was a simple man with terminal cancer who was given one last task to do before he left this world. As you will see, at first it seemed like a small thing to do. What John learned (as every Christian does) is that we’re asked to be obedient to our Creator regardless of how small or large we think the task may be. He will take care of the rest. We have no idea how our lives can impact others and God’s plan for this world – but He certainly does. Like every true man of God, John would tell you that this comes from the Lord – he is simply a servant doing what he is asked to do. This will be longer than most of my posts, but I feel strongly that the Lord has asked me to give this to you. As we near the end of this age, suffering and misery will get worse – we need to understand why.
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Dear precious reader:

Regardless of what kind of person you are, regardless of what you have not done, in God’s eyes you are extremely precious. Bring to mind right now the most vile and repulsive person you can think of. Can the same be said of that person? Is that person extremely precious in God’s eyes? Absolutely, positively! What is it that makes a person precious? Connection with God. When the Creator has free access to the creature he will re-create the creature into His own precious image.

This is a letter of introduction to the article I am enclosing. Many people have been greatly helped by this humble article, so please pass it on that others may be helped. Thank you. This material may be reprinted, copied or re-used in any form so long as the original text is not altered or abridged in any way. This is not my message, so please do not change it. This is God’s doing. Those who know me know that I have no natural abilities of this kind and there’s no way under the sun that I could possibly write an article like this.

Briefly, about myself: After losing the battle with Lymphoma, I permanently checked into this Veterans Administration Medical Center Nursing Home in Fresno, California, as a terminal cancer patient with only a short time to live. I just could not understand why god would not heal me! I had diligently studied the laws of health, healing, prayer, faith, total commitment, etc. I was anointed twice by Godly men. And, on top of all this, I had great plans to give our message to thousands of winter visitors who come each year to the warm desert areas of Arizona and California. But human plans aren’t worth anything. The sooner we all learn this, the better.

The greatest surprise I have ever had in my life and the happiest that I have ever been was after my little world fell apart and I was admitted to this Nursing Home, waiting to die. This beautiful, generous gift that God gave to me – this article He impressed me to write – marvelously turned everything around for me. After having failed Him all my life, He very kindly and graciously gives me a gift like this! My parents certainly gave me the right name. In Hebrew, the name John means “God is gracious”. God has certainly been gracious to me. After I go to my “rest”, this paper will keep right on working. When I think of how kind, how generous and gracious God is, and how He is treating me, what can I do but just cry!

It all started when my former roommate told me he was an atheist. I told Charlie that in order for a person to come to an intelligent conclusion about anything, he would have to first look at all the facts – all the evidence. I asked him what evidence he examined that brought him to such a drastic conclusion that God did not exist.

Charlie related stories of tragedies and suffering in his family and friends. Then he concluded with, “If there is a God, would He allow things like this to happen to good people?” (He stressed the word good.) I said excitedly, “Charlie, I have an answer. Just read the first chapter in this book (“Why Was Evil Permitted?), and you will see this whole thing from an entirely different perspective.” His answer was, “No, I’m an atheist and I don’t believe in life here-after.” Poor Charlie. To think that 30 minutes of reading was too much trouble for him! It reminds me of the thousands who died because they refused to just look at the uplifted serpent [Numbers chapter 21]. It was at this time I decided to write a small article showing what God is like and why He had to allow sin and suffering to devastate this world. As I started writing, it was very evident that I was receiving Divine assistance. I had no idea of God’s plan to place this paper around the world. I only wrote it to be used here in the Nursing Home.

Two hours after I started handing out the papers here in the Nursing Home, a patient came to my room with tears in his eyes and told me how touched he was by reading my paper. He asked for written permission to make copies and pass them out. He’s from Atascadero, California. A sister is sending a copy to the Braille Foundation, and if they use it, it will go around the world. My pastor’s wife is sending a copy to the Pacific Press to see if they will put it in booklet form for colporteurs to place in Medical/Dental offices, etc. Many came back for extra copies to give out. Groups are passing them out in their door to door work.

In just a matter of three weeks I have had to broaden my thinking from a small local work here in this V.A. Medical Complex to a work that goes around the world. I am absolutely overwhelmed. I never expected anything like this! God is so good to me that I can hardly stand it. People have offered to give me money for this work. I really don’t want anyone’s money until I use up all my own. Thank you.

When a person sees God as He really is, a God with such unbelievable kindness toward one who is so undeserving, then that person’s prayers change from words to tears. Then the story of Mary washing Jesus’ feet with her tears and wiping them with her hair becomes the most beautiful story in the Bible [John, chapters 11 & 12). When you realize the true sacrifice of God – His willingness to die eternally for you, and your heart constantly overflowing with love and appreciation for Him, it is then that God’s purpose of allowing sin to devastate this world has been accomplished forever.

With my warmest regards,

John Balukian

Now, Do You Believe God?

In your opinion, who is the most controversial person who ever lived? Without a shadow of a doubt, it is God, Himself. Many see God as being tender-hearted, caring, highly sympathetic toward all His creatures and they see that He is not willing that any should perish. And they see that His love and feelings for them are so deep that He willingly allowed His Son to come down from heaven and become one of us and go through terrible sufferings and insults and die for every one of us so that if we wanted to, we could live forever.

Why Didn’t God Nip This Whole Thing In The Bud?

All this is very touching; however, a serious question must be answered before this makes any sense. Why didn’t God nip this whole thing in the bud and prevent all this terrible suffering and misery to come into our world? He could have done it and done it with ease. God knew what would happen if He allowed sin to come into our world, and yet He allowed it. Why?

Many people are puzzled over this and I was too. But now that I have the answer, I can see that what God is doing makes a lot of good sense. And certainly, God is very desirous for each of us to have an intelligent understanding of religion. In writing this little paper to answer this question and others, I am well aware that many different types of minds are reading it. I must be very careful and not take anything for granted and try to write this so clearly that everyone who reads it can’t help but understand.

In the Beginning….Love

So, let’s go back to the beginning and take a look at what life was like under God’s marvelous government of love. We will see also how this terrible problem of sin began and why God, very wisely, did not nip this whole thing in the bud; but allowed it to wreak havoc in this poor world for these last 6,000 years. The Bible tells us that God is love and also His character, law and government is love. The beautiful relationship of God with His children was also one of love. But now, really, what is love?

What is love?

It was after a number of years of being a struggling, up and down Christian that I began to really understand the meaning of this vital word. Love is a small word that is used in a wide range of meanings; from the Hollywood barnyard love to the outstanding sacrifice of God on the cross. Love has deep feelings and emotions. The Apostle Paul, in 1 Corinthians 13, shares with us the beautiful and noble qualities of love. But in order to grasp a fuller understanding of this word, and how it relates to God’s government and people, let’s define love as a principle.

Illustration of a Principle

To make sure that everyone clearly understands what this word (principle) means, I’ll give an example: Remember the saying, “Do unto others as you would want them to do unto you”? It’s so easy to see the principle involved here and to understand what this word means. Say that your boss treats you harshly and unjustly. According to the principle that’s in this saying, how should you respond? Certainly not the same way he treated you. What a brilliant and beautiful idea. Think of the peace and harmony that would result from following such a simple principle!

The Principle of Love

Now, let’s define this principle that is in love and put it in one simple sentence so that no one can possibly misunderstand it. The greatest demonstration that was ever given, or could ever be given, was when God willingly suffered and died so that you and I would be able to live. We are talking about God – The majestic and awesome Creator of this whole vast universe! As if that isn’t enough to blow your mind, think on this: God was not only willing to die, but to die eternally just so that you could live eternally. (Jesus knew that He would rise up again to life after three days. But in His darkest temptation, when He cried out, “My God, my God, why hast thou forsaken me?” He did not know that he would ever live again, but He chose to save man at any price.) Dear reader, can you really grasp that? Would God die eternally just for Saddam Hussein? Absolutely! But why? Because this is exactly the type of person He is. God is love. He is this principle.

It is not difficult to see the principle in love, is it? When it came right down to choosing to save Himself or His children, He chose to save His children – and at what a terrible price! He put His children first and Himself second. So in one sentence, and in my own words, here is my definition of this principle: “Love is a principle that always puts the other person first.” What another brilliant and beautiful idea! With God and all His creatures living by this principle, no wonder heaven and the entire universe enjoyed such supreme happiness and experienced such peaceful harmony.

The Principle of Sin

But then a completely different principle raised its ugly head and the peace and harmony of the universe was shattered. In this principle, Self is put first instead of putting the other person first. It all began when Lucifer, the highest angel in heaven, wanted to become God. For him to pursue such an insane and impossible ambition, he had to first cast aside this beautiful principle of love and take hold of the principle of sin. So, we see that the principle of sin is self-seeking, selfishness, putting one’s own desires ahead of God’s desires and everyone else’s. Now we have two entirely different and directly opposite principles operating in this world and they are totally incompatible.

The Deadly Blindness of Sin

This raises a very interesting question. What could possibly be the reason why a created being would dare stand up in opposition to his Creator and actually believe that he could take over His throne? We are referring to God, the One who created this whole vast universe; the One who has unlimited power and authority; the One who knows the end from the beginning. And, on top of that, Lucifer knew that to be God, one has to have creative power – power to create something out of nothing. This same power is necessary to sustain all creation. If this power was cut off, the entire universe would immediately disintegrate, which of course, would mean his own death too. And yet Lucifer still wanted it and vigorously pursued it. Why? It just doesn’t make any sense!

Lucifer was not a dummy or a slouch. He was the most brilliant, intelligent, talented, and beautiful of all angels; and also had the highest position (right next to the throne of God). Without even realizing it, Lucifer made a fatal mistake by pushing aside God’s principle of love and taking hold of the selfish principle of sin. What happened when he did that? He actually separated himself from God. Since God is the very source of all light, truth and wisdom; all good judgment, common sense and balanced thinking; when Lucifer turned away, he lost all of this and stepped right into darkness. He was now blind. He became unreasonable and unbalanced in his thinking.

God’s Way of Keeping Pride Out of Our Hearts

If Lucifer had remembered one thing and had taken it to heart, he would not have gotten proud and possibly this whole problem of sin would not have arisen. I mentioned the noble qualities that Lucifer had; his brilliance, beauty, talents, position, etc. Where did he get these? God gave them to him. Every good thing that Lucifer had was a gift from a gracious God. A deadly problem arose when Lucifer began to think of all these beautiful and noble qualities and characteristics that he had as being his naturally rather than as precious gifts from God. That opened wide the door to pride. Pride always brings self into the picture and puts it first. This is the very principle of sin. What a lesson for us! If we would never let go of the idea that every good thing we have is a loving gift from a gracious Creator, we would shut the door to deadly pride.

Who is Telling the Truth – The Creator or the Creature?

Getting back to our original question: Why didn’t God nip this whole thing in the bud by simply putting Lucifer to death? Look at all the terrible misery He could have avoided. Wouldn’t you have done just that if you were in charge? Not if you were able to see the end from the beginning, as God is able. Suppose you were there witnessing all of this. On one side is God, whom you love and worship. Opposing God is Lucifer, whom you respect and admire. God says one thing and Lucifer says the opposite. Who are you going to believe? Remember now, you had never heard a lie before; you have no idea what sin is really like; and certainly to accept the idea that Lucifer, if given the opportunity, would go so far as to actually kill God, would be unthinkable to you!

In this situation, if you saw God kill Lucifer, what would you think? You would consider God to be totally unreasonable and unfair. In fact, you would begin being looked at as a tyrant. You would not serve God any longer because you loved and appreciated Him, but would serve Him because you became afraid of Him. God wants us always to be free, happy and trusting.

God’s Children Were Created to Fully Appreciate Him

Let’s take a closer look at God’s situation. If God had created His children to be mere robots, there would be no problem. All He would have to do would be to program their computers to never sin again. God would never have to be concerned about His children disobeying Him or rebelling. But who would want children like that? God wants His children to have the highest type of life and to never stop growing and developing. In order to have this type of children, God created us in His own image. He created us with the ability to reason things out and come to intelligent conclusions. God gave us a heart that could fully appreciate Him and spontaneously respond to His love and kindness. He made us free.

Change of Name to Fit the Character

When Lucifer rebelled, God changed his name to fit his character. Lucifer means “Light Bearer”, Satan means “Adversary”. So, from now on, I will refer to Lucifer as Satan. Satan toured the vast universe and with great piety and carelessness, he cleverly spread vicious lies about our gracious God. This brought in untold confusion and perplexity. I must remind you again that no one had ever heard a lie before. This will help you to understand why there was such serious perplexity. So we see the deep damage that Satan did by planting the seeds of disturbing suggestions and doubts in the minds of all.

Sin Shall Never Rise Up Again

God promises that after this terrible experience of sin is over, that sin shall never rise up again. Never! Is it because God will not allow it to happen again? No, that would be defeating His purpose. His children are always free to sin any time they want to, but no one will ever want to. Because all these disturbing seeds of doubt have been completely removed and absolute trust and admiration for their gracious God has been fully restored. Since God never used fear or force, what means does He use to accomplish this miraculous feat?

Truth is God’s Weapon

Let’s sharpen the focus. In Genesis 3:4, Satan contradicts God and calls Him a liar. The issue in this controversy is not who has the greater power or anything like that, but the issue is who is telling the truth. Truth is on God’s side. Satan is deathly afraid of truth because it exposes his lies and deceptions and this will definitely be the cause of his total defeat.

What is the topic we hear most about today? Isn’t it how bad everything is getting? Crime, sickness, the insane legislative policies of our politicians, etc. Who wants this type of life? It all started when Lucifer began telling lies about our gracious God. This undermined confidence in God. Before this whole problem of sin can be resolved permanently, total confidence in God must be restored. Truth restores. The truth about God’s character; how He feels about His children; the unspeakable sacrifice and suffering He is willing to go through to save us, and many other truths.

Do You Really Know What Faith Is?

I have come to the place where I don’t take anything for granted anymore. This little word, faith, for instance, is extremely important (“Righteousness by faith”, “Justification by faith”, “Salvation by faith”, etc.). If we don’t understand what this word means, then how are we going to understand how faith in God is restored? I know people who have been Christians many years who flunked this easy, simple, homely test.

Sally was driving through Death Valley in the month of August with the temperature over 120 degrees. All of a sudden, her car quits. After waiting for several tormented hours, a car pulls up with one man in it who is a total stranger. Immediately, another car stops with one man and she knows him real well. He is her pastor. Now, for Sally to best demonstrate what faith is, which car should she get into – the car of the stranger or the car of the friend? You might be thinking, “What kind of question is that? Of course she is going to get into the car of her friend.” But wait a moment. We are trying to clarify what faith is. Hebrews 11:1 says, “Faith is the substance of things hoped for, the evidence of things not seen.” So now, once again, for Sally to best demonstrate what faith is, which car shall she get into, the car of the stranger or the car of the friend?

If you hesitated to answer, chances are you don’t really know what faith is. True faith is not blind. True faith is based upon evidence. How could Sally possibly determine if the stranger could be trusted if she had no experience, no evidence by which to judge him? She couldn’t. She had ample evidence that her friend could be trusted. So in order for Sally to best demonstrate what faith is, she could get in the car of the friend. In order for God to completely gain the faith of His children, He had to give them the evidence upon which they could intelligently judge Him. He gave them mountains of evidence during these past several thousand years which came to a convincing climax upon the cross.

The Cross Tells a Convincing Story

The entire universe looked on in total shock and in complete silence as they watched their Creator dying on the cross. With His last living breath He managed to cry out, “It is finished.” Then He died. At that very moment, God came off victorious. How can that be since He is the One who died? As the universe looked on, their sorrow turned into heart-warming joy as they saw and suddenly realized the truth about God’s willingness to pay the supreme price of dying eternally for his children. This beautiful truth they witnessed with their own eyes, completely removed every trace of doubt that satan planted with the lie; that God did not have His children’s best interest at heart. The truth revealed how fantastic our gracious God is. Their hearts were so touched and filled with love and affection for their gracious God that nothing could ever change it.

Let’s go back to the beginning again and let’s say that God did nip this whole thing in the bud by putting Lucifer to death. We know that this act of God would have been totally unacceptable to you. But how about when you stood before the cross in absolute shock and watched your Creator die? Here is 4,000 years of undisputed evidence and demonstration of how far Lucifer would go and, on top of that, the demonstration of the terrible malignancy of sin. Now, you can see clearly that if God had put Lucifer to death at the beginning, you would have wholeheartedly agreed that He did the right thing. It’s too bad that God had to take the long and painful way around, but it’s the only way that His children could understand.

Sin is insanity

We need to take a closer look at sin to see what it really is. Here is another homely illustration: A scorpion wanted to get on the other side of the pond. He asked a turtle swimming by to take him over on his back. The turtle replied, “Do you think I’m crazy? You would sting me and I would die.” The scorpion said, “Do you think I’m crazy? If you died, I would die too, because I can’t swim.” The turtle thought for a moment and then said, “You’re right. Nobody would be that crazy! Get on my back and I’ll take you across.” When they were about halfway across the pond, the turtle felt a sickening sting on the back of his neck. He turned his head and said, “Why in the world did you do that?” The scorpion replied, “I just couldn’t help it, it’s my nature.”

Why would the most intelligent angel in the universe kill God, since it is God who gives Him life moment by moment? It certainly doesn’t make any sense, does it? The Bible defines sin in several ways, but my personal definition is: Sin is insanity!

A Law of the Mind

It’s a law of the mind that we will become like the one we worship and admire. It’s terribly important then that we know what kind of person our God is. Jesus warned His disciples in John 16:2-3 “Yea, the time cometh, that whosoever killeth you will think that he doeth God service. And these things will they do unto you, because they have not known the Father, nor me.” Why will these persecutors resort to violence? Because they think God is this way. God does not force anyone’s conscience. He wins hearts by his gentleness and love. What do you think of a God who created this whole vast universe; who has all this power and authority, yet He is so humble that He willingly washed twelve pairs of filthy feet when His disciples refused to do it? This appeals to me to no end. God is the most humble person in all this universe because He lives by the beautiful principle of love. God always puts the other person first and Himself second.

The true God of heaven appealed to the hearts of His rebellious children with kindness and love. He didn’t use a sword! There are millions of people who believe that the end justifies the means by using force in God’s work. This is what a band of religious fanatics had in mind when they rode into the town of ErZurum over a hundred years ago. They came to take the life of the Christian minister if he did not yield to their wishes. They were not familiar with the weapons of kindness and love. Their weapons were force and fear. They were out to force the Christians to change their beliefs.

They were highly disappointed when they learned that the minister had died. So they did the next best thing by taking the minister’s widowed wife and her three little girls to the town square. Surrounding this poor widow they all drew out their huge, wicked knives. The leader, raising his voice demanded that she renounce Christ and declare before all these people that Mohammed was the true prophet of God.

Everyone knew what would happen if she refused, and with tears they begged her to comply. Speaking in Armenian so that these men couldn’t understand, they said, “We know you love Jesus. God knows you love Him. Please, please do what they say and save your life. Think of your children!” Oh, what terrible pressure! Standing before her were her three little girls petrified with fear. The oldest girl was my mother.

The Sword Never Wins

But my Grandmother didn’t put herself first, she put her God first. She had learned the principle of love. Raising her voice and speaking in perfect Turkish, my Grandmother said, “I believe with all my heart that Jesus Christ is my Lord and Savior.” Without a moment’s hesitation they slashed her to the ground and hacked off her head. My mother’s tender mind was affected for the rest of her life. I remember while growing up, whenever my mother thought of her mother, she would cry.

The Basic Reason Why a Church Would Turn to the State for Power

What would you say would be the basic reason why a church or religious organization would turn to the state (government) for power to force others to accept their religious teachings? Is it because they don’t have power – the Holy Spirit (the power of God)? Why don’t they have the power of God? Because God uses only one kind of power – Love. His method is winning the heart, not forcing the conscience with threats and fear. God’s method of winning hearts is simply putting the other person first. God always has that person’s best interests at heart and He is willing to go through any amount of suffering and to pay any price to save that person. He is not willing that any should be lost. How can a sincere, honest person fight against that?

What Makes a Person Savable?

Just what is it that makes a person savable anyway? The Apostle Paul makes it very clear in 1 Corinthians 13 that even a person loaded with talent, doing God’s work with zeal, making tremendous sacrifices by putting all his means in the work and even going as far as giving his body to be burned is not savable if he does not have love. And it doesn’t take a rocket scientist to understand why. Love is a principle that always puts the other person first. God and all His children live by this principle. If you refuse to live by this principle, you couldn’t possibly fit in. You would be out of harmony with the entire universe.

Love is a Gift from a Gracious God

God is very reasonable and understanding. He generously gives us everything that He requires of us. We need love? He will see to it that we have it. Every good thing that we have or will need now and throughout all eternity will be given to us as a gift from a generous and gracious God. We are absolutely dependent upon God for everything and always will be.

There Are Only Two People in Religion

Now we come to the bottom line. The sharp focus is on only two persons: you and God. Oh, if I had only done this years ago I would have avoided many disappointments and discouragements. Never again am I going to allow my religion to become complicated or confusing. One to one contact with God, forming a bond and friendship that can never be broken, is actually what religion is all about. It’s just that simple. Just imagine, the very best friend you have is the One who created this whole vast universe. Wow! Can you bend your mind around that?

Another thing I find extremely helpful is to personify a text. Take Romans 6:14 for example: “For sin shall not have dominion over you: for ye are not under the law, but under grace.” I love the strong, positive, emphatic way this is put. To me, this is saying that, in no way will sin dominate me. Then it goes on to tell why. When I read this text, this is the picture that comes to my mind: I am standing before the law, which I picture as a huge giant, towering over me. I’m a sinner and condemned to die. There is absolutely nothing I can do to appease him or to escape. But the text says that I am under grace. To me, grace means that I’m being treated, not as I deserve, but with unlimited kindness and generosity. There is no such thing as grace without there being behind it a very gracious person. I see, standing nearby, this most gracious person. He says to me, “You’re in deep trouble, but I can help you. Do you want Me to help you?” I say, “Please do.” So, He steps in between me and this giant and He puts His arm around me. “There is therefore now no condemnation to them which are in Christ Jesus, who walk not after flesh, but after the spirit.” [Romans 8:11].

The Most Precious Moment of Our Life

At that precious moment, I am safe to save – I am savable. The moment that I accept God’s gracious offer to take over my life and to personally be my Savior, everything is right between God and myself and not one person in all this universe can say anything against me. The law has nothing against me now, because God has taken full responsibility for my becoming fit for heaven. God paid the full price for me by living a life without sinning and by His death, so that I can go clean and free. What a precious gift! And what a precious Savior!

How Can God Save Saddam Hussein?

Saddam Hussein has been portrayed (especially by the West) as being an exceptionally cruel national leader who would not only be willing to exterminate all the Kurds, but would enforce cruelty on his own people to achieve personal power and prestige. He has a lot of blood on his hands! (by the way, does God love Saddam Hussein as much as He loves Mother Teresa? Of course He does!) Say that the Holy Spirit is able to touch Saddam Hussein’s heart and, miraculously, he accepts God’s gracious offer. He is willing now to have God take complete charge of his life and also to take full responsibility of fitting him for heaven. Now, let’s see how God does this.

Saddam Has No Sins?

That’s exactly right! As soon as God is allowed to take over Saddam’s life (and how is this accomplished? Simply by Saddam praying and requesting that God will take over his life and really meaning it), He takes away all of Saddam’s sins. “There is therefore now no condemnation to them which are in Christ Jesus, who walk not after the flesh, but after the Spirit.” [Romans 8:1]. This text means exactly what it says. God not only takes away Saddam’s sins and completely frees him of the responsibility of all the sins he ever committed, but he graciously restores Saddam to his God-given dignity. How is this accomplished? Simply by connection – connection with God. (It’s like a branch that’s connected to the vine). It’s a precious gift from a gracious God. Every good thing we have, or ever will have through all eternity, is a gift of love from our loving Creator. Sad to say, Lucifer lost hold of this precious truth. The wonderful and noble qualities of wisdom, beauty, talents, position, etc., that he possessed, he started regarding these as his naturally, instead of precious gifts from God. We are not only seeing, but feeling, the disastrous results.

Day by day, the more Saddam walks with his God, the more thrilled he becomes as he sees the type of person God is. He sees God as a fantastic person who actually has his best interest at heart. As a national leader, Saddam always put himself first and his people second. What a contrast! And you can be sure that Satan spread enough lies about God to give the people the impression that God was totally selfish and arbitrary. As I mentioned before, truth is on God’s side. As the truth is known about God, there will be such a heart appreciation for this type of God that no one will ever want God to be any different. They will be thrilled to follow Him throughout eternity. This is why sin shall not rise up again – EVER!

One of Heaven’s Greatest Surprises

One of the greatest surprises that heaven will have for us is learning how much it costs God to get us there. Besides God paying a price on the cross that will never be fathomed, God has suffered unmerciful abuse, insults and criticisms of all kinds. He is blamed and cursed for everything. Here, at the nursing home, if the kitchen forgets to put a slab of margarine on a tray, God is cursed. God is even blamed for all the forest fires. In legal circles, it’s called “An Act of God”.

Years ago, I was working with a number of other different tradesmen in a building. Usually, on a job like this, there is a certain amount of swearing going on. But, on this particular day, it seemed that almost everyone was having a problem and God was getting blamed for it all. The cursing was so bad that I stopped my work and just listened. I thought to myself, “If there is this much cursing arising out of this one building, how much is rising out of the whole town of Paso Robles?” I had a very impressive picture of God in deep sorrow, bending over the world in loving concern. With this picture in mind, I visualized millions and millions of angry voices in every language and dialect, in every part of the world, cursing God. There is a deafening roar of curses constantly ascending up and hitting our gracious Creator right in the face.

But love is stronger than hate, and God is bent on saving us no matter what the cost; no matter how much pain He has to suffer; no matter how much He is insulted; no matter how much He is falsely accused; no matter how much He is hated and rejected. Satan would have us to believe that God doesn’t care, but the very opposite is the truth. For 6,000 years our gracious Creator has been lavishing His love upon us under such repulsive conditions. After 6,000 years of presenting all of this evidence – this mountainous amount of visual demonstration, God has one question for you: “Now do you believe me?”

Suffering is Priceless

One of the best things that ever happened to me was when I became terminally ill. When I got sick and was suffering, it made God’s suffering very real to me. I was absolutely overwhelmed that the Majesty of this whole vast universe with all His power and authority would even care about a person like me, let alone go through all that He was going through to save me. God could not reveal His love for me any more powerfully or effectively than by His sacrifice and suffering. This kind and gracious person touched my heart. My religion now is a person. My religion is a God.

Welcome Home

Do you think that you could find one person in God’s vast universe who would be willing to trade places with you, no matter what your condition or how much you are suffering? The beautiful truth is that you could not find even one person who would not be willing to trade places with you. How do I know this? I know this because God is love and love is a principle that puts the other person first. All of God’s children live by this beautiful principle of love. The entire government of God is based on this wonderful principle.

No matter who you are, no matter what kind of life you have lived here, there will be an experience for you in heaven that is one of supreme happiness and total acceptance. Whether you are looking into the eyes of your Creator or rubbing shoulders with the Holy Angels, one message will come through to you loud and clear, WELCOME HOME!!

John Balukian
V.A. Nursing Home

MEMORIAL

John Balukian went to his rest in Jesus on September 27, 1994. One of John’s favorite Bible verses can be found in 1 Thessalonians 4:16-18: “For the Lord himself shall descend from heaven with a shout, with the voice of the archangel, and with the trump of God; and the dead in Christ shall rise first: Then we which are alive and remain shall be caught up together with them in the clouds, to meet the Lord in the air; and so shall we ever be with the Lord. Wherefore comfort one another with these words.”

John’s strength and courage and hope came from a firm belief in this promise. Rest well, Friend.
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It’s hard for us to understand sometimes, but the truth is that we (human beings) invited sin into this world. God gave us a perfect world and we invited satan and sin into it. God did not create a fallen world for us, the world was originally without sin. What you see around you everyday is the result of our fateful decision – violence, death, destruction, misery, etc. We brought this misery upon ourselves. You may think that this was Adam and Eve’s fault, not yours…but we make similar choices everyday. Instead of walking the narrow path and choosing God’s will for our lives and following His paths, we instead choose our own way and choose to sin against our Creator. Fortunately for us, our Creator loves us so much that He has provided all of us a way back to Him. Regardless of what you’ve done, regardless of what is happening in the world….He loves you and wants you to know Him. There is only one way to Him, through faith that His Son Jesus gave His life for you. You do not need anything in this world to be saved. You do not need a church, a pastor, a priest or a religious ritual. True men of God can help you, guide you and teach you, but they can’t save you. The same is true of God’s church. It’s important to remain close to believers, but simply being in close proximity to God’s children will not save you. Only you can believe in God’s offer of salvation and accept it. How do you do this? You can do what I did. Pray to your Father in Heaven. Go someplace by yourself where it is quiet, fall on your knees, and tell Him that you believe that Jesus died for you, that you want to know Him, to see Him, to become what He created you to be. He will hear you. Tell Him your fears, ask Him for stronger faith, for understanding….to be more like Him. Ask Him for help against our enemy. Seek Him. If you truly want to know Him, you will find Him. Believe in the Truth that is Jesus Christ. Pray everyday…..and then listen. Pay attention to the quiet, still voice inside you, pay attention to the circumstances in your life. Expect Him to reveal Himself to you. He knew everything about you before you were ever born….your strengths and weaknesses. He will strengthen your faith, transform you and show you your true purpose….regardless of what you’ve done in your past. He will replace the sand that has been the foundation of your life with the Rock that is Jesus Christ. Your fear of this world will fade away and you will be set free. “Therefore whoever hears these sayings of Mine, and does them, I will liken him to a wise man who built his house on the rock: and the rain descended, the floods came, and the winds blew and beat on that house; and it did not fall, for it was founded on the rock. “But everyone who hears these sayings of Mine, and does not do them, will be like a foolish man who built his house on the sand: and the rain descended, the floods came, and the winds blew and beat on that house; and it fell. And great was its fall.” Mathew 7:24-27.

It’s not always easy to look past the misery in this world to His kingdom, but that’s what we must do. We must never lose the hope that exists for us. It doesn’t matter how bad things get here, our Father has prepared a place for us in Heaven….never forget this. I’m writing this post in April 2007. I don’t know when you are reading this, but I do know that the Lord has given me these words to give to you. You are reading these words because the Lord is communicating to you….specifically to you. I am simply a humble messenger, doing what I’m asked to do.

Regardless of how bad things may get in this fallen world, never forget:

“No eye has seen, no ear has heard, no mind has conceived what God has prepared for those who love him” 1 Corinthians 2:9.

Posted by: John Gilmore | September 21, 2006

Faith and Trials

In the United States today, most of us expect everything to go our way. We expect to have good jobs, plenty of money, a nice home, money saved for retirement, nice vacations, security, etc…..and we do not like or expect any type of hardship. Many teachers today also tell us that God wants to bless us, give us good things – and they only tell us one small piece of the Gospel.

What is one very effective way that God strengthens us? Trials and tribulations. We read about how God uses trials in both the old and new Testaments. We read time and again how trials strengthen the faith of the Lord’s children. It stands to reason then, that we should expect trials in our life – and know that God is in control of them and our lives.

The following is another sermon by John MacArthur. John does an excellent job of explaining how God uses trials in our life.

The Purpose of Trials
Selected Scriptures
by John MacArthur

As we begin our study tonight in James chapter 1, you might open your Bible to that wonderful section of Scripture that is filled with so much hope for those of us who go through trouble.

While you’re doing that, I want to share a letter with you. A couple of weeks ago, someone called me on the phone in our church and said, “I wonder if you could make a phone call for us to a brother in law who just had a terrible tragedy in his life.”

And I said I would be happy to do that. So I called. And when he picked up the phone, responded, I said, “Hi, this is John MacArthur in California,” he was in Colorado. And he was stunned for a moment because he had been listening to the radio and the tapes but had not met me personally, to my knowledge anyway. And he said, “I can’t believe this. I can’t believe you called me. I’m sitting here at the table writing you a letter.”

And the letter came and in the middle of the letter, right in the middle of it it says, “Wow, praise God, this is where you called me.” This is on page four of the letter. “I feel like God is telling me something.”

Six:fifteen P.M. on the sixteenth of March, 1986, the letter says this:
I would like to tell you a story that begins over a year ago. The story is far too complex for me to write in a letter, at least in all its detail. I would like to share perhaps a paragraph of it with you.

My name is Dan. I met you at Grace Church briefly and I sat four rows back, dead center on December 22, 1985, you remember? My wife was not able to come as she was ill. We have a son, Luke, age 4 and a daughter age 22 months.

In March of 1985, my wife was diagnosed as having a brain tumor in her right cerebellum. On April 3, 1985, Carolyn went into surgery and they removed the tumor along with 80 percent of her right cerebellum.

On Good Friday, April 3, 1985, things were looking good and they moved Carolyn out of the ICU into a regular room. April 5, 1985, I went home to her parents’ house around 10:30 P.M. I went in to kiss the kids good night and Sara, then 8 months old, was glassy eyed and staring off into space. I thought she was gone. The doctors at Children’s Hospital took a spinal tap and said she had Spinal Meningitis. They told me she could die, or have any number of deficiencies. It would take 24 hours to tell if she would survive.

It was then that I really lost control. I could do nothing. As my daughter lay there on an inclined crib, she had splints on her arms and one leg. She had an IV in her left foot, right hand, left hand and scalp. She was tied down with her arms spread and had three monitors on her chest.

I wept. Lord, why her? She’s so innocent. I was totally at a loss for answers. There I was trying to keep this from my wife, Carolyn, who was in another hospital. I couldn’t. Lord, what would I do?

On Easter morning, April 6, I was at Children’s, holding Sara with all the wires and IVs, sitting in a chair. And a nurse came in and told me that Sara had made it. The monitors indicated she had responded well to the antibiotics and they could take off all of the apparatus.

As you can imagine, during that time I did a lot of footwork between the two hospitals. In doing that, I was using Carolyn’s car and she listened to radio station KWBI A.M. 91, somewhere in Longmont, Colorado. That’s where I first heard you. I don’t remember the date, but you were in the series, “How to handle persecution,” from the book of Acts.

First time I heard, I had to stop the car. I was crying too hard to drive. My wife, Carolyn, courageously fought back from her surgery and even though her motor skills would never be normal, she never gave up. She was dedicated to her children and me and her Savior and Lord.

I’ve included some of her notes from the Bible study on “Kingdom Life.” And they’re in the back of the letter, her own notes, written with obviously a scrawling hand that would reflect some of the brain damage.

She was not a Bible scholar but she loved the Lord. She died May 8, 1986 in my arms, the third tumor was inoperable.

Praise God, we have a Savior who has conquered death. As I write this letter, I have wet eyes and the smell of funeral flowers fills my nostrils. I’m not writing this for sympathy. I just could not let it go any longer because I wanted you to know how much Grace To You has blessed me and my family. And I speak for those outside my family as well.

Please give my thanks to your staff at Grace To You and also to Grace Community Church. And then I love this at the end Many of your church have prayed for Carolyn and I and the family and P.S., we’re praying for you and your new building. Your friend, Dan Hummel(?)

Now there’s a man who went through a very, very wrenching emotional experience. In one sentence he said, “She died in my arms,” and the very next sentence he said, “Praise God for a Savior who has conquered death.” In the most profound of human agony, for the Christian there is great hope…there is triumph no matter how deep the trouble.

It’s all a question of perspective. The family that I mentioned to you this morning, the Romanoski(?) family, whose two daughters were killed yesterday, have been staying with Russ and Heidi Moir. I asked Russ what their attitude is and he said to me, “To be honest with you, they were rejoicing today.” Rejoicing? Over the death of two daughters in an auto accident?
“Well, they’re rejoicing because both their daughters knew Jesus Christ and the other two students with them who were spared do not know Christ.” Cause for rejoicing.

It’s perspective. Going through any trial of life for a Christian can be a joyous experience if perspective is right. Now imagine for yourself the worst trial you could possible face. Maybe for some people it might seem to be financial crisis, all your investments are lost, your life savings. For other people it might be the loss of employment, you’re fired, you have no income to support your family, you lose all your dignity. Or the announcement from the doctor that you have just received word that you’re going to have to have a triple bypass immediately. Or that you have a massive brain tumor. Or, your husband does, or your son does. Or, the word has just come over the telephone that your daughter has had a terrible car accident and has died. Or, been raped. Or your wife has been murdered by a drug addict who broke into the house. Or maybe that your child has a fatal disease and only a few days to live. And we could go on and on and on. And frankly, folks, all of those things touch us one way or another, don’t they? Because as Job put it, “Man is born into trouble as the sparks fly upward.”

And anybody who tries to create a fantasy world where everything is perfect is only setting themselves up for even a more profound sorrow. It must be anticipated. And I have to confess to you that the anticipation of the reality of sorrow and agony and trouble coming close to us, cast a sort of a shadow even over our highest joys, doesn’t it? In a sense, it mitigates even the most wonderful events of life. And maybe that’s the reason that though Jesus wept rather commonly, as Scripture records, no place in Scripture does it ever say He laughed.

Perhaps He did. But His happiness at any occasion certainly would have been offset by His overwhelming sense of sadness over sin. All of us, to some degree or another, if we think realistically know we’re going to face trouble. We’re going to have to look right in the eyes of agony at some point in our lives. And we need to understand how to face that.

I was trying to think this week as I sat in my study of what to me would be the severest trial of all trials. The most painful experience to go through. And I thought about the classic Job who lost his family and his crops and his animals and everything. And I thought about that for a while, lost all his possessions, lost all his children. And worse, he was left with a wife who didn’t understand anything. He was personally struck with disease. And that is admittedly a heavy duty trial.

But as I thought about it more, I thought of another person who in my judgment, and you may or may not agree with me, but who in my judgment probably was faced with potentially the severest trial any human being could ever endure. And the man’s name is Abraham.

Turn with me for a moment back to Genesis 22. I really wanted to get into James but I just got to thinking about this and felt that perhaps this would give us a very good perspective. I think what God put Abraham through is unquestionably the most unimaginable test that anyone was ever given.

In Genesis 22 verse 1, it says, “It came to pass after these things that God did test Abraham.” This is a peirasmos, folks. This is a trial for Abraham. This is a test for Abraham. He was faced with the severest trial that is imaginable. God did test Abraham.

“He said to him, Abraham, He said, Behold, here I am. And He said, Take now your son…notice the emphasis…your only Isaac whom you love.” Almost as if God is rubbing it in. Not just your son, but your only son. Not just your only son but the one you love. “And go into the land of Moriah and offer him there for a burnt offering upon one of the mountains which I will tell you about.” It’s incredible. I want to sacrifice out of you and I want a human sacrifice, I want your son, I want you to go there, I want you to kill him as an offering to Me.

This did not fit Abraham’s theology. There was no history in the covenant of God of human sacrifice. That was a pagan thing. No child of God would ever offer his own in human sacrifice. Furthermore, this was the son of promise. God had touched the dead loins of Abraham and allowed him to bring to a consummation, a relationship with his wife Sarah who was also dry in her own loins and produce a son, a son of the covenant, a son of promise, a son of hope, a son of Sarah who was barren all her life.

Why would God call for human sacrifice when He never had called for human sacrifice before? And to do so would be the antithesis of everything Abraham knew to be true about God. Why would God go to great lengths to enable a man and a woman nearing 100 years of age who had been barren all their life to produce a son then ask the son be killed? Why would God make a promise to Abraham that he would be the father of nations and the seed that would come out of his loins would number as the sands of the sea and the stars of the heaven and then kill the only child he had?

The whole idea was absolutely bizarre. All hope of progeny in old Abraham would die. All hope of promise would die. Abraham would be killing his love, killing God’s promises, striking a blow at God’s Word, striking a blow at the character of God, striking a blow at the covenant faithfulness of God, killing the promise of God and cutting off the line of Messiah. Absolutely inconceivable.

And what makes it the severest trial ever is not that Isaac was to die, but that Abraham was to kill him with his own hand. Incredible. It’s one thing to have the one you love die, it’s something else to be told to kill that person. An unthinkable trial. A trial that made sense no way, not theologically, not in terms of the nature of God, not in terms of the plan of redemption, not in terms of God’s Word, not in terms of His love or of Abraham’s love for Isaac. If there ever was anything that God commanded to man to do that deserved a rather lengthy argument, this was it. And we would have understood if Abraham had said, “Look, God, could You explain this, please? This makes no sense. I can’t do it.”

Notice his response. Verse 3, “And Abraham rose up early in the morning and saddled his ass and took two of his young men with him and Isaac his son.” What? In the morning he got ready to leave, to go. “And he cut the wood.” He had to cut his own wood to put his son on to burn him to death. And he rose up, and he went to the place which God told him to go.

Amazing man, absolutely amazing man…no questioning, no delay, no argument, no dispute, no reaction. Three days later, verse 4, “Abraham lifted up his eyes and saw the place afar off. And Abraham said to his young men,” he had some people going along with him, “abide here with the ass and I and the lad will go yonder and worship.” Watch this one, “And come again to you.” You ought to underline that. I and the lad will go and worship and we’ll be back. Here’s the secret. Keep that in mind. He said we’ll both come back.

“And Abraham took the wood of the burnt offering, laid it on Isaac his son. He took the fire in his hand and a knife and they went both of them together. And Isaac spoke to Abraham his father and said, My father. He said, Here I am, my son. He said, Behold the fire and the wood but where is the lamb for a burnt offering?” O my, this is agonizing…a trusting son who doesn’t know what’s going on, says in such a loving way, and gently to his father about this act of worship, “Where is the lamb? And Abraham said, My son, God will provide Himself a lamb for a burnt offering. So they went both of them together.” And you ought to underline that. You see, I believe down deep in Abraham’s heart, he knew God had something in mind that was consistent with God’s character and consistent with God’s covenant. I don’t know that he knew what it was specifically, but I think he had a good idea.
“And they came to the place of which God had told him and Abraham built an altar there.” He had to build the altar. “Laid the wood in order, bound Isaac his son.” No struggle on Isaac’s part either. “Tied him up, laid him on the altar upon the wood. Abraham stretched forth his hand, took the knife to slay his son.” You can stop at that point.

Unbelievable. Do you understand by reading that story what it means when it says “Abraham believed God and it was counted to him for righteousness?” Do you understand why the New Testament says that Abraham is the father of the faithful? He is the greatest single model of trust in God the Bible knows anything about apart from Christ. The man is at the point of plunging the knife into the breast of his own son. An unthinkable thing. What a trial. Contradictory, indescribable, painful, murderous, inconsistent with everything he knew about God…and yet he is submissive, he is obedient, he will worship at any cost. And God took Abraham’s willingness for performance. God judged him on his willingness and didn’t make him carry out the act.

Verse 11, “The angel of the Lord called unto him out of heaven and said, Abraham, Abraham. And he said, Here I am. And he said, Lay not your hand on the lad, neither do anything unto him for now I know that you fear God.” Guess what, this was a test and Abraham…what?…passed. He passed. He would obey the Word of God no matter what. “You have not withheld your son, your only son from Me.” Umph…
Now Abraham shows us that we might be tested in things very near to us. We might be tested in things very dear to us like a son or a daughter, or a husband or a wife or a friend. We may have to offer up our own Isaac, give the ones we love most over to the Lord, not only in death but maybe in life. Maybe by letting them go the way that God wants them to go, not necessarily the way we want them to go. You see, when Abraham was willing to give up Isaac, no matter how much Isaac meant to him in every way, he showed by being willing to give him up…watch this…that he had the right to keep him. See that? He wasn’t possessive. He would release him to God’s will. Why? Because he would do anything God asked him to do.

Now we all have a lot of trials in life, but I can’t ever imagine a trial like that. I can’t imagine what I would do if God told me to do that….I can’t imagine what I would go through. But I think we can conclude from this that the more excellent or the more difficult the obedience, the more excellent the obedience. And the more difficult the obedience, the more self denial is inherent in it. So here you have an obedience that takes tremendous self denial and therefore is the most excellent. Abraham passed the test. He says, “Now I know you fear God.” In other words, you truly reverence God at any cost. What a trial.

The commentary on this trial of Abraham is given in the eleventh chapter of Hebrews. Would you look there for just a moment? In Hebrews chapter 11 and verse 17, how did Abraham do this? How could he bring himself to this? Hebrews 11:17 tells us very clearly, the first two words of verse 17 tell the whole story, “By…what?…faith Abraham…and here it comes again, you ought to underline it…when he was tested.” This was a test. I think about that on the radio. The other day I was driving in to the church and the little beep came on and said, “This is a test.” And I thought about Abraham. God was saying, “Beep…this is a test. Beep…the test has just been concluded.” This is a test. “And when he was tested, he offered up Isaac and he that had received the promises offered up his only begotten son, of whom it was said, In Isaac shall thy seed be called.”
How could he do that? Here it comes…here’s the key, verse 19, “Accounting, or taking note of the fact, that God was able to raise him up even from…what?…the dead.” You know why he was willing to do that? Because he believed God could raise the dead. Had he ever seen the dead raised? Not to my knowledge, but he believed God could raise the dead. What he really believed was this, that God was so true to His Word that if He made a promise, He would even raise the dead to keep it. Tremendous faith.

Now I don’t want to read too much into the story but it just may be that Abraham was a little disappointed when he wasn’t allowed to take his son’s life because he would like to have seen a resurrection. We don’t know that. But he believed, if need be, God would raise him from the dead.

Now what does that tell us? It tells us that a man can go through the severest imaginable trial of life if he really trusts God. And if he believes that God is on the throne, that God will keep His promise, that God never makes mistakes, that God always fulfills His word and that God will accomplish His purposes, it is that kind of faith that passes the test. When Abraham was put through the peirasmos, when he was tried or tested, he passed. And I say again, is it any wonder, is it any wonder that this man is the single greatest human model of faith? In Galatians 3 verse 7, “Know ye therefore that they who are of faith are the sons of Abraham.” Anybody who lives by faith in God is in a spiritual sense a son of Abraham. He is the father of the faithful. He is the model of faith.

Verse 9 says, “They who are of faith are blessed with faithful Abraham.” He knew that through his loins the nations of the world would be blessed. And he knew God kept His word and God would bring it to pass.

Now, beloved, we have to realize that God is going to allow us to go through tests. And the thing that sustains us in the midst of that is our trust in God, our faith that God is working all things out for His own holy purpose. I know we dream of worldly ease, and we like to create a perfect environment, we want to have absolute comfort. We want to get all the rough spots out of life. We want to make sure everything is perfectly settled. Frankly, I’ve never known such a moment in my life. Every once in a while I think there’s one there and I find out there isn’t.
But the fact that we have temporary rest and temporary ease sort of fools us into thinking we might find a permanent exemption when that is not the case. I remember the words of the psalmist, you remember Psalm 30 verse 6, he said, “In my prosperity I said I shall never be moved.” Implied, but I was wrong. “When I was fat, I thought it would always be like this.” And you can live in a fool’s paradise if you want, never forecasting any trouble, promising yourself ease. But that isn’t what Christ said. He said, “Watch and pray that you enter not into peirasmos, trials.” Watch, look for trials, pray, ask for strength. Watch and pray.

I was reading, as I often enjoy doing, the works of Thomas Manton, a marvelous Puritan writer. And I found one line in some of the things I was reading this week that stuck in my mind. He said this, “God had one Son without sin, but no son without a cross.” It just goes with the territory. We’re going to have trials. Psalm 23 says, “Yea, though I walk through the valley of the shadow of death, I will fear no evil for Thou art with me.” Trials will come, the confidence is in the presence of God.

Now, let me talk a little bit more by way of introduction and I..as I said, I wanted to get into the text itself but so many things came into my mind this week that probably should have been covered in the introduction. So if you’ll indulge me a bit.

Trials can come to us through several means and with several purposes in mind. Let me just suggest some to you, all right? First of all, trials come to test the strength of our faith. And we really did get into that last week, I just want to touch this one. Trials come to test the strength of our faith. There’s a great illustration of this in 2 Chronicles 32:31, you don’t need to look it up, I’ll quote that portion of it. It relates to Hezekiah who was king and of Hezekiah it says this, listen, “God left him to test him that he might know all that was in his heart.” Did you get that? God left him to test him that he might know all that was in his heart.

That who might know? Well, not God. God didn’t need to know by testing what was in Hezekiah’s heart. He knew by omniscience, right? Does God have to test you to find out what’s in your heart? No. God doesn’t have to test any of us to find out what’s in our heart, God tests us so we can find out.

In other words, He assists us in doing that spiritual inventory. He assists us in self examination. I need to know and you need to know the strength of our faith. And so, God brings trials into our lives to demonstrate to us the strength or weakness of our faith. If you’re right now going through a severe trial, it is revealing to you the strength or weakness of your faith, isn’t it? If you’re shaking your fist at God, if you’re wondering why it’s happening, if you’re fretting all the time and worrying, if you’re in anxiety from morning till night, there’s a good indication that you have a weak faith.

If, on the other hand, you’re going through a trial and you find yourself resting in the Lord, having placed it into His care, letting Him bear the burden of it, and going on your way rejoicing as best you can in a difficult situation, waiting for God to show you the way out, then you are seeing for yourself that you possess a strength of faith.

So, in one sense then, we ought to be thankful for trials because they assist us in the inventory of our own faith. That’s very helpful. I always want to know where my faith is so that it can be stronger. For the stronger my faith is the more likely I am to be useful to God.

When Habakkuk was going through the mystery of his own situation in the devastating promise that the Chaldeans were going to come and wipe out his people, in spite of everything he said, “Even if the fig tree doesn’t blossom, and the fruit is not in the vines and the labor of the olive fails and the fields yield no food and the flocks are cut off from the fold and there’s no herd in the stalls,” in other words, if everything that I know of as normative in life ceases, “Yet will I rejoice in the Lord, I will joy in the God of my salvation, the Lord God is my strength and He will make my feet like mountain goat’s feet and make me walk upon my high places.”
And then at the end he says, “To the chief singer on my stringed instruments, this is praise, sing it.” In the midst of an absolutely unsolvable mystery, his trust never wavered. He learned through that the strength of his faith.

And so one of the purposes of testing is to reveal to you and to me the strength of our faith so that we can move along the path to greater strength. Job was tested. As a result of his testing in chapter 42, that familiar text, he says, “I had heard of Thee,” speaking of God, “with the hearing of mine ear, now my eyes seeth Thee and I repent, I abhor myself, I repent in dust and ashes.” In other words, he said I want to confess my sin. Lord, I have never really seen You the way I see You now. And I realize that some of the things I thought about You and said about You and felt about You were sinful. Lord, my faith in its weakness has been revealed. So trials come as a test to the strength of our faith.

Secondly, we must recognize that trials come to humble us. They come to remind us not to think more confidently of our spiritual strength than we should. It’s closely connected to the first one, but a little different. They come not only to show us our strength, but they come to humble us. Lest we think that we are more strong spiritually than we are.

This is illustrated, I think, perhaps as graphically as anywhere in Scripture in the wonderful testimony of Paul in 2 Corinthians 12, you know it. He says in verse 7, “And lest I should be exalted above measure.” In other words, lest I should think more highly of myself than I ought to think because of the abundance of the revelations. And to be caught up into the third heaven…and all of the things that Paul was able to do in the power of the Spirit, miracles and signs and wonders and mighty deeds and revelations coming out of him from God. And through all of these things, he could well have been exalted in his own mind. So lest I should be exalted above measure through the abundance of the revelations, there was given to me a thorn in the flesh to buffet me, to just beat me up all the time, lest I should be exalted above measure.

And we must realize that God allows trials in our lives, especially when we are blessed in places of spiritual service, to keep us humble, lest we think more confidently of our spiritual strength than we should and start to feel that we’re invincible.

There’s a third reason as I thought these things through, and these are really my own reflections, trying to look at it from the biblical and the personal viewpoint. I believe the Lord brings trials in our life also to wean us from worldly things…to wean us away from worldly things. Have you found that maybe the older you’ve gotten and the more things you’ve accumulated, the more furniture or cars or houses or bank accounts or whatever, the more success you may have had, the more worldly things you’ve done, you’ve been here, you’ve been there, you’ve traveled, you’ve seen this, you’ve seen that, have you noticed that as that has gone on in your life, those things tend to have less and less significance? There was a time when you thought that they were the most desirable things in life and now you no longer feel that because they have not been able to deal with the real issues of life? They don’t really solve deep problems, great anxieties, hurts.

And when trials come into your life and you reach out for all those worldly things and they make no difference, and they mean absolutely nothing, that trial is weaning you off of those things. Because it is demonstrating their utter inability to solve any problem…or to provide for you any real resource in a time of stress. We need to be weaned away.

Philip, you know, in John 6, he comes to Jesus and he says, “Boy, how we going to get bread to feed these people?” He’s looking at things from a worldly viewpoint. “How…where we…there’s no stores around here. And there’s not enough bread anyway. We’ve got a multitude here, a massive crowd. How are we going to get food for 5,000 men plus women and children?” And so he says, “Well, Philip, you tell Me, where are we going to buy bread?” And it says in verse 6, “And this He said to test him.” He wanted to find out whether Philip looked to worldly resources. And, of course, he did. But it wasn’t any good at that point, and the Lord then created a meal and very quickly weaned Philip off the worldly things and satisfied him with the spiritual things.

I think about Moses, you remember in chapter 11 of Hebrews verses 24 to 26? He had been raised in Pharaoh’s house. He had been brought up as a prince in Egypt. For 40 years he was educated. He was literally in line in the Pharaoh’s family for prominence. He had reached the apex of Egyptian society which was at the height of the world. All the education, all the money, all the prestige, all the honor, all the success, all the comfort was there in his hands. But he considered the reproach of Christ, the Lord’s anointed, greater riches than the treasures of Egypt. See, he had gotten his eyes off all of that and he began to be concerned about the trial of his people. And the Lord used that trial to wean him off of worldly things. Trials will do that.

There’s a fourth, I think, purpose in trials. I think they call us to what we could an eternal hope. Trials in life, I don’t know how they work with you but they work this way with me, trials in my life tend to make me want to go to heaven. Have you noticed that? That’s what I’m saying. I don’t want to make it too difficult, it’s pretty simple. They call us to an eternal hope. Like the dear man who wrote me the letter and said she died in my arms, praise the Lord for a Savior who conquered death. All of a sudden for him, heaven is sweeter than it’s ever been. Or the little family that lost two daughters, heaven is sweeter than it’s ever been. And they have a new…what should I say?…a new disinterest in the passing world, wouldn’t you say that if you’ve lost a loved one? If the most precious people in your life and the most precious person in your life, the Lord Jesus Christ, and if the most precious possessions in your life have been laid away as treasure in heaven, you’re going to have a very very disengaged relationship with this passing world.

So trials…trials tend to show us the bankruptcy of human resources and wean us off the world and sort of settle us on the heavenly hope. In Romans 8, among many scriptures that could be noted, we just support that thought, in Romans chapter 8 it says, “The Spirit bears witness with our spirit that we are children of God, and if children, then heirs, heirs of God, joint heirs with Christ. If so be that we suffer with Him, we may also be glorified together. And I reckon, or I count that the sufferings of this present time are not worthy to be compared with the glory which shall be revealed in us.” As I go through suffering, Paul says, I just get more and more hungry for glory. “And I see the whole creation groaning and waiting for the hope to be realized, waiting for the glorious…verse 21…liberation of the children of God.” And then in verse 24, or 23, “We are groaning, waiting for the redemption of our body,” verse 24, “we are saved in hope.”

So we go through trials. Trials give us a greater affection for that which is eternal. They help us long for the eternal city. They set our affections on things above. That’s a very important spiritual thing. They cause us to think on things divine, things heavenly. And that’s what Paul said in 2 Corinthians 4:16, “For which cause we faint not, for though our outward man perish, the inward man is renewed day by day and our light affliction which is but for a moment works for us a far more exceeding and eternal weight of glory.” And then he says this, “While we look not at the things which are seen, but at the things which are not seen. For the things which are seen are temporal, but the things which are not seen are eternal.”

How did he get that kind of attitude? Oh, it’s very easy. Just go back to verse 8, “We’re troubled on every side. We’re perplexed. We’re persecuted. We always bear in our body the dying of Jesus Christ.” Verse 12, “Death works in us.” He’s going through so much trouble, it’s little wonder he doesn’t like the world, he’d rather be in glory. So you see, trials have a very, very helpful purpose. They test the strength of our faith. They humble us, lest we think more confidently of our spiritual strength than we should. They wean us off of worldly things. And they call us a heavenly hope.

Fifthly, trials also serve a very important purpose because they reveal what we really love. They reveal what we really love. Could anything have been dearer to Abraham than Isaac? Anything? It’s questionable that anything could be dearer to him than Isaac…anything in this world, certainly God was dearer to him than Isaac. But that was the test, to find out did he love Isaac more than he loved God? Or did he love God more than he loved Isaac? That’s the test. You see, trials will reveal what you really love, by how you react. You see, if you supremely love God, you’re going to say, “Thank You, God, for what You’re accomplishing through this. Help me to see that and give You glory though You’re allowing this to happen.”

But if you really love self more than God, you’re going to say, “God, why do You do this?” And you’re going to be irate and you’re going to be upset and you’re going to be bitter and you’re going to be full of anxiety. You see, there’s a sense in which if anything is dearer to you than God, then He has to have it. He’s got to remove it. So in my own life, I just want to make sure nothing is dearer to me than the Lord because I don’t want Him to remove it…not that He always does.

I was thinking about this and reading back in the Pentateuch a little bit. I came to Deuteronomy chapter 13, verse 3, “Thou shalt not hearken to the words of that prophet or that dreamer of dreams.” This would be a false prophet. “For the Lord your God…look at this…tests you to know whether you love the Lord your God with all your heart and with all your soul.” Wow, the Lord is testing you to see who you really love, whether you love Him with all your heart and all your soul. In Luke 14:26, “If any man come to Me and hate not his father and mother and wife and children and brethren and sisters, yea and his own life, also, he cannot be…what?…My disciple. And whosoever doesn’t bear his cross and come after Me cannot be My disciple.”

Now what in the world is He saying? Is He literally saying that it’s a Christian thing to hate everybody including yourself? No, what He means by that is if you do not love God to the degree that you willingly if necessary cut yourself off from father, mother, wife, children, brethren, sister, and your own life, then you don’t love God supremely. You’re not worthy to be His disciple.

Well, what do you mean cut off? We mean by that this, that you will do the will of God first and foremost, no matter what appeals those others make to you. No matter what appeal your father might make or your mother, or your wife or your child, or your brother or your sister, or your own flesh, you will do the will of God no matter what appeals are being made because therein lies your supreme love.
God wanted, in the case of Abraham, to let Abraham find out and all of us find out, who Abraham loved most. He said to him, “Isaac, your only son whom you love.” Abraham passed the test. Whom did Abraham love most? God. And that’s the value of the trial. Abraham found out he loved God most and everybody found out that. That’s so important to know. When you go through a trial, find out what it reveals about your love.

There’s a sixth purpose in trials that really is very, very helpful, and that is this, trials teach us to value the blessing of God. They teach us to value the blessing of God. Reason…reason teaches us to value the world. Sense, feeling tells us to value pleasure. Faith tells us to value God’s Word, God’s Word and God’s favor, God’s blessing.

Reason says grab what you can grab in the world and go. Sense and feeling says find pleasure at any price. Faith says obey the Word of God and be blessed. See, trials teach us the blessing of obedience. In the midst of a trial, we obey and are blessed. That’s what they are intended to teach. They show us that obedience at all costs brings the blessing of God. The psalmist says in Psalm 63:3, and this out of personal experience, “Because Thy loving kindness is better than life, my lips shall praise Thee.” God, I have seen Your loving kindness, and it’s the best thing there is…the best thing there is.

Jesus is the perfect example of this in Hebrews 5, in the days of His flesh, He offered up prayers, supplications, with strong crying and tears unto Him that was able to save Him from death. Jesus going through the trial in the garden, that’s what’s being pictured there. And He was sweating, as it were, great drops of blood, weeping and crying out to God, deliver Him. And He was heard in that He feared. And though He were a Son and a beloved one at that, yet He learned obedience by the things He suffered. And being made perfect, He became the author of eternal salvation to all them that obey Him, through…watch this…through suffering, He was obedient and God exalted Him.

Philippians 2 puts it another way, “He was humbled, took upon Him the form of a man, offered Himself in death and God highly exalted Him.”

Trials come to put us through suffering that we may obey in the suffering and then receive the full blessing of God. And I would say that when you go through a trial, if you learn to obey God, you will experience the exhilaration of His blessing. That’s His promise.

Let me give you two others that are purposes of suffering. Number seven, suffering comes…and this is a very, very valuable purpose…suffering comes to enable us to help others in their suffering. Sometimes when suffering comes, it may have no more purpose than to make us better able to assist others in their own suffering. I think of that in regard to the twenty second chapter of Luke where Jesus says to Peter, “And the Lord said, Simon, Simon, behold, Satan’s desired to have you that he may sift you as wheat.” Satan’s going to take you and shake you. “And I’ve prayed for you that your faith fail not.” Now watch this, “And when you are turned around,” when you come through that thing, He says, “strengthen your brethren.” There you go. A wonderful purpose, that’s like Jesus in Hebrews chapter 4, Hebrews chapter 2 also, who becomes a faithful merciful high priest, able to help those who come to Him because He has been through every trial we’ve been through, right? That’s what makes Him a merciful faithful high priest.

So, we go through trials for the purpose of being able to help others. How wonderful…how wonderful that God allows us to learn by experience to instruct others.

And then finally, the eighth, and this leads us right into the passage…we’ll have to wait a week, but eighth, trials come to develop enduring strength for greater usefulness. They come to develop enduring strength for greater usefulness. Again, Thomas Manton said, “While all things are quite and comfortable, we live by sense rather than faith. But the worth of a soldier is never known in times of peace,” end quote.

That’s right. The worth of a soldier is never known in times of peace. God has His purpose in trial. And what it is to do is to give us greater strength. As you go through one trial, you’re spiritual muscles are exercised, you’re stronger for the next one. That means you can face a greater foe. That means you’re more useful. You go through another trial, and another trial and another trial and all those are strengthening, strengthening, strengthening until now your usefulness is on the increase, your endurance makes you more useful. And then the more useful you are, the more used you are and the more used you are, the more you accomplish in the power of the Spirit for the glory of God.

So, let me sum it up. What is God’s purpose as He tests us? First, to test the strength of our faith that we might know where our strength is, or isn’t. Secondly, to humble us, lest we think more confidently of our spiritual strength than we should. Thirdly, to wean us away from worldly things. Fourthly, to call us to a heavenly hope so that we live in the above and not in the below. Fifthly, to reveal what we really love. Sixthly, to teach us to value the blessing of God and to appreciate it as it comes to us out of the times of suffering. Seventh, to enable us to help others in their trial, to bear one another’s burdens. And eighth, to develop enduring strength for greater usefulness so that God can thrust us into greater places of ministry and effectiveness.

Now aren’t these all worthwhile purposes? All of these fit into the plan of God by His grace. But the question still lingers in your mind, as it does in mine…Fine, they’re going to come…let’s go back to James 1 for just a closing thought…it says they’re going to come, the testing of your faith, it’s going to come, verse 3. Verse 12, “Blessed is the man that endures the testing, after he’s tried, he’s going to be rewarded.” They’re going to come, there’s no way to avoid them.

And we might say, “I know they’re going to come and I know all of these things are God’s purposes in them and He wants to accomplish all of this. I can buy into that. But it still doesn’t answer the question: how do I get through it in the middle of it? How do I make it through? It’s fine to have all this in place on a list in my sermon notes, how do I get through that trial?” And that’s where James 1:2 to 12 really speak to the heart.

First of all, it takes a joyous attitude. The first means to persevering in a trial is a joyous attitude. “My brethren, count it all joy…” The second is an understanding mind, “Knowing this…” that this test is producing something. The third is a submissive will, “Let patience have its perfect work.” In other words, let it happen because God is at work. The fourth, in verses 5 to 8, is a believing heart. Ask God for what you need. And ask, verse 6 says, in…what?…in faith. You have to have a believing heart to believe that God has a purpose and that He will supply everything you need for that trial…a believing heart.

And finally, in verses 9 to 11, a humble spirit…a humble spirit. You persevere through trials with a joyous attitude, an understanding mind, a submissive will, a believing heart and a humble spirit. Now next time we’re going to look at those final two…a believing heart and a humble spirit. I just wanted to set it up and I want you to notice, we’re going to look at some very, very exciting truth where it talks about asking of God for wisdom, where it talks about asking in faith, never wavering. It talks about a double minded man and how that man forfeits anything from God. And then we’re going to look at that whole area of a humble spirit and what part that plays in endurance.

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Posted by: John Gilmore | September 21, 2006

A Servant of the Lord – Isaiah 49

Anyone who serves the Lord goes through tough times. Hardship is not something that should surprise us in this world. If you’re going to do great things for God – you’re going to go through great trials. This is how you become a ‘polished arrow’ in the verses below. This is how God molds you into His image – this is how He instills His character in you. This is how He prepares you to face our enemy and all of his schemes.

There have been times over the past 4 years where I became so tired and frustrated with my circumstances – I wanted to give up. I was tired of being broke and struggling to pay bills. I was tired of not being able to do all of the things I wanted to do. To be honest – I was tired of being tested – tired of the trials – tired of having the burden of knowing what was coming for us – tired of battling our enemy.

I wanted to walk away.

I argued with God.

Why is this happening to me? I’ve done what you’ve asked and it has led me to financial ruin!

I felt like God was asking me to run the race – with a broken leg.

I wanted to stop analyzing the world’s economic system and what the global elite are doing to the world. Most of the people in the world worship the world and the things in it – let them reap what they have sown. I’m tired of telling people the truth – when they aren’t interested. They are doomed – and I want out of here.

I felt like Job wrapped in sackcloth – sitting on a pile of ashes – wondering why this was happening to me – if I’m one of the good guys.

I think every person who ever served the Lord – has had similar thoughts and feelings about their circumstances and what they have been asked to do. I also think that the Lord let’s us vent at times. This world is hard – which is why our trials are tough – which is why the ‘narrow path’ is the most difficult path to take in this world – which is why few choose to follow Jesus. It’s not easy – and it never will be.

Although I have struggled financially – I’ve somehow always managed to get by. When I thought that no one was listening – I would get an email from someone who was encouraged by what I’ve written.

I rarely received what I wanted – but I have always received what I needed. Remember this.

There have been times when I simply needed something to lift me up. I needed a word from my Creator to let me know I was still on the right path.

Today – he gave me Isaiah 49. (Summer 2009)
______________________________________
Isaiah 49

The Servant of the LORD

1 Listen to me, you islands;

hear this, you distant nations:

Before I was born the LORD called me;

from my birth he has made mention of my name.

2 He made my mouth like a sharpened sword,

in the shadow of his hand he hid me;

he made me into a polished arrow

and concealed me in his quiver.

3 He said to me, “You are my servant,

Israel, in whom I will display my splendor.”

4 But I said, “I have labored to no purpose;

I have spent my strength in vain and for nothing.

Yet what is due me is in the LORD’s hand,

and my reward is with my God.”

5 And now the LORD says—

he who formed me in the womb to be his servant

to bring Jacob back to him

and gather Israel to himself,

for I am honored in the eyes of the LORD

and my God has been my strength-

6 he says:

“It is too small a thing for you to be my servant

to restore the tribes of Jacob

and bring back those of Israel I have kept.

I will also make you a light for the Gentiles,

that you may bring my salvation to the ends of the earth.”

7 This is what the LORD says—

the Redeemer and Holy One of Israel—

to him who was despised and abhorred by the nation,

to the servant of rulers:

“Kings will see you and rise up,

princes will see and bow down,

because of the LORD, who is faithful,

the Holy One of Israel, who has chosen you.”

Posted by: John Gilmore | September 20, 2006

Signs of the Times – Part 1

We have discussed many Biblical prophecies relating to end time events. Most of our discussions have centered on the antichrist, the beasts and the Book of Revelation. In this post, we’re going to take a look at other verses in the Bible that give us clues to the time in which we live. I believe that we’re given many clues that we can apply to today’s world. For me, it has become clear that we are on the edge of passing into the final stages before Christ’s return at the end of this age. We’re going to see the formation of a worldwide political ‘beast’. We’re going to see the Roman Catholic Church become a ‘beast’ once again. We will see increasing climate change that results in more severe storms, drought and famine. Wars will become even more intense. During all of this, we will also see an increase in the persecution of God’s saints. Why does God reveal these things to us? He has given us these clues so that we will not be deceived by the world. Learn the truth of what is happening and why. Jesus told us these things must happen, but to endure until the end. Focus on God’s kingdom. If you’re reading this because an event has taken place that has caused widespread fear, ask yourself why you could not see it coming. I have spoken with many true Christians who know, as I do, that the U.S. cannot continue on its present course without God’s correction. They may not have received a specific word from the Lord on judgment, but they know God’s Word and they know what happens when a nation refuses to heed the Lord’s warnings. They know that there are only two paths from here – our nation repents and returns to the Lord or we do not change and the Lord corrects us. If the things happening in the world have caught you unaware, remember what Jesus told us in Revelation chapter 3. As I’ve mentioned before, many of us are members of the church of Laodicea.

“To the angel of the church in Laodicea write: These are the words of the Amen, the faithful and true witness, the ruler of God’s creation. I know your deeds, that you are neither cold nor hot. I wish you were either one or the other! So, because you are lukewarm—neither hot nor cold—I am about to spit you out of my mouth. You say, ‘I am rich; I have acquired wealth and do not need a thing.’ But you do not realize that you are wretched, pitiful, poor, blind and naked. I counsel you to buy from me gold refined in the fire, so you can become rich; and white clothes to wear, so you can cover your shameful nakedness; and salve to put on your eyes, so you can see. Those whom I love I rebuke and discipline. So be earnest, and repent. Here I am! I stand at the door and knock. If anyone hears my voice and opens the door, I will come in and eat with him, and he with me. To him who overcomes, I will give the right to sit with me on my throne, just as I overcame and sat down with my Father on his throne. He who has an ear, let him hear what the Spirit says to the churches.” (Revelation 3:14-22)

Step back and think about your spiritual life. Are you hot or cold or lukewarm? The truth is that many of us today are lukewarm. Many of us are wealthy and live comfortable lives, but are spiritually poor….and therefore spiritually blind. Many of us in the church cannot hear the Lord. Many of us are not following His will. It’s time for us to change.

Although I believe that our generation is the church of Laodicea and is receiving a warning from Jesus in the above verses, I also believe that He is giving us words of encouragement in the following verses:

“I want you to know how much I am struggling for you and for those at Laodicea, and for all who have not met me personally. My purpose is that they may be encouraged in heart and united in love, so that they may have the full riches of complete understanding, in order that they may know the mystery of God, namely, Christ, in whom are hidden all the treasures of wisdom and knowledge. I tell you this so that no one may deceive you by fine-sounding arguments. For though I am absent from you in body, I am present with you in spirit and delight to see how orderly you are and how firm your faith in Christ is. So then, just as you received Christ Jesus as Lord, continue to live in him, rooted and built up in him, strengthened in the faith as you were taught, and overflowing with thankfulness. See to it that no one takes you captive through hollow and deceptive philosophy, which depends on human tradition and the basic principles of this world rather than on Christ.” (Colossians 2:1-8)

Let’s start our discussion of the biblical signs present in our world today by looking at the Book of Mathew, chapter 24. This is the chapter where Jesus tells us about the signs of the end of this age:

“Jesus left the temple and was walking away when his disciples came up to him to call his attention to its buildings. “Do you see all these things?” he asked. “I tell you the truth, not one stone here will be left on another; every one will be thrown down.” As Jesus was sitting on the Mount of Olives, the disciples came to him privately. “Tell us,” they said, “when will this happen, and what will be the sign of your coming and of the end of the age?” Jesus answered: “Watch out that no one deceives you. For many will come in my name, claiming, ‘I am the Christ,’ and will deceive many. You will hear of wars and rumors of wars, but see to it that you are not alarmed. Such things must happen, but the end is still to come. Nation will rise against nation, and kingdom against kingdom. There will be famines and earthquakes in various places. All these are the beginning of birth pains.” (Mathew 24:1-8)

This chapter begins with Jesus walking in Jerusalem. He starts by telling his disciples that ‘every stone will be thrown down’. He’s speaking of the destruction of Jerusalem. Jesus also speaks of this in Mathew 23:37-38: “O Jerusalem, Jerusalem, you who kill the prophets and stone those sent to you, how often I have longed to gather your children together, as a hen gathers her chicks under her wings, but you were not willing. Look, your house is left to you desolate.” Here Jesus speaks of Israel’s unwillingness to believe the Truth and its rejection of the Lord’s prophets. The question becomes, is Jesus talking about the destruction of Jerusalem by Rome in 70 A.D. or is this something that will take place during the very end of this age? Was ‘every stone thrown down’ in 70 A.D.? Since His disciples asked Him about this and His return in the same sentence, I believe it is possible this is something that will happen towards the very end of this age. The remaining verses in chapter 24 also speak of end time events. Since I do not believe in coincidences, I believe that it is certainly possible that this destruction was mentioned in Mathew 24 because Jesus is telling us this will happen toward the end of the age.

After being asked by His disciples about signs of the end of the age, Jesus immediately warns us about being deceived. He is giving us a direct warning – there will be much deception in the world during the end times. He then tells us that many will claim to be Christ. Is He saying that many will say they are actually Jesus Christ? I believe the answer is no. Jesus is telling us that many will offer false religions with false salvation. We are then told about wars and nations rising against nations. Earthquakes and famines will happen throughout the world. We are then given a vital key to these things. Jesus tells us that these events are the beginning of ‘birth pains’. Think about what happens during childbirth. As the delivery progresses, contractions become more intense and happen more often. I believe we can safely assume that as we come closer to Christ’s return – wars, earthquakes and famines will all become more intense and will increase in number. Think about the world today. Wars continue to rage around the world, we are seeing a significant number of earthquakes happening every week and famines continue. It’s going to get worse.

The chapter continues with verse 9:

“Then you will be handed over to be persecuted and put to death, and you will be hated by all nations because of me. At that time many will turn away from the faith and will betray and hate each other, and many false prophets will appear and deceive many people. Because of the increase of wickedness, the love of most will grow cold, but he who stands firm to the end will be saved. And this gospel of the kingdom will be preached in the whole world as a testimony to all nations, and then the end will come.” (Mathew 24:9-14).

We are being told that true followers of Christ will be persecuted and some will be put to death. This parallels other verses throughout the Bible (including verses in Revelation). Christ’s true followers are persecuted. We are then told that many will turn away from true faith in Jesus. Again, this parallels Revelation in that immense pressure will be placed on believers. Those without a true, strong faith will fall. Many will not be able to stand against our enemy. Only those with true faith will be able to stand. Jesus then warns us again against false prophets and deception. This also parallels Revelation 13:13-14 “And he performed great and miraculous signs, even causing fire to come down from heaven to earth in full view of men. Because of the signs he was given power to do on behalf of the first beast, he deceived the inhabitants of the earth”. Does this deception exist today? Absolutely. If you’ve read my other posts, then you are aware of just how deceived we are.

Verse 12 gives us another clue that Jesus is talking about our times. “Because of the increase of wickedness, the love of most will grow cold”. Think about the world in which we live today. Has wickedness increased? Violence permeates our society. Jails are overflowing. Pornography is available in most of our homes either through the internet or television. School shootings are happening more often. Wars are raging. As a result of our times, is the love of most growing cold? How often do you see someone really reaching out to others – whether they know the person or not? There are certainly faithful people in the world, but it appears that most of us are becoming more isolated. We spend less time with family and friends and helping others. As a result, our focus shifts from our relationship with God and those that we love, to things in the world – pursuit of wealth, material goods, social status, etc. Empty things that the Lord tells us are meaningless pursuits.

We live in a very busy, ‘self’ society where most of what is talked about and done is for ‘me’, not others. This is the basis of sin – selfishness. There are countless self help books available, but they cannot give us what we’re searching for – our Creator and His purpose for us. If you’re working today (as most of us are), think about how the working world has changed in the past 15 years. How many of us leave work at 5pm each day? How long are we commuting? How much actual time are we spending with our spouses, our children, our families? With cell phones, blackberries and other devices, many of us don’t ever really leave work. There were times when I would get up on Sunday, answer a few emails on my blackberry and not even realize that I left it on my hip during church. My mind would even wander in church to things I needed to do at work on Monday. I couldn’t even give God one hour every week. I would have conversations with my wife, family and friends, but I wouldn’t always be engaged in the conversation. My mind would shift to work-related issues, problems, planning – things that needed to get done. There’s obviously nothing wrong with working to provide for ourselves and our families. In fact, the Bible instructs us to do so. ‘For even when we were with you, we gave you this rule: “If a man will not work, he shall not eat.”’ (2 Thessalonians 3:10). The problem is that for many of us, our work has become the focus of our lives. This is not biblical. ‘If that is how God clothes the grass of the field, which is here today and tomorrow is thrown into the fire, will he not much more clothe you, O you of little faith? So do not worry, saying, ‘What shall we eat?’ or ‘What shall we drink?’ or ‘What shall we wear?’ ‘For the pagans run after all these things, and your heavenly Father knows that you need them. But seek first his kingdom and his righteousness, and all these things will be given to you as well. Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own.’ (Mathew 6:30-34). The glaring truth is that most of us do not have the faith required to put the Lord’s Word into practice. If you’re like I was, I couldn’t seek God first because I needed to earn a living to buy nice things before anything else. The opposite of what the Bible tells us to do. I allowed our enemy to pull me away from the truth because I wasn’t reading God’s Word and praying to Him. I was defenseless against the devil’s schemes. I couldn’t even see them.

We don’t like to admit that we have allowed our spiritual enemy to deceive us, but he has in many ways. It’s time to put away our pride and realize that we don’t know it all, that we don’t have all of the answers we’re seeking. It’s time to realize it, understand it and start following the Lord, not our own way.

Posted by: John Gilmore | September 19, 2006

Signs of the Times – Part 2

Let’s continue in the Book of Mathew chapter 24:

“So when you see standing in the holy place ‘the abomination that causes desolation,’ spoken of through the prophet Daniel—let the reader understand— then let those who are in Judea flee to the mountains. Let no one on the roof of his house go down to take anything out of the house. Let no one in the field go back to get his cloak. How dreadful it will be in those days for pregnant women and nursing mothers! Pray that your flight will not take place in winter or on the Sabbath. For then there will be great distress, unequaled from the beginning of the world until now—and never to be equaled again. If those days had not been cut short, no one would survive, but for the sake of the elect those days will be shortened. At that time if anyone says to you, ‘Look, here is the Christ!’ or, ‘There he is!’ do not believe it. For false Christs and false prophets will appear and perform great signs and miracles to deceive even the elect—if that were possible. See, I have told you ahead of time. (Mathew 24:15-25)

The ‘abomination that causes desolation’ is a difficult topic. It’s difficult because there are two possible interpretations of this prophecy. This prophecy either describes the destruction of Jerusalem in 70 A.D. by the Roman Empire or it is describing a future event that has not taken place. Much has been written about this event mentioned by the prophet Daniel and Jesus. In the Left Behind book series, the authors interpret this as a future event with the antichrist (Nicolae Carpathia) riding through a rebuilt Jewish Temple on a pig, proclaiming to be God. We now know that this is pure fiction. So, is it possible that this remains a future event? It’s very difficult to say. Honestly, I’m not 100% sure of the answer. Jesus could have been warning His followers that when they see Roman soldiers entering the Temple (an abomination in a holy place), drop everything and get out of the city to spare yourselves. I don’t believe this 100% because we’re also told that ‘For then there will be great distress, unequaled from the beginning of the world until now – and never to be equaled again.’ Jesus is the Lord and Savior of the whole world, not just the Jewish nation, so was this event in 70 A.D. something that caused the most distress the world has ever seen? I don’t believe that we’ve seen the worst that satan is going to throw at us, so it is certainly possible that this is a future event. If it is a future event, the key to unlocking this mystery is determining where ‘the holy place’ is. Would the Lord consider a rebuilt Jewish temple that offered animal sacrifices His holy place? We previously discussed this – I believe the answer is no. We are told in the New Testament that we are the Lord’s church (not a building or structure)– those justified by faith. So, if this is a future event, where will this ‘abomination’ take place? This would lead me to believe that this prophecy was fulfilled in 70 A.D. The end result of my study of this prophecy is that I don’t know the answer with 100% certainty. If it is a future event, we will need to spiritually discern it.

If this prophecy is describing a future event, how bad will it be? Jesus makes it crystal clear for us – ‘there will be great distress, unequaled from the beginning of the world until now – and never to be equaled again.’ Jesus tells us that when this takes place, all of us will be affected. If it were not for God’s mercy for His children, no one would survive. I believe that Jesus could by describing Armageddon. Nuclear war on a global scale. It’s also interesting to note that we are told in multiple verses in the Bible that before the Lord’s return, the sun will be darkened and the moon will turn to blood. This could very well be describing how the dust and debris in the atmosphere from this worldwide event causes the sun to appear darkened and the moon to appear red. I believe this could be describing the time between the ‘abomination that causes desolation’ and the Lord’s return.

‘I will pour out my Spirit on all people. Your sons and daughters will prophesy, your old men will dream dreams, your young men will see visions. Even on my servants, both men and women, I will pour out my Spirit in those days. I will show wonders in the heavens and on the earth, blood and fire and billows of smoke. The sun will be turned to darkness and the moon to blood before the coming of the great and dreadful day of the LORD. And everyone who calls on the name of the LORD will be saved; for on Mount Zion and in Jerusalem there will be deliverance, as the LORD has said, among the survivors whom the LORD calls.’ (Joel 2:28-35)

Notice that the Lord mentions ‘fire and billows of smoke’ and we are told, once again, that the true children of God will be saved. We are also told that many will prophecy, dream and see visions. Throughout the Bible we see that the Lord tells us what He is going to do and why. He will also speak to us at the end of this age through these prophecies, dreams and visions.

The Book of Revelation also reveals judgments that affect the appearance of the sun and moon:

‘I watched as he opened the sixth seal. There was a great earthquake. The sun turned black like sackcloth made of goat hair, the whole moon turned blood red, and the stars in the sky fell to earth, as late figs drop from a fig tree when shaken by a strong wind.’ (Revelation 6:12-13)

Again, it appears that our view of the sun, moon and stars will be affected by an event on earth.

‘The fourth angel sounded his trumpet, and a third of the sun was struck, a third of the moon, and a third of the stars, so that a third of them turned dark. A third of the day was without light, and also a third of the night.’ (Revelation 8:12)

Once again, the sun, moon and stars turn dark due to a judgment from the Lord. Are all of these verses related to the same event? It is certainly possible. It is also possible that multiple events will have the same result – darkened skies.

‘Wail, for the day of the LORD is near; it will come like destruction from the Almighty. Because of this, all hands will go limp, every man’s heart will melt. Terror will seize them, pain and anguish will grip them; they will writhe like a woman in labor. They will look aghast at each other, their faces aflame. See, the day of the LORD is coming —a cruel day, with wrath and fierce anger — to make the land desolate and destroy the sinners within it. The stars of heaven and their constellations will not show their light. The rising sun will be darkened and the moon will not give its light. I will punish the world for its evil, the wicked for their sins. I will put an end to the arrogance of the haughty and will humble the pride of the ruthless. I will make man scarcer than pure gold, more rare than the gold of Ophir. Therefore I will make the heavens tremble; and the earth will shake from its place at the wrath of the LORD Almighty, in the day of his burning anger.’ (Isaiah 13:6-13)

Here we see again that the sun, moon and stars are darkened. The word ‘desolate’ is once again used to describe the earth. Do you see a pattern? For those who question if the Bible is really the Word of God, remember that the men who were inspired by the Holy Spirit to write these words (in both the Old and New Testaments) lived hundreds of years apart – yet the message was the same. You see this time and again within the Lord’s Word. We are also given the reasons for these things – sin and evil in the world. When the time comes according to God, He will punish the world for its sins. We see this described again in Zephaniah 1:14-18:

‘The great day of the LORD is near—near and coming quickly. Listen! The cry on the day of the LORD will be bitter, the shouting of the warrior there. That day will be a day of wrath, a day of distress and anguish, a day of trouble and ruin, a day of darkness and gloom, a day of clouds and blackness, a day of trumpet and battle cry against the fortified cities and against the corner towers. I will bring distress on the people and they will walk like blind men, because they have sinned against the LORD. Their blood will be poured out like dust and their entrails like filth. Neither their silver nor their gold will be able to save them on the day of the LORD’s wrath. In the fire of his jealousy the whole world will be consumed, for he will make a sudden end of all who live in the earth.’ (Zephaniah 1:14-18)

We see, once again, a description of the same terrible event. Once again ‘darkness and gloom…clouds and blackness’ are mentioned to describe our atmosphere resulting from these events. Why are these events taking place? It’s clear – ‘….they have sinned against the Lord.’ In our physical world, how will the Lord do this? I believe that it is clear this is the result of worldwide war – ‘a day of trumpet and battle cry against the fortified cities and against the corner towers’. There is only one thing in the world today that could cause such widespread destruction – nuclear weapons. Also note that we’re told that all the wealth in the world cannot prevent this from happening. None of the things of the world can protect us if we turn away from God – our wealth, our weapons, our military strength – they mean nothing.

Once again, we’re also told that those who are following the Lord are offered the Lord’s protection:

‘Seek the LORD, all you humble of the land, you who do what he commands. Seek righteousness, seek humility; perhaps you will be sheltered on the day of the LORD’s anger.’ (Zephaniah 2:3)

The Bible tells us that even though all of these things have been foretold in God’s Word, even though there will be many who preach the Truth during these times, most of the world will not repent. They will not turn back to God:

‘The rest of mankind that were not killed by these plagues still did not repent of the work of their hands; they did not stop worshiping demons, and idols of gold, silver, bronze, stone and wood—idols that cannot see or hear or walk.’ (Revelation 9:20)

Why are we told all of these things? Why has the Lord instructed me to write about them? We all need to wake up to what is happening in the world and what is going to happen. We need to prepare ourselves spiritually.

‘These are the words of him who holds the seven spirits of God and the seven stars. I know your deeds; you have a reputation of being alive, but you are dead. Wake up! Strengthen what remains and is about to die, for I have not found your deeds complete in the sight of my God. Remember, therefore, what you have received and heard; obey it, and repent. But if you do not wake up, I will come like a thief, and you will not know at what time I will come to you. Yet you have a few people in Sardis who have not soiled their clothes. They will walk with me, dressed in white, for they are worthy. He who overcomes will, like them, be dressed in white. I will never blot out his name from the book of life, but will acknowledge his name before my Father and his angels. He who has an ear, let him hear what the Spirit says to the churches.’ (Revelation 3:1-6)

Posted by: John Gilmore | September 18, 2006

Signs of the Times – Part 3

Continuing our discussion of Mathew 24:

‘At that time if anyone says to you, ‘Look, here is the Christ!’ or, ‘There he is!’ do not believe it. For false Christs and false prophets will appear and perform great signs and miracles to deceive even the elect—if that were possible. See, I have told you ahead of time.’ (Mathew 24:23-25)

Jesus warns us again against deception. He is telling us that when people of the world point us away from the Truth, away from Him, do not believe it. Do not let yourself be deceptively led away to false prophets and false religions. Do not believe the enemy’s lie that you don’t need Me. He also tells us something very serious – ‘signs and miracles to deceive even the elect’. The ‘elect’ are God’s children. These are true believers, teachers and prophets. What are we told? Even some of God’s true children will be deceived. What are the ‘great signs and miracles’ that are performed by these false prophets? Remember, the ‘beast out of the earth’ of Revelation chapter 13 is referred to as a ‘false prophet’ in Revelation 19. Take note that this verse also refers to ‘miraculous signs’ and deception:

‘But the beast was captured, and with him the false prophet who had performed the miraculous signs on his behalf. With these signs he had deluded those who had received the mark of the beast and worshiped his image. The two of them were thrown alive into the fiery lake of burning sulfur.’ (Revelation 19:20).

So, what are these miraculous signs? It’s made clear in this verse and in Revelation Chapter 13 that these ‘signs’ deceive the inhabitants of earth. Looking at the world today, do we see any of these ‘signs’? I believe the answer is yes. Remember, in more than one verse, these ‘miraculous signs’ are associated with the ‘beast out of the earth’. If you’ve read previous posts of mine, then you know that I believe this to be the Illuminati/Freemason beast that becomes the worldwide political beast – this ‘beast out of the earth’. What are we seeing in the world today that could be considered ‘miraculous signs’ associated with this beast? Since these signs are associated with this beast, it’s safe to assume that the signs are being used as part of the plan to gain political control of the entire world. Here are some signs that have made worldwide headlines in recent years:

1. 9/11/01 New York City, United States. WTC destroyed by airliners. 3000 killed.
2. 3/11/04 Madrid, Spain. Commuter Train attacks. 191 killed – 2050 injured.
3. 7/7/05 London, England. Commuter bus attacks. 56 killed – 700 injured.
4. 7/11/06 Mumbai, India. Commuter Train attacks. 209 killed – 700 injured.

Think about where these ‘terrorist’ events have led us. We are losing many freedoms (Patriot Act, Military Commissions Act). All the U.S. government needs to do is label you an ‘unlawful enemy combatant’ and you’ve lost your rights that were granted to you under the Bill of Rights. Security is increasing everywhere – not just airports. I recently attended a Major League baseball game and everyone was checked (frisked, metal detecting wands) before entering the stadium. We accept this increase in ‘security’ because of these ‘events’ that have happened. What if our government tried to pass the Patriot Act, Military Commissions Act and tighten security to these levels at airports and elsewhere if these ‘events’ had not taken place? You and I know that Americans would never have let it happen. It’s hard to accept, but it’s the ‘beast’ that is doing this to us. Whether or not we want to accept it, it’s the truth. We’re going to see more devastating ‘signs’ in the years to come leading us to submit to this political beast.

Mathew 24 continues:

‘So if anyone tells you, ‘There he is, out in the desert,’ do not go out; or, ‘Here he is, in the inner rooms,’ do not believe it. For as lightning that comes from the east is visible even in the west, so will be the coming of the Son of Man. Wherever there is a carcass, there the vultures will gather.’ (Mathew 24:26-28)

Jesus continues with warnings concerning deception during the end times. All of God’s Word has meaning – none of it returns void. So, when Jesus warns us about someone in the desert claiming to be from God, but is not, who is He referring to? Jesus would not tell us this if this person did not deceive many in the world. In the past 2,000 years, who has claimed to be a prophet of God, spent much of his time in the desert and has led millions to a false religion? I believe Jesus is warning us about one man – Muhammad. When Jesus tells us ‘do not go out’, he is warning us not to follow this religious deception. Jesus is telling us that there is only one Truth in the world – Him and Him only. Do not let yourself be deceived by a religion that mixes the clean (verses from the Bible) with the unclean (Koran).

Jesus also mentions something that I find very interesting. He tells us not to believe something that is ‘in the inner rooms’. The King James Version translates this as ‘in the secret chambers’. What is Jesus referring to? Does a religion exist in the world today that claims to be the truth, but once again mixes the clean (God’s Word) with the unclean (unbiblical teaching)? Is there a religion that has deceived millions with its deceptive doctrine that includes ‘secret chambers’ in its teachings? The answer is yes. The teachings of the Watchtower organization (Jehovah’s Witnesses). They claim to be Christian and do teach from some verses in the Bible, but much of their teaching is deceptive. Some of their teachings that contradict the Bible:

1. They deny the Holy Trinity
2. They deny the deity of Jesus Christ
3. They deny the personhood of the Holy Spirit
4. They deny Jesus’ physical resurrection
5. They deny salvation by grace through faith (they teach salvation by works)
6. They take verses in the Bible out of context and alter verses to fit their teaching (Example: Revelation 7:4)
7. They teach that Jesus was only a man on earth (same as Adam)
8. Jesus was the Archangel Michael prior to His coming to Earth. After His death, he became the Archangel again and is kept in a ‘secret chamber’.

There are many other ways their teachings contradict God’s Word, but rest assured, their teachings are not from the Lord. They are deceptively leading people away from the Truth.

I believe that Jesus made this statement regarding ‘secret chambers’ to warn us against any false religion that does anything ‘in secret’. Did Jesus hide anything from us required for our salvation? Did he try to hide anything from us? No.

‘I have spoken openly to the world,” Jesus replied. “I always taught in synagogues or at the temple, where all the Jews come together. I said nothing in secret.’ (John 18:20)

Are there other deceptive, secretive ‘religions’ in the world today that would lead people away from the truth? Certainly. The following is taken from the Scientology website (founded by L. Ron Hubbard):

“Man is an immortal, spiritual being. His experience extends well beyond a single lifetime. His capabilities are unlimited, even if not presently realized — and those capabilities can be realized. He is able to not only solve his own problems, accomplish his goals and gain lasting happiness, but also achieve new, higher states of awareness and ability. In Scientology no one is asked to accept anything as belief or on faith. That which is true for you is what you have observed to be true. An individual discovers for himself that Scientology works by personally applying its principles and observing or experiencing results.”

I’ll translate this – L. Ron Hubbard is telling us that we don’t need God. We can solve our own problems, accomplish our own goals and somehow achieve happiness. Since he says that our capabilities are unlimited, he’s saying that human beings, in essence, are God. Mr. Hubbard tells us that we don’t need faith or belief in anything. Whatever you want to believe is fine; the truth is what you make it.

Of course, all of these things contradict the Bible. We do need God. Look at the world today. Much of the world is going its own way with disastrous results. What does the Bible say about the plans and actions of men? Filthy rags. ‘All of us have become like one who is unclean, and all our righteous acts are like filthy rags; we all shrivel up like a leaf, and like the wind our sins sweep us away.’ (Isaiah 64:6)

Do you see now why Jesus warned us so many times about deception during our times? Our spiritual enemy knows that we need God, so he gives us counterfeit versions of the truth. Satan creates false religion that encompasses some of the Lord’s Word and mixes it with things that are unclean to deceive those who are seeking God. He also creates ‘religions’ like Scientology that deceive those that are not necessarily seeking God, but who want to belong to something. After being indoctrinated with these false teachings, it becomes that much harder to believe the truth. As I’ve mentioned before, there is only one, uncorrupted truth in this world, the Holy Bible. Any religion or teaching that adds to or takes from the Lord’s Word is a false religion. Any religion that uses some of the Lord’s Word, while disregarding much of the Bible is a false religion. If you ask a Mormon a theological question, will they reach for their Bible or the Book of Mormon? What does the Bible say about this? Once again, the Lord makes it crystal clear:

‘I warn everyone who hears the words of the prophecy of this book: If anyone adds anything to them, God will add to him the plagues described in this book. And if anyone takes words away from this book of prophecy, God will take away from him his share in the tree of life and in the holy city, which are described in this book.’ (Revelation 22:18-19)

Don’t miss the significance of these verses. If you add to or take away from God’s Word, you will be cursed and will have placed your salvation in jeopardy. Does your Church teach only from the Bible? Are you adding to or taking away from God’s Word? Don’t let our enemy deceive you. There are no exceptions. If it’s not in the Bible, you can’t say that God ‘intended’ for it to be there. If He wanted it in the Bible, it would be in the Bible. Same goes for those that disregard sections of the Bible because they don’t fit a particular theology or lifestyle. All that we need is in the Bible – pure and simple. You must ask yourself – am I learning only from the Bible? Am I being deceived? I’ve mentioned it before and I’ll say it again here – God will not accept your excuse on the day of judgment if you say that you were deceived. God has given us His Word so that we would know the Truth. Jesus warned us many times against the deceptions present in the world. There will be no excuses.

“See to it that no one takes you captive through hollow and deceptive philosophy, which depends on human tradition and the basic principles of this world rather than on Christ.” (Colossians 2:8)

I cannot emphasize enough how important it is for us to stay true to God’s Word and His plan of salvation in these deceptive times. Our enemy has deceived many with false religions in the world today – just as Jesus told us he would. Never forget, there is only one truth in this world – that Jesus Christ is the Son of God and offered Himself as a sacrifice for our sins so that we may live in eternity. He was resurrected by the power of God and now sits at the right hand of the Father with all power and authority over heaven and earth. We can only rely on the truth of the Holy Bible to guide us and instruct us. Do not be deceived and let others tell you differently. Do not let them tell you that you don’t need our Father in heaven, Jesus Christ and the Holy Spirit. Don’t let anyone tell you that you don’t need to read the Bible. Don’t let them tell you to disregard verses in the Bible. Don’t let them add to God’s Word and then tell you it’s ok. All of these things are designed to lead you away from the truth. If you notice carefully, all false religions very quietly, very deceptively lead you away from what the Bible tells us is required for salvation – faith in Jesus Christ. Faith that he died for our sins and was resurrected on the 3rd day.

“know that a man is not justified by observing the law, but by faith in Jesus Christ. So we, too, have put our faith in Christ Jesus that we may be justified by faith in Christ and not by observing the law, because by observing the law no one will be justified.” (Galatians 2:16)

According to the Bible, you will not receive salvation by observing religious rituals – any rituals. Don’t let a person or church (any church) tell you differently. The Bible is clear. Salvation is a gift to us by the grace of God through faith in Jesus Christ. Many churches teach that salvation can be achieved by our works on earth. What does the Bible say about this? It’s clear:

“For it is by grace you have been saved, through faith—and this not from yourselves, it is the gift of God— not by works, so that no one can boast. For we are God’s workmanship, created in Christ Jesus to do good works, which God prepared in advance for us to do.” (Ephesians 2:8-10)

Once we are saved through faith, we will do God’s work on earth, but your works will not save you. You must believe and have faith in Jesus Christ.

Jesus clearly answers this question for us and leaves no doubt on this subject:

‘Then they asked him, “What must we do to do the works God requires?”
Jesus answered, “The work of God is this: to believe in the one he has sent.’ (John 6:28-29)


The Lord has given me these words for a reason. He wants all of us to believe the truth and accept his offer of salvation. He desires that we all overcome the world and its deception. If you are someone who is a member of a church or organization that does not teach exclusively from the Bible, this message is for you. You are at a crossroads. You may have been led astray at some point in your life, but you’ve now been given the truth. You must now choose whom you will follow. Will you accept God’s offer of salvation and follow Him and where He leads you or will you continue on your own way? It’s a decision that we will all make in this life – and no decision has more importance or significance. You don’t have to be alone in the world. He guides us through all of our trials and tribulations.

Remember these words from the Lord:

“I am astonished that you are so quickly deserting the one who called you by the grace of Christ and are turning to a different gospel— which is really no gospel at all. Evidently some people are throwing you into confusion and are trying to pervert the gospel of Christ. But even if we or an angel from heaven should preach a gospel other than the one we preached to you, let him be eternally condemned! As we have already said, so now I say again: If anybody is preaching to you a gospel other than what you accepted, let him be eternally condemned! Am I now trying to win the approval of men, or of God? Or am I trying to please men? If I were still trying to please men, I would not be a servant of Christ.” (Galatians 1:6-10)

“But there were also false prophets among the people, just as there will be false teachers among you. They will secretly introduce destructive heresies, even denying the sovereign Lord who bought them—bringing swift destruction on themselves. Many will follow their shameful ways and will bring the way of truth into disrepute. In their greed these teachers will exploit you with stories they have made up. Their condemnation has long been hanging over them, and their destruction has not been sleeping.” (2 Peter 2:1-3)

“For certain men whose condemnation was written about long ago have secretly slipped in among you. They are godless men, who change the grace of our God into a license for immorality and deny Jesus Christ our only Sovereign and Lord.” (Jude 1:4)

Posted by: John Gilmore | September 17, 2006

Signs of the Times – Part 4

We continue our study of Mathew Chapter 24:

“So if anyone tells you, ‘There he is, out in the desert,’ do not go out; or, ‘Here he is, in the inner rooms,’ do not believe it. For as lightning that comes from the east is visible even in the west, so will be the coming of the Son of Man. Wherever there is a carcass, there the vultures will gather. Immediately after the distress of those days the sun will be darkened, and the moon will not give its light; the stars will fall from the sky, and the heavenly bodies will be shaken. At that time the sign of the Son of Man will appear in the sky, and all the nations of the earth will mourn. They will see the Son of Man coming on the clouds of the sky, with power and great glory. And he will send his angels with a loud trumpet call, and they will gather his elect from the four winds, from one end of the heavens to the other.” (Mathew 24:26-31)

Jesus also tells us here about the sun, moon and stars being darkened ‘after the distress of those days’. So, I believe that the Lord’s prophets and Jesus Himself are all speaking of the same events. I believe they are speaking of worldwide events that are going to cause widespread ‘desolation’. What are these events? I think we can safely say that nuclear weapons are going to be part of this. Nothing else on earth could cause such destruction. This may only be one part of everything that is happening during this time. What results from these events? Our atmosphere is going to be polluted to the point that all heavenly bodies are darkened. This sounds horrible and it’s going to be a very difficult time, but there is hope. Never forget that our focus should not be on this world, but on God’s kingdom. Jesus tells us that after these events, He will appear in the sky with power and glory. While these events may seem horrible to unbelievers on earth and fill them with fear, they will be a sign to believers that the end is near. They will know that their Savior is at the door. Why will the nations mourn when Jesus returns? Because they will see the Truth and it will be too late. Many will have rejected God’s offer of salvation and will realize that they face eternal judgment. Imagine persecuting God’s faithful and rejecting Him, then seeing Jesus coming in the clouds. Finally, we’re told that Jesus gathers His faithful. Those that have remained faithful to the end will inherit eternal life in the kingdom of heaven with Jesus and our Father. They will have endured unto the end.

“Now learn this lesson from the fig tree: As soon as its twigs get tender and its leaves come out, you know that summer is near. Even so, when you see all these things, you know that it is near, right at the door. I tell you the truth, this generation will certainly not pass away until all these things have happened. Heaven and earth will pass away, but my words will never pass away.” (Mathew 24:32-35)

What are we told here? We’re told that when we begin to see these signs, the end is ‘right at the door’. We’re also told that the generation that sees these events ‘will certainly not pass away until all these things have happened’. Don’t miss the significance of this message. Even though Jesus is speaking to our generation and we will see all of these things, the most important piece is that those of us who survive to the end will see Jesus return. So, we’re not told a definite date of the Lord’s return, but we are told that we will see Him. We are getting very close to the end of this age.

“No one knows about that day or hour, not even the angels in heaven, nor the Son, but only the Father. As it was in the days of Noah, so it will be at the coming of the Son of Man. For in the days before the flood, people were eating and drinking, marrying and giving in marriage, up to the day Noah entered the ark; and they knew nothing about what would happen until the flood came and took them all away. That is how it will be at the coming of the Son of Man. Two men will be in the field; one will be taken and the other left. Two women will be grinding with a hand mill; one will be taken and the other left.” (Mathew 24:36-41)

Here we are told that only our Father knows the time of Jesus’ return. I know that many in the world try to determine when Jesus will return, but I believe these verses make it clear – we are told of the events that will tell us when the time is near, but we will not know the exact time. We’re told by Jesus to be ready at any time for His return. We should always focus on God’s plan for us and not worry about what is or is not going to happen. I know this is difficult. It is something that I struggled with for some time. As you mature spiritually, this will become easier as you place your complete trust in the Lord.

Jesus mentions the story of Noah for a reason. Imagine for a moment that you are Noah. The Lord speaks to you and tells you to build an ark because the world is overcome with wickedness. Through faith, you do what is asked of you. Imagine building an ark in a wicked society. Do you think that Noah was ridiculed for building this ark when nothing was currently wrong? I’m sure he endured a few insults. I’m sure that people probably laughed at him. Did he build it in his backyard? Based on the dimensions of this ark, I’m sure it looked very out of place to everyone else. In spite of what everyone else thought, regardless of what was said to him in this world, he did what the Lord asked because he trusted the Lord. Now, think about the world today. Are true believers who trust the Lord ridiculed? If someone speaks a word of prophecy, how does the world respond? I imagine that today we endure the same type of ridicule that Noah endured. Those who do not know the Lord are spiritually blind, and just as in Noah’s day, they will be caught unaware of what is coming.

Verses 40 and 41 then tell us what will happen when Jesus does return at the end– some will be taken (His faithful believers) with Him, others will be left (unbelievers). If you are left, you will face eternal punishment. There will be no second chances at this point.

“Now, brothers, about times and dates we do not need to write to you, for you know very well that the day of the Lord will come like a thief in the night. While people are saying, “Peace and safety,” destruction will come on them suddenly, as labor pains on a pregnant woman, and they will not escape. But you, brothers, are not in darkness so that this day should surprise you like a thief. You are all sons of the light and sons of the day. We do not belong to the night or to the darkness. So then, let us not be like others, who are asleep, but let us be alert and self-controlled. For those who sleep, sleep at night, and those who get drunk, get drunk at night. But since we belong to the day, let us be self-controlled, putting on faith and love as a breastplate, and the hope of salvation as a helmet. For God did not appoint us to suffer wrath but to receive salvation through our Lord Jesus Christ.” (1 Thessalonians 5:1-9)

We are given some very important guidance in these verses. We are told that the Day of the Lord will come unexpectedly to unbelievers. They will not escape the Lord’s wrath. As always, we’re then given a message of hope. The Lord tells true believers that we are not blind as unbelievers. The Day of the Lord will not be a surprise to us. We will be prepared for it. We are of the light and therefore, will not be uninformed of what is happening and why. Verse 8 then gives us similar instruction as Ephesians chapter 6 – put on the armor of God so that when your day of evil comes, you will be able to stand. Knowing that we have eternal salvation through God’s grace, we will not fear what is happening in the world.

“Therefore keep watch, because you do not know on what day your Lord will come. But understand this: If the owner of the house had known at what time of night the thief was coming, he would have kept watch and would not have let his house be broken into. So you also must be ready, because the Son of Man will come at an hour when you do not expect him.” (Mathew 24:42-44)

Once again we’re told that we do not know the exact time of our Lord’s return, so stay faithful and keep watch. Do not let the world draw you away from the Lord.

“Who then is the faithful and wise servant, whom the master has put in charge of the servants in his household to give them their food at the proper time? It will be good for that servant whose master finds him doing so when he returns. I tell you the truth, he will put him in charge of all his possessions. But suppose that servant is wicked and says to himself, ‘My master is staying away a long time,’ and he then begins to beat his fellow servants and to eat and drink with drunkards. The master of that servant will come on a day when he does not expect him and at an hour he is not aware of. He will cut him to pieces and assign him a place with the hypocrites, where there will be weeping and gnashing of teeth.” (Mathew 24:45-51)

Mathew chapter 24 then concludes with a clear warning to us. Jesus is telling us to remain faithful until the end and endure. Do not let the world pull you away from the Truth and deceive you. If we are faithful until the end, we will receive our reward. Do not be like those who fall away from the Truth because Jesus has not returned according to their own timetable. Those who do not remain faithful to the end, but return to the world are given a clear warning – ‘…and assign him a place with the hypocrites, where there will be weeping and gnashing of teeth.’ Those that fall away will face the same fate as unbelievers. Eternal punishment.

Posted by: John Gilmore | September 16, 2006

Wealth and the Bible

Let’s spend some time discussing wealth and what the Bible has to say on this subject. It seems our society has become focused on wealth and becoming rich. We’re constantly reminded in this world that being rich is a good and desirable goal. We see this in the Wall Street Journal and listed on the Fortune 500. We read about it in daily newspapers and listen to ‘experts’ talk about wealth on programs such as CNN and Fox News. Most of us invest in the stock market with the hopes that we’ll one day strike it rich or at least receive high enough returns to retire comfortably. American CEO’s are the highest paid corporate leaders in the world with some earning 400-500 times what the average worker takes home. If you’re like me and have managed a business whether on your own or for a corporation, then you know that in today’s world, you’re only as good as your last week, month, quarter, year. Have a good week? Great, now have a good quarter. Have a good quarter? Spend an hour celebrating and then focus on the year. Have a good year? Better start planning a strategy to do even better next year. If you are successful, you receive rewards in the form of raises, bonuses, better benefits, etc. Have you ever wondered, as I have, whether all the time spent on the pursuit of business/working success is worth the time? Of course you don’t need to manage a business to feel the stress of the working world today. All of us are concerned with earning more money, working our way up, receiving better benefits…..and we’re all concerned with job security considering that we could be ‘downsized’, ‘reassigned’ or fired due to ‘synergies’ created by a merger. Even if you’ve been successful and have reached your financial goals, my guess is that you’ve reached the goal and thought – ‘Is this it?’ It probably hasn’t been as satisfying as you thought it would be. Regardless, it’s as though we’re all on this big treadmill that seems to be going faster and faster and we can’t get off and we can’t slow down. It’s as though someone is dangling a carrot in front of our faces that we can never quite reach. What does the Bible teach us about the pursuit of wealth?

“But if we have food and clothing, we will be content with that. People who want to get rich fall into temptation and a trap and into many foolish and harmful desires that plunge men into ruin and destruction. For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs.” (1 Timothy 6:8-10)

The Bible teaches us that money isn’t the root of all evil (as is often quoted), but the love of money. If you believe that everything in the world is the Lord’s and you’re simply a steward of His possessions, then you won’t fall into the devil’s trap of falling in love with money and wealth. If you begin to view your money as only yours, to do with as you please, then you are starting down a dark path….which is what we, as a nation, have done.

Since public corporations seem to make up over 90% of what we read about in the business world, let’s take a moment and look at the decisions they make and why they make those decisions. As I’ve mentioned before, I have some experience with corporate decision-making. I’ve never been a CEO of a company, but like many others in middle management, I’ve had to execute senior management decisions within my area of responsibility. Let’s start by asking some basic, high level questions. What is the purpose of a corporation? What are the goals of a corporation? What influences the majority of high level decisions within a company?

Don’t worry, I won’t go into a long-winded discussion on microeconomics and financial statements. For our purposes here, we’ll stick to the basics. Obviously, public companies are focused on their stock price and the company’s return to shareholders. Companies initially issue stock in return for capital (cash) that they can use to grow their business, invest in research, etc. They want their stock price to rise so that their shareholders are satisfied and that, in return, benefits the employees of the company in many ways…increased salary, bonuses, stock options, career advancement, etc. The stock price is the focus of any publicly traded company. It is certainly the focus of anyone who invests in stocks or mutual funds.

Have you ever thought about what really affects stock prices? The answer is ….just about everything. Obviously, how well a company is performing financially and operationally impacts their stock price. The problem with stocks is that there are many other things that affect their prices – scandals, fraud, wars, terrorist activity, the overall economy, the overall stock market, interest rates, inflation, Federal Reserve decisions, Federal legislation, etc. If a big investment institution (private equity funds, hedge funds or the big Wall St. banks) buys or sells a big chunk of stock in a company, they have the power to raise or lower the price to some degree (regardless of what you’re told, all investors are not the same). Mergers & acquisitions can have a big impact on stock prices. So, even though our society consistently tells us that we should invest in stocks because of past history (we always hear about past 5, 10, 30 years trends), does the past really give us a true indication of the future? As it relates to something as risky as the stock market, the past has absolutely no bearing on the future. Yes, you can see trends, but you can’t see if a war is going to break-out tomorrow. You can’t see if a terrorist event is going to happen tomorrow. Did 9/11 affect your checking account or savings account? Did the value of your CD’s drop? No. How did your stocks do? We are blindly following flawed advice that says you have to invest in stocks in order to save for retirement. The U.S. has invested trillions in the stock market. Where is our faith? Are you placing faith in things of this world or your Creator? What do you think God sees when He looks at the stock market? I have an idea – greed. The truth is that the stock market is a house of cards and it’s going to fall. How? I don’t know specifically, but remember, only one card (a negative event) needs to fall for the whole house to come down.

For simplicity, if we were to point to one, overriding factor in a company’s stock price, I believe it would be growth. Stock analysts always point to a company’s sales/revenue growth, profit growth, prospects for growth, hindrances to growth, etc. when discussing stocks. Sales and revenue must continue to grow at an acceptable level (10%, 20%, 30+%), profits must grow, etc……in order for investors to continue to invest in a company’s stock. If you’re a CEO of a publicly traded company, you’re focused on (among many other things) how to grow your business through internal growth, acquisitions, etc., while keeping costs as low as possible. You’re constantly under pressure to find ways to grow your business. You can’t just run a nice profitable business, you must get bigger. The treadmill never stops running.

So, with these things in mind, let’s answer the questions above. What is the purpose of any corporation? We could say that companies provide products and services that benefit us…and that’s a good thing. This is certainly true for some companies, but the one overriding purpose for any publicly traded company is to make money. If you aren’t profitable, how long will your investors continue to support you? I think the Dot Com bust of 2000 showed us the answer. If you have a great idea, you better turn the idea into a profitable business within a couple of years (depending on the industry) or you’re going to find yourself under ever increasing pressure to do so. What are the goals of a corporation? Every publicly traded company has operational and financial objectives that will meet or exceed expectations. They must meet sales, revenue, cost and profit expectations or their stock could decline. What influences decisions within the company? Most high level decisions revolve around whether the outcome of these decisions will have a positive or negative impact on these same metrics – sales, revenue, costs and profits. If we step back for a moment and really think about what drives corporations and their decisions, we see one overriding theme – the pursuit of money. What does the Bible say about spending our lives in pursuit of money? God’s Word is clear – pursue God, not money. The love and pursuit of money will lead you into all kinds of evil. If you’re wondering how corporations can do evil, you won’t have to look far. Remember, the measuring stick is not the world – don’t compare yourself or your business to the world and think you’re a-ok. The measuring stick is God’s Word. Pollution, deforestation, fraud, embezzlement, bribes, ‘creative’ accounting, oppressing the poor, pursuit of profits above all else, etc. Think about the structure of a corporation. The people at the top are usually wealthy, while the people at the bottom struggle to get by. In fact, corporations are consistently rewarded for paying the lowest wages possible (an example is outsourcing) regardless of whether they are doing fine financially. Yes, people with more responsibility should make more, but not 400 times more and not at the expense of others. Every time you read about layoffs, outsourcing or ‘downsizing’, who usually loses their jobs? Those at the bottom of the corporate ladder are usually the most affected. Who usually benefits? The people at the top. Wall Street normally applauds these ‘cost reductions’….which many times leads to more compensation to those making these decisions. They never mention the lives that are turned upside down because of these decisions. For weeks now (April 2007), I have been reading about how the downturn in the subprime market is causing a spike in foreclosures and mortgage company bankrupcies. Many articles have discussed how this could trickle down to affect many areas of the economy. Not one article I have seen (in the Wall St. Journal or other publications) has discussed the impact to the families who are being evicted due to the foreclosures. I’m sure their are many reasons for the problems – people taking on too much debt, economic downturn in some areas, overzealous mortgage salespeople & companies, etc., but this is how the world looks at things. Very rarely do we read about the human cost. This cost doesn’t affect the bottom line. The corporate working world can chew you up and spit you out. God tells us this in His Word – you and I are going to have problems throughout our time on earth (work included). The difference for those that believe in Him is that we know He’s watching over us. We will always receive what we need according to His will.

‘Keep your lives free from the love of money and be content with what you have, because God has said, “Never will I leave you; never will I forsake you.”’ (Hebrews 13:5)

With all of this said, let’s ask the toughest question of all – is it easy to run a company in today’s world based on the principles in God’s Word? I believe the short answer is no. Why? Because the #1 focus of most companies is the pursuit of money. If you were to listen to any publicly traded company’s quarterly earnings call, would the CEO begin talking about how they were following God’s plan? Would the CEO talk about how their success this quarter contributed to the company’s ability to give back to God? It seems a little strange to us to even suggest something like this. In today’s world, we inherently want to separate our working world from our personal world. We don’t think in terms of blessing and cursing as it applies to the companies we work for. Why? We like to think that if I live my personal life according to God’s Word, it’s ok if I let things slip when making decisions for my company. The truth is that God asks us to stand against our enemy in every aspect of our life. One of the benefits of forming a corporation is that employees of the corporation are shielded from liability (this changed to some degree with the Sarbanes-Oxley legislation, but we won’t go into details here). If a defect on a car causes an accident, the people involved in the accident don’t personally sue the CEO of the company who built the car, they sue the corporation. This is one of the ‘benefits’ of creating a corporation. In the same way, we feel that God (I was certainly included) wouldn’t ask us to stand against such overwhelming worldly thinking and actions at work. What if we were fired because we didn’t conform? Instead of relying on Him, we rely on ourselves and worry about how the world will react. Never forget, the world wants you to conform to its way of thinking and our workplace is just another conduit for our enemy to get to us. The Bible tells us that we must stand against our enemy – always. God is always faithful and will provide for us.

Let’s look at an example. If you’ve read my initial letters, then you know that I spent a few years working for a cable company. When our company launched our services in Knoxville, we had a few ‘adult’ channels as part of our channel lineup. I simply accepted this as part of being in this business. A couple of years after we launched, our company decided to launch ‘level 2’ adult channels. These are more graphic and the price is higher. I held out on offering these channels until we were the only division without them. Eventually, I gave in because ‘every other division offered them’ and they offered us more ‘revenue’. Once the Lord began to change me, I no longer viewed these channels as ‘revenue’. I viewed them as they truly were – a way for our enemy to lead people down dark paths. What came to mind for me was this – a family man who has never viewed pornography sees an ad for the Playboy channel late at night while watching ESPN. He decides to order one movie…which leads to other movies and possibly the Internet. After awhile, his wife discovers that he’s viewing these things and ……you can guess the rest. All of us are susceptible to this temptation (yes gentlemen, the Lord knows we are weak in this area. He created us to be visual, but only to look at our wives!). If someone is not a strong believer in God, all they need is a little push to get hooked on this stuff. Ask any pastor and they’ll tell you how damaging pornography can be. It can destroy marriages, families, homes.

“Your eye is the lamp of your body. When your eyes are good, your whole body also is full of light. But when they are bad, your body also is full of darkness.” (Luke 11:34).

Of course, it only starts out with a movie. This is how the enemy works. It became very clear that I was going right along with the plan. I can tell you that it is a very sobering moment when you see that you are being used by the enemy. Would I have felt responsible if the marriage of someone I knew ended because I decided to show these movies? Of course not, I’m simply trying to earn a living – who am I to push my values on someone else? This line of reasoning doesn’t make much sense to me now. I thought I was doing ok in this world, but I was not strong enough to resist our enemy because I was relying on my own understanding and strength…I failed time and again to resist.

“Trust in the LORD with all your heart and lean not on your own understanding; in all your ways acknowledge him, and he will make your paths straight.” (Proverbs 3:5-6)

Once I began following the Lord, I was led to this verse:

“Return, faithless people,” declares the LORD, “for I am your husband. I will choose you—one from a town and two from a clan—and bring you to Zion. Then I will give you shepherds after my own heart, who will lead you with knowledge and understanding.” (Jeremiah 3:14-15)

Let’s briefly take a look at a few Bible verses that comment on wealth and the pursuit of wealth:

“Then Jesus said to his disciples, I tell you the truth, it is hard for a rich man to enter the kingdom of heaven. Again I tell you, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of heaven.” (Matthew 19:23-24)

Is Jesus telling us that if you are wealthy it is impossible to enter God’s kingdom? No. It is difficult for wealthy people to enter heaven because in most cases, wealth and the pursuit of riches becomes their master. They put their pursuit of wealth ahead of God and money becomes the focus of their lives. Are we warned about this? Absolutely.

“No one can serve two masters. Either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve both God and Money.” (Matthew 6:24)

“Do not store up for yourselves treasures on earth, where moth and rust destroy, and where thieves break in and steal. But store up for yourselves treasures in heaven, where moth and rust do not destroy, and where thieves do not break in and steal. For where your treasure is, there your heart will be also.” (Matthew 6:19-21)

How do you know who you’re serving? It’s not hard. If God asked you to give up everything as part of His plan for you, could you do it? Be honest. Two years ago I could not have done it. If you seek God and allow Him to change you, money will no longer be your master because He will give you true faith. The Lord may bless you with wealth, but you’ll view it as His – you will only be a steward of His money to use for His kingdom. This is how you determine whether money is your master. Do you view it as yours or His?

We are given many warnings about pursuing wealth:

“Looking at his disciples, he said: “Blessed are you who are poor, for yours is the kingdom of heaven. Blessed are you who hunger now, for you will be satisfied. Blessed are you who weep now, for you will laugh. Blessed are you when men hate you, when they exclude you and insult you and reject your name as evil, because of the Son of Man. “Rejoice in that day and leap for joy, because great is your reward in heaven. For that is how their fathers treated the prophets. “But woe to you who are rich, for you have already received your comfort. Woe to you who are well fed now, for you will go hungry. Woe to you who laugh now, for you will mourn and weep.” (Luke 6:20-25)

Don’t let the riches and pleasures of this world keep you from maturing spiritually:

“While a large crowd was gathering and people were coming to Jesus from town after town, he told this parable: “A farmer went out to sow his seed. As he was scattering the seed, some fell along the path; it was trampled on, and the birds of the air ate it up. Some fell on rock, and when it came up, the plants withered because they had no moisture. Other seed fell among thorns, which grew up with it and choked the plants. Still other seed fell on good soil. It came up and yielded a crop, a hundred times more than was sown.” When he said this, he called out, “He who has ears to hear, let him hear.” His disciples asked him what this parable meant. He said, “The knowledge of the secrets of the kingdom of God has been given to you, but to others I speak in parables, so that, ” ‘though seeing, they may not see; though hearing, they may not understand.’

“This is the meaning of the parable: The seed is the word of God. Those along the path are the ones who hear, and then the devil comes and takes away the word from their hearts, so that they may not believe and be saved. Those on the rock are the ones who receive the word with joy when they hear it, but they have no root. They believe for a while, but in the time of testing they fall away. The seed that fell among thorns stands for those who hear, but as they go on their way they are choked by life’s worries, riches and pleasures, and they do not mature. But the seed on good soil stands for those with a noble and good heart, who hear the word, retain it, and by persevering produce a crop.” (Luke 8:4-15)

This is another parable that certainly applies to us today:

“Then he said to them, “Watch out! Be on your guard against all kinds of greed; a man’s life does not consist in the abundance of his possessions.” And he told them this parable: “The ground of a certain rich man produced a good crop. He thought to himself, ‘What shall I do? I have no place to store my crops.’ “Then he said, ‘This is what I’ll do. I will tear down my barns and build bigger ones, and there I will store all my grain and my goods. And I’ll say to myself, “You have plenty of good things laid up for many years. Take life easy; eat, drink and be merry.” “But God said to him, ‘You fool! This very night your life will be demanded from you. Then who will get what you have prepared for yourself?’ “This is how it will be with anyone who stores up things for himself but is not rich toward God.” (Luke 12:15-21)

What does the world tell us? Acquire all the money you can. There is certainly nothing wrong with having a reserve for tough times, but we are constantly told to store up as much as we can. This doesn’t mean that you should spend everything you earn, but seek God’s guidance on how He wants to use what has been given to you. Don’t store up a lot of money and then sit back and take it easy. We don’t know what’s going to happen tomorrow, so stay close to the Lord, do not put your faith in money.

“Whoever can be trusted with very little can also be trusted with much, and whoever is dishonest with very little will also be dishonest with much. So if you have not been trustworthy in handling worldly wealth, who will trust you with true riches? And if you have not been trustworthy with someone else’s property, who will give you property of your own? (Luke 16:10-12)

We’re being told here that if you are faithful with a little, the Lord will give you more to manage for him…and not just wealth, but ‘true riches’. He will give you more authority to carry out His will. Most importantly, we are told that you cannot serve God and money. Don’t think that making lots of money and giving small amounts on Sunday means that you are serving God. If you are truly following the Lord, you are tithing on Sundays and giving when and where He asks you to give. Your focus is on Him.

There are many lessons given to us in James chapter 4. One of them speaks directly to us today regarding how we are living our lives. We pursue worldly business and things with no thought about what the Lord wishes us to do. We don’t ask God for what we need, we try to do it all ourselves.

“What causes fights and quarrels among you? Don’t they come from your desires that battle within you? You want something but don’t get it. You kill and covet, but you cannot have what you want. You quarrel and fight. You do not have, because you do not ask God. When you ask, you do not receive, because you ask with wrong motives, that you may spend what you get on your pleasures.

You adulterous people, don’t you know that friendship with the world is hatred toward God? Anyone who chooses to be a friend of the world becomes an enemy of God. Or do you think Scripture says without reason that the spirit he caused to live in us envies intensely? But he gives us more grace. That is why Scripture says:
“God opposes the proud
but gives grace to the humble.”

Submit yourselves, then, to God. Resist the devil, and he will flee from you. Come near to God and he will come near to you. Wash your hands, you sinners, and purify your hearts, you double-minded. Grieve, mourn and wail. Change your laughter to mourning and your joy to gloom. Humble yourselves before the Lord, and he will lift you up.

Brothers, do not slander one another. Anyone who speaks against his brother or judges him speaks against the law and judges it. When you judge the law, you are not keeping it, but sitting in judgment on it. There is only one Lawgiver and Judge, the one who is able to save and destroy. But you—who are you to judge your neighbor?

Now listen, you who say, “Today or tomorrow we will go to this or that city, spend a year there, carry on business and make money.” Why, you do not even know what will happen tomorrow. What is your life? You are a mist that appears for a little while and then vanishes. Instead, you ought to say, “If it is the Lord’s will, we will live and do this or that.” As it is, you boast and brag. All such boasting is evil. Anyone, then, who knows the good he ought to do and doesn’t do it, sins.” (James chapter 4)

We must overcome the world and our focus on worldly things through faith in Jesus Christ:

“You, dear children, are from God and have overcome them, because the one who is in you is greater than the one who is in the world.” (1 John 4:4)

“This is love for God: to obey his commands. And his commands are not burdensome, for everyone born of God overcomes the world. This is the victory that has overcome the world, even our faith. Who is it that overcomes the world? Only he who believes that Jesus is the Son of God.” (1 John 5:3-5)

“I have told you these things, so that in me you may have peace. In this world you will have trouble. But take heart! I have overcome the world.” (John 16:33)

And finally, we are given warnings to those who are focused on wealth in this world and those that have taken advantage of the poor:

“Now listen, you rich people, weep and wail because of the misery that is coming upon you. Your wealth has rotted, and moths have eaten your clothes. Your gold and silver are corroded. Their corrosion will testify against you and eat your flesh like fire. You have hoarded wealth in the last days. Look! The wages you failed to pay the workmen who mowed your fields are crying out against you. The cries of the harvesters have reached the ears of the Lord Almighty. You have lived on earth in luxury and self-indulgence. You have fattened yourselves in the day of slaughter. You have condemned and murdered innocent men, who were not opposing you.” (James 5:1-6)

As you think about these things, remember what we’re told from this passage in Luke. No matter what you have done to this point, it’s never too late to allow God to change your life and accept His offer of salvation – until you leave this world. Once we die in this world, there are no more chances. The Bible is clear on this subject.

“There was a rich man who was dressed in purple and fine linen and lived in luxury every day. At his gate was laid a beggar named Lazarus, covered with sores and longing to eat what fell from the rich man’s table. Even the dogs came and licked his sores.

“The time came when the beggar died and the angels carried him to Abraham’s side. The rich man also died and was buried. In hell, where he was in torment, he looked up and saw Abraham far away, with Lazarus by his side. So he called to him, ‘Father Abraham, have pity on me and send Lazarus to dip the tip of his finger in water and cool my tongue, because I am in agony in this fire.’

“But Abraham replied, ‘Son, remember that in your lifetime you received your good things, while Lazarus received bad things, but now he is comforted here and you are in agony. And besides all this, between us and you a great chasm has been fixed, so that those who want to go from here to you cannot, nor can anyone cross over from there to us.’

“He answered, ‘Then I beg you, father, send Lazarus to my father’s house, for I have five brothers. Let him warn them, so that they will not also come to this place of torment.’

“Abraham replied, ‘They have Moses and the Prophets; let them listen to them.’

” ‘No, father Abraham,’ he said, ‘but if someone from the dead goes to them, they will repent.’

“He said to him, ‘If they do not listen to Moses and the Prophets, they will not be convinced even if someone rises from the dead.’ ” (Luke 16:19-31)

I just read a couple of articles about why Americans are never satisfied with what we have. Even though we are the richest nation on earth, we want more. It’s always interesting to read secular articles try to explain these things when the Bible does a much better job in one sentence. In the fallen world in which we live, material gain is never good enough.

“…..the eyes of man are never satisfied.” (Proverbs 27:20)

In the end, we all need to remember why we’re here. We’re not here to live nice, comfortable lives and focus on gaining material wealth. We are here to love and serve our Creator in a spiritual war…just as He loves us. If our enemy has diverted you from your true purpose through worldly pursuits, it’s time to ask God for forgiveness and start on His path for your life. Remember, if you’re reading this, you still have time.

Lastly, it doesn’t take a doctoral degree to see what most corporations focus on – the pursuit of money and power. There’s not a whole lot of difference between corporations and governments in the world today (both are in the business of power and money). In some areas, they actually seem to be blending together. Where is this pursuit of money leading us? The above verses spell it out quite clearly. In addition, the Bible tells us that we will not be able to buy or sell unless we accept the mark of the beast. While I don’t believe that the mark of the beast is technology related (previous post – this is a spiritual mark), I do believe that technology will certainly come into play. How else could the coming political beast prevent buying and selling? By removing cash from the world’s economic system. To buy and sell, you will need to be part of the ‘system’. Who will control the ‘system’? In the physical world, it will obviously be this beast. In the spiritual realm, satan will be in control of this. He will put enormous pressure on us to relent and give up – give up our life in eternity. Now think about this – who is inventing the technology to do this? Our government? No. Private enterprise – corporations. Also remember that as larger and larger mergers & acquisitions take place, more control is placed in the hands of fewer people. The same thing is happening as governments grow larger and exert more control over us. So, fewer and fewer people are controlling more and more of our money supply, economic policies, job opportunities, etc. Does this make you a little uneasy? It should. Bible prophecy tells us that power will be consolidated at the very end of this age. It’s happening right in front of us.

Again, this isn’t an attack, it’s the truth. Corporations make decisions on what’s best for the company and pay no attention to whether it’s the correct, Biblical thing to do. In effect, they are not following God’s plan, but our enemy’s. If you are thinking that it is impossible to run a company according to Biblical principles in today’s world, then you believe our enemy’s lies – just as I did. This type of Godless decision-making will ultimately lead to technology that places the world into bondage. There will remain only one way to get free – Jesus Christ.

If you are someone in a leadership position within a company, ask yourself who you are following. Which team are you on? Regardless of what you’ve been told, there are only two teams. Be honest with yourself. Don’t let our enemy tell you that your life should be used to make money and die rich. If you lead a Godless life in the pursuit of money and never ask for forgiveness – never receive God’s offer of salvation, there will be nothing that He can do for you at that point. You will have rejected all that He did to save you from an eternity in desolation. Worldly success is a deception – don’t be deceived. True success is walking in our Father’s perfect will.

“Command those who are rich in this present world not to be arrogant nor to put their hope in wealth, which is so uncertain, but to put their hope in God, who richly provides us with everything for our enjoyment. Command them to do good, to be rich in good deeds, and to be generous and willing to share.” (1 Timothy 6:17-18)

Posted by: John Gilmore | September 16, 2006

Wealth and the Bible – Wall St. Journal Article

After writing the previous post, I saw this in today’s Wall Street Journal:

Wall Street’s profit undertow: drugs and anxiety
By Tim McLaughlin 1 hour, 31 minutes ago

NEW YORK (Reuters) – Wall Street’s push for record profits is ruining careers, tearing apart families and keeping drug dealers busy, mental health experts say.
While record bonuses make some Wall Street bankers feel invincible, others become emotional wrecks from pressure to perform and some hit rock bottom, experts say.
Harris Stratyner, a psychologist at Caron’s New York Recovery Center, said some executives he treats are experimenting with cocaine, opiate-based drugs, Ecstasy and marijuana, as well as abusing alcohol.

“It’s like they’re chasing a dream. Even when they make tremendous profits, they’re still worried,” he said.

Alden Cass, a clinical psychologist who counsels Wall Streeters with drug addictions, said drug abuse and high anxiety are undercurrents to the current boom.
“When things are really good, they feel invulnerable,” Cass said. “That can lead to adultery, substance abuse, problems with the law.”

When it comes to profits, things are really good.

Six of the largest U.S. investment banks — Goldman Sachs, Lehman Brothers, Citigroup, JPMorgan & Chase Co., Morgan Stanley and Bear Stearns — combined for $17.6 billion in first-quarter profit this year. That’s after shelling out $28.8 billion for pay and benefits, financial statements show.

Those profit and pay figures are more than double those seen in the first quarter of 2000, the last days before the dot-com bubble burst. New York’s comptroller estimates Wall Street’s 2006 bonuses will generate $1.6 billion in state tax revenue.

COCAINE AND HILLBILLY HEROIN

“To my knowledge, we have not seen an uptick in drug use,” Morgan Stanley spokeswoman Jean Marie McFadden said.
The other five firms declined comment or did not return telephone calls.
But Cass said opiate abuse among his clients is rising and they openly talk about being hooked on prescription drugs like OxyContin, known as hillbilly heroin.

“That’s what has changed from previous booms on Wall Street,” he said.
Cass and Stratyner said their clients sometimes conceal their habits by taking prescription drugs they get for back surgery or sports-related injuries. The Internet has also expanded the black market for drugs.

Wall Street professionals in their 20s use Ritalin and Adderall, prescription drugs used to treat attention-deficit disorder and hyperactivity, to enhance their performance as they grind out 100-hour weeks, Cass said.

Big bonuses and the need to blow off steam have helped invigorate demand for cocaine in Manhattan, according to two junior bankers who did not want to be named.
Juan Rodriguez, convicted of selling drugs to investment bankers and other professionals, said his clients never complained about the price of cocaine, even as it escalated.

“My customers were all business individuals,” Rodriguez said, citing Morgan Stanley bankers as among his clients.

Morgan Stanley said the company has a strong policy against substance abuse and uses random drug testing.

PASSING THE TEST

One hiring manager at a major New York bank said new staff must take a urine test, which is typical for the industry. But he said new hires can choose when to schedule the test during a 45-day period before their start date.

“Our drug test is not so much a test of whether you actually take drugs as it is an intelligence test to see if you can figure out how long it takes to get traces of the drug out of your system,” said the manager, who asked not to be named.
The hiring manager said his employer also had a policy of random drug tests for employees but that in several years he had never encountered anyone subjected to such a test.

Drugs are not the only reason for executive meltdowns.

Overwhelming pressure and anxiety to meet profit goals undid star trader David Becker as he rose the Citigroup ladder.
Nine months after becoming global commodities chief, Becker found himself on the fast track to prison. The largest U.S. bank discovered in 2004 that Becker and others conspired to overstate profits by $20 million.

Becker, 41, pleaded guilty and is serving a 15-month sentence in federal prison. He declined to comment.

Before he committed his crime, he sought psychiatric help to deal with the pressure of balancing family and career, court papers show.

A metaphor for his life was a painting he owned depicting a man being pulled by all four limbs, Becker’s psychiatrist, Dr. Barbara Deutsch, wrote to the judge in the case.

“He felt enormous pressure to make the group’s budget at all costs,” Deutsch wrote. “He felt identified with this tortured man.”

Posted by: John Gilmore | September 16, 2006

Wealth and the Bible – Private Equity & Hedge Funds

If you regularly read the business section in your local newspaper or subscribe to the Wall Street Journal, then you have been reading over the past few years about the rise of ‘Private Equity’ and Hedge Funds. We’re going to spend some time discussing these funds in this post along with an article that was published today in the Wall Street Journal. If you are unfamiliar with these funds, you’ll gain a little insight into what they are and what they do. We’re not going to go into details, we’ll simply look at what they do and apply to them what the Bible says about wealth and the accumulation of wealth. If you are (or were) wealthy and invested in these funds, you are probably starting to feel a little uncomfortable – because you know where this is going……

Hedge funds and private-equity funds are pools of private investor money. They typically boast of very high returns and therefore, attract large amounts of cash from very wealthy investors. There is a high degree of risk involved with these funds, but over recent years, the returns have been large enough to outweigh any perceived risk – and billions of dollars have flowed into them. Because of the promised high returns, they charge very high fees which are typically 2% of assets under management every year and 20% of any profits. So, they must be both aggressive and creative in order to make money for themselves and to keep their investors happy…..and from withdrawing their money. They have made billions of dollars in recent years for themselves and their investors. We’re going to take a brief look at how they have done this.

Have you ever been called by a hedge fund or private equity fund looking for new investment dollars? The answer for the vast majority of us is – no. The reason is that these funds cater to the rich. They are looking for multi-million dollar initial investments, not the few dollars you and I would put into a mutual fund every month. So, they are investment vehicles for the rich and are certainly influenced by very rich people. What does the Bible say about the rich and the pursuit of riches? We have already discussed this, so I will summarize here. The Bible tells us that we should seek the Lord and His Righteousness first – other things we need will be given to us. Do not love money, love the Lord. He will take care of us and give us all we need. What do you think the Lord sees when he looks at Wall Street and these funds? He sees wealthy people pursuing ever more wealth. Do these funds make money at the expense of the poor or less fortunate? Yes – they do. The pursuit of money has blinded us to how this money is made. This is what we’re going to focus on. Do you think the Lord approves of this type of behavior? We’ve already covered this topic in previous posts and the Bible is clear – the love of money is the root of all evil. It can’t get any clearer than this. So, if these funds and Wall Street in general are pursuing riches at all costs, how long do you think the Lord will allow it to continue? Will He allow the rich to continue to exploit the poor forever? I believe we’re about to find out that the answer is no. We are beginning to see this today – July 27, 2007. Let’s take a quick look at events that have transpired over the past few months that are beginning to have a very direct impact on Wall Street.

We discussed the current subprime mortgage problem in a previous post. Let’s do a quick review of what has happened and what may happen in the future as a result of these events. Subprime mortgages are mortgages that are given to homebuyers with poor credit. These mortgages typically have much higher overall interest rates than mortgages given to consumers with good credit. It appears that many of them are not fixed rate loans, but have adjustable interest rates so that the mortgage broker or bank can offer very low initial interest rates that will reset at a much higher rate at a later date. It’s what many would call a ‘teaser’ rate that looks good to the borrower and sells more mortgages. As the Federal Reserve has increased the Federal Funds Rate, many of these mortgages have reset at much higher interest rates which have then increased the monthly payments that many of these subprime borrowers must pay every month. As a result, many of the subprime borrowers have been unable to make these increased payments leading to a very dramatic increase in home foreclosures.

You may be wondering how this has affected Wall Street and hedge funds. Good question. Until recently, a housing downturn could have affected Wall Street due to the overall impact to the U.S. economy, but now there is a much more direct correlation. In recent years these loans have been sold by the banks who initiated the loans to the big Wall Street investment banks. The Wall Street banks have then re-packaged these loans into investment securities called collateralized debt obligations or CDO’s. These CDO’s have then been bought by many different hedge funds. In recent years, these have been attractive to investors because they promised high returns and with the housing boom and low interest rates, the risk involved seemed muted. With the downturn in the housing market and increased interest rates, it has become apparent that many subprime borrowers were issued loans they could not afford. They can’t refinance because the value of their home has not appreciated (in some cases has depreciated) and interest rates are now higher than their initial rate….so they’re trapped. With no options, they lose their homes in foreclosure. We can talk about why this has happened, but the bottom line is that many have taken advantage of the poorest of us in the pursuit of wealth. I’m sure that the borrowers, brokers, banks and Wall Street have all played a part in this, but the bottom line is that many wealthy people were profiting from these loans. From what we read, there is very little concern about the people who have lost their homes as a result of this. The vast majority of articles we read are about how this could affect hedge funds, the housing market and the stock market. Ever wonder what the Bible says about loaning money to the poor at high interest rates? The answer is there and remember, the Lord’s Word applies to us today, just as it applied to everyone alive when it was written.

“He who increases his wealth by exorbitant interest amasses it for another, who will be kind to the poor.” (Proverbs 28:8)

The Lord is clear: if you continue to exploit the poor, your wealth will be taken from you.

“You trample on the poor
and force him to give you grain.
Therefore, though you have built stone mansions,
you will not live in them;
though you have planted lush vineyards,
you will not drink their wine.
For I know how many are your offenses
and how great your sins.
You oppress the righteous and take bribes
and you deprive the poor of justice in the courts.
Therefore the prudent man keeps quiet in such times,
for the times are evil.
Seek good, not evil,
that you may live.
Then the LORD God Almighty will be with you,
just as you say he is. “ (Amos 5:11-14)

“He oppresses the poor and needy.
He commits robbery.
He does not return what he took in pledge.
He looks to the idols.
He does detestable things.
He lends at usury and takes excessive interest. Will such a man live? He will not! Because he has done all these detestable things, he will surely be put to death and his blood will be on his own head.” (Ezekiel 18:12-13)

“The LORD takes his place in court;
he rises to judge the people.
The LORD enters into judgment
against the elders and leaders of his people:
“It is you who have ruined my vineyard;
the plunder from the poor is in your houses.
What do you mean by crushing my people
and grinding the faces of the poor?”
declares the Lord, the LORD Almighty.” (Isaiah 3:13-15)

There are many other verses, but we’ll stop there. Where is this subprime problem leading? Hedge funds that invested heavily in these subprime securities are closing. Debt markets are tightening due to investor’s adversity to the perceived increase in risk. This, in turn, is making it much harder for private equity companies to fund their buyout deals. This issue, coupled with the housing downturn, is causing the stock market to fall (the NYSE dropped over 300 points yesterday). It shouldn’t surprise anyone who is spiritually mature that the exploitation of the poor by the wealthy is turning around to bite the wealthy. Will the current situation end softly or are we facing something much more dramatic? I believe we are seeing the beginning of the end of the financial dominance of the U.S. What we are seeing is only the beginning as the Lord begins to redistribute wealth from those focused on themselves and the pursuit of money to those who are following Him and His kingdom.

The following article appeared in the Wall Street Journal today. Take note of who is benefiting from the efforts of private equity and who is suffering.

IN THE TRENCHES
How a Blackstone Deal
Shook Up a Work Force
Layoffs at Travelport,
Dividend for Investors;
‘On Pins and Needles’

By IANTHE JEANNE DUGAN
July 27, 2007; Page A1

CENTENNIAL, Colo. — Not long after the Blackstone Group bought Travelport Ltd. last August, workers at the company’s office campus here began feeling the squeeze.
Two months after the deal closed, scores of employees were lugging boxes of personal belongings to their cars, having lost their jobs. Under Blackstone’s ownership, the travel-reservations conglomerate has laid off 841 people, about 10% of its work force. Blackstone, a private-equity firm, has already recouped all of the money it invested in Travelport.
__________________________________
RAPID PACE

• The Situation: After Blackstone Group bought Travelport, changes came swiftly for some workers.
• The Background: To capitalize on their investments more quickly, private-equity firms have been overhauling companies faster.
• The Bottom Line: Travelport has laid off 841 workers, and Blackstone has already recouped its investment.
_______________________________
Similar scenes have been unfolding at companies around the nation, a human toll of the corporate-buyout boom. Private-equity firms, which say they bring sorely needed financial discipline to poorly run companies, have been slashing costs and extracting profits at warp speed. As the cycle of buying and selling companies has intensified, life in the trenches can be unstable and traumatic.
By the end of 2007, Travelport expects to slash costs by $150 million. Last week, it brought public its online reservations unit, Orbitz Worldwide Inc., using the proceeds to pay off debt. Its Galileo unit, which feeds airline information to travel agents, is the focus of much of the overhaul. Many of the job cuts have occurred at the company’s data-operations center here outside Denver, where some jobs have been outmoded by shifts in technology and in the way people buy airline tickets and rent cars, executives say.

John Kliegel, 41 years old, a computer-systems analyst, and his twin, Russell, a technical writer, were both laid off. They’re selling the house they share because they can no longer afford it. Don Kleppinger, a 46-year-old software engineer with five sons, lost his job, leaving him without health insurance for several months. Grace Covyeau, 63, who lost her job as a telecommunications engineer, took a part-time job last month making sandwiches and coffee at King Soopers grocery store.
“It came as a shock,” says Michael Berson, 49, who lost his job as a data engineer in October, three years after receiving a “Super Star” award for saving the company $1.2 million on telecommunications costs. Mr. Berson has moved to Tulsa, where he is looking for a new job.

In addition to the 841 layoffs, 1,500 Travelport workers have left voluntarily since the buyout. The company says it has hired 1,582 new workers during that period, and has invested heavily in new technology.

Travelport Chief Executive Jeff Clarke describes the Centennial operation as the “factory” through which thousands of transactions pass every second. “We need to shift into new technologies,” he says. “Some require productivity improvements and often will lead to layoffs.”

To complete their $4.3 billion Travelport purchase, Blackstone and Technology Crossover Ventures, a Palo Alto, Calif., venture-capital firm that now owns 11%, invested $1 billion and borrowed the rest. That debt landed on Travelport’s balance sheet. In March, Travelport borrowed an additional $1.1 billion and paid it out as a dividend to the two firms, returning all their money in just seven months.

“This is likely one of the quickest returns of invested capital for a private-equity deal of its size,” Travelport’s new chief financial officer, Michael Rescoe, said in a May conference call with analysts.

The buyout boom has been lucrative for Blackstone partners and investors, which include large institutions such as pension funds. Last year, Blackstone managed assets valued at about $88 billion and earned $2.27 billion, according to a prospectus for its own initial public offering in June. Its chief executive, Stephen Schwarzman, who resides in a 35-room Manhattan apartment, made more than $650 million on the offering and retained a 24% stake now worth more than $5 billion.
Such riches raise hackles among laid-off workers. “These investments are helping the fat cats by hurting the little guys,” says Ms. Covyeau. “It’ll make you sick.”
Over the past five years, private-equity firms have bought more than 10,000 companies. This year, through June, 1,399 deals worth $582 billion have been announced, according to data provider Dealogic.

In order to recoup their investments quickly, buyout firms are speeding up everything — closing deals more swiftly, cutting jobs and restructuring companies faster, and taking them public sooner. They’ve also been taking big cash payments out of the companies they buy, as Blackstone did with Travelport. These payments, known as “dividend recapitalizations,” reached a record $25 billion in 2006, and are on pace to exceed that amount this year, according to Standard & Poor’s Corp. In 2001, they amounted to just $1 billion. The payments increase pressure to cut costs.
“Layoffs are far more likely at firms that pay these dividends,” says Steven Bavaria, who oversees bank-loan ratings at Standard & Poor’s. “Employees left behind are doing more work, looking over their shoulders, feeling stressed.”
At a congressional hearing in May, the Private Equity Council, a lobbying group, testified that buyouts often result in long-term job growth. It cited the Carlyle Group’s 2005 purchase of auto-parts company AxleTech International Holdings Inc., which grew to 568 from 425 workers after it began supplying parts to military-vehicle makers.

In other cases, job cuts follow buyouts. After buying Hertz Global Holdings Inc. for $15 billion from Ford Motor Co. in late 2005, Clayton, Dubilier & Rice Inc. and a unit of Merrill Lynch & Co. collected a $1 billion dividend, then took the company public. This year, Hertz cut more than 2,000 jobs, or about 8% of its work force.
Last summer, Blackstone teamed up with Carlyle, Kohlberg Kravis Roberts & Co. and other buyout firms to buy VNU, the parent of Nielsen Media Research and ACNielsen, for about $10 billion. In December, the firm announced 4,100 job cuts, about 10% of its work force.

“None of us wants a single job to be cut,” says Paul “Chip” Schorr IV, the Blackstone senior managing director who orchestrated the purchase of Travelport and now serves as its chairman. Mr. Schorr, 40, joined Blackstone in 2005 from the venture-capital arm of Citigroup Inc.

The layoffs at Travelport were one of many steps taken to revamp the company. All told, Travelport has reduced operating costs by 6%, the company says.
Before Blackstone bought it, Travelport was operating as the Travel Distribution Systems unit of Cendant Corp., a travel and real-estate conglomerate based in Parsippany, N.J. Cendant’s founder and chief executive, Henry Silverman, a former Blackstone partner, had cobbled together Cendant’s travel unit through a series of acquisitions.

Galileo, which Cendant bought in 2001, gets paid by airlines to feed information about airline schedules, pricing and inventory to travel agents. In addition, it runs the reservations system for United Airlines. Galileo is the largest contributor of Travelport revenue, which totaled $2.6 billion last year.

That business has been suffering. The Sept. 11 attacks curtailed airline travel, as did the outbreak of severe acute respiratory syndrome, or SARS. In 2003, struggling airlines reduced the fees they paid to middlemen such as Galileo.
Cendant also had gotten into the online travel-agency business by buying Orbitz, which competes with Travelocity, Expedia and others. Each time consumers use the site to book reservations for flights, rental cars and hotels, Orbitz collects a fee. As more consumers turned to the Internet for travel planning, the business grew.
But as airlines and hotels began handling reservations through their own Web sites, the middlemen lost business. In 2001, systems such as Galileo had handled 70% of airline reservations, according to Forrester Research, a market-research firm. These days, such systems handle just 50%. Cendant began laying off employees, and in 2005, it decided to split itself into four parts.

Mr. Schorr believed that Cendant hadn’t fully integrated the systems behind the travel businesses it had acquired. “It was like having a house with eight kitchens,” he says. If it eliminated overlapping systems, he believed, the business could become more efficient. He also saw growing opportunities in foreign markets such as the Middle East and Asia.

On Aug. 23, the day Blackstone took over, Mr. Clarke wrote to employees on an internal blog: “For most of us, our jobs won’t change.” Mr. Clarke, who had become chief executive a few months earlier, previously held senior positions at Computer Associates and at Compaq Computer Corp.

Some employees believed Blackstone’s arrival would ease the belt-tightening and stress that had begun under Cendant. “A lot of us thought these layoffs would stop,” says Gina Fugazzi, 51, who oversaw the company’s voice systems in the U.S. “There was no more to cut.”

Others had heard enough about how private-equity firms operate to be concerned about their jobs. Ms. Covyeau, the telecommunications manager, says many employees were “aware that the pattern at private-equity firms was streamlining work forces.” Anxiety, she says, began rising.

In the blog, Mr. Clarke noted to employees that Travelport intended to re-engineer operations to reduce overlap and to eliminate “activities that are not contributing to our success.”

The company decided to overhaul the telecommunications center housed in Centennial. “We are automating work that was done manually,” explains Mr. Clarke.
Within weeks of the buyout, at a meeting with employees in Centennial, some managers warned that more cuts were coming. Ms. Covyeau says she began packing her boxes and told a manager: “Please, just give me a severance package and let me out of here.”
One morning in October, managers in Centennial sent emails instructing employees to report to various conference rooms and cafeterias. Ms. Fugazzi says her heart sank when she walked into her designated room and found only about 20 people. “I suddenly realized I was in a group getting laid off,” she says. A colleague, she recalls, spotted a tray of bagels and coffee and chortled: “Looks like this is our last supper.”

A manager told them their jobs were being cut for economic reasons, according to several people who were there. Some employees burst into tears; others stared stoically. “I was devastated,” recalls Ms. Fugazzi, who says she had planned to retire in four years. “I had the mentality that if you worked hard, you could keep your job forever.”

When they got back to their desks, their email had been disabled. Guards lingered while employees filled boxes with belongings. The company declined to provide written references. In the confusion, some employees say, they were inadvertently given a wrong number to call about benefits — it was a sex line. A company spokesman says only eight employees received the incorrect number, and the company corrected the mistake right away.

All told, Travelport laid off about 500 people that month, including veterans in their 50s and 60s who say they had good performance reviews and relatively high salaries of about $100,000.

Most of the layoffs occurred at Galileo. Gordon Wilson, Galileo’s London-based chief executive, said in a written statement that many of the jobs had been outmoded by technology. For example, travel agents used to connect to Galileo’s system by phone. Now, many of them access it via the Internet.

The company offered laid-off employees two weeks severance for every year they worked, according to several employees. Mr. Wilson declined to provide details about the severance packages, which he called “generous.”

In December, Travelport announced the acquisition of Worldspan, one of Galileo’s chief competitors, for $1.4 billion. At a Christmas party at the Denver Museum of Nature and Science, a Travelport executive assured remaining employees that 2007 would be more stable, according to people who were there.

In January, Mr. Clarke, the chief executive, reorganized Travelport into three brands — Orbitz, Galileo and Gullivers Travel Associates, a wholesaler of hotel rooms and group tours. The company continued to cut jobs.

Galileo’s Mr. Wilson says he has warned employees of “further changes” as the company completes the Worldspan acquisition. The deal could produce about $100 million in cost savings through the consolidation of sales staffs, data centers, and other operations, Mr. Clarke says.

In this year’s first quarter, Travelport’s profits were up 36% over the year-earlier period, to $157 million. Half of the profit improvement was because of revenue growth, the company says, 25% was because of vendor-related cost reductions and 25% was from productivity improvements, including reductions in the work force.
Mr. Wilson says Travelport’s debt load has made it more urgent to generate cash. “If we can accelerate the reduction of our debt and therefore lessen our interest payments,” he says, “no one would expect management to do otherwise.”
With the Worldspan merger looming, employees at both companies say they are worried about their jobs. “We are all on pins and needles,” says one employee. “Everybody here feels it’s only a matter of time.”

For many laid-off employees, finding new jobs hasn’t been easy. Danny Carrasco, a software developer in his 50s, searched for five months before finding a job at a telecommunications company. Technical analyst Robert Renwick, 30, sent out more than 100 résumés over four months before landing a job at the local school district. He and his wife, a first-grade teacher, put off having children, he says. “I can’t believe they would ruin all these lives to make a couple extra pennies,” he says.
John Kliegel is earning 33% less as a program manager at a satellite company. His twin, Russell, is juggling job hunting with free-lancing. Mr. Kleppinger, the software engineer, once expected to retire at Travelport. He’s now earning 20% less at a new job.

After months of searching, writing résumés and reading books on how to interview, Ms. Fugazzi landed a job with the Colorado Department of Human Services. She earns about $33,000 less than she did at Travelport, counting her old bonus. But the government job, she says, “feels more secure.”
Write to Ianthe Jeanne Dugan at ianthe.dugan@wsj.com

Posted by: John Gilmore | September 16, 2006

Wealth and the Bible – The Federal Reserve

Wealth and the Bible – The Federal Reserve

The following article was printed today in the Wall Street Journal (August 7, 2007). It does an excellent job of describing what has happened to credit markets over the past decade as a result of decisions made by the Federal Reserve and Wall Street investment banks.

It’s obvious what is driving Wall Street – greed. Why else would you push mortgage companies for loans (that could be repackaged as securities) with no income documentation from the borrower that covered 100% of the purchase price? There has been no regard for the people who borrowed this money. No consideration of what would happen when these ‘introductory’ rates reset at higher interest rates. The only consideration was – how much money can I make? I’m sure that there were people within Wall Street who probably sounded an alarm – but it’s obvious that any objections were silenced by the people at the top. What is the root of all evil?
We are led to believe that no one truly understands how our economy works (from the world’s perspective) – it’s simply too complicated. If you only listen to the media and economic ‘experts’ and never study economic and monetary policy yourself, you’ll never understand the truth of the economic system you rely on. I now believe that there are a few men in the world today who do understand and control much of the world’s economic activity. Because this certainly relates to Biblical end time events – we’ll review the truth of our monetary system in the next post.

We have many ways to measure our economy and economic growth, but what really causes periods of growth and periods of recession? What triggers a recession or a depression? If the leaders of our nation really understood our economy and really cared about our livelihood, we’d obviously never have recessions or depressions. Over the past few years, I’ve read many who believed we finally had it all figured out. Now, uncertainty reigns again. Derivatives, CLO’s, CDO’s & SIV’s supposedly spread risk around and protect investors….now it appears that everything is much more closely interconnected than anyone thought. Based on what we’ve learned about wealth from the Bible, do you really want to align yourself with such greed by investing in Wall Street? Take note of the section below entitled ‘Casino Night’. Do you really want to place your life savings on black and have someone spin the wheel? At least in Vegas, you know your odds.

The actions of the Federal Reserve are more curious. Let’s disregard for a moment that the Federal Reserve is a private corporation with private owners and take a quick look at their actions over the past few years. After Sept 11, 2001, the Fed reduced the Federal Funds Rate (rate charged to banks) to 1%. This is what has contributed to the ‘easy money’ or liquidity flowing throughout the world (see article below for details). As the economy has strengthened in recent years, the Federal Funds rate has steadily climbed to 5.25%. This, in effect, has raised the cost of everything in this country. The reason we are consistently given for this increase is that the Fed is concerned about inflation. We are always told that inflation is the enemy and must be contained at all costs. I agree, from an economic standpoint, inflation can destroy economic growth. But the question we must ask is this – is the Fed truly concerned about inflation?

Economists measure inflation in a couple of ways – the Consumer Price Index (CPI) and the Producer Price indexes (PPI) are two of the most prominent measures of inflation. Both measure the change in prices (for consumers and businesses) over time. What is something else that impacts the rate of inflation that doesn’t get mentioned much in the media? The money supply. It stands to reason that as the supply of money in a nation increases, the chance of inflation increases. If you place more money in the hands of consumers and businesses, then there is a very high probability that everyone will buy more and invest more and drive up the prices of everything from consumer goods and services to stocks. Not sure whether this is an acceptable way to measure inflation? It used to be a very accurate measure of inflation – by the Federal Reserve. The following was taken from Wikipedia:
“In January 1987, with C.P.I. inflation down to only 1%, the Federal Reserve announced it was no longer going to use money supply aggregates, such as M2, as guidelines to control inflation, even though this method had been in use from 1979, apparently with great success. Previous to 1980, interest rates were used as guidelines; inflation was heavy. The Fed complained that the aggregates were confusing; Volcker was still chairman until August 1987, whereupon Alan Greenspan assumed the mantle, seven months after monetary aggregate policy had changed.”
Think about home equity loans. Low interest rates coupled with a hot housing market (again, this is inflation) has enabled many people to cash out equity in their homes. What have they done with this money? From what I’ve read, many have bought more stuff. This increases prices (supply and demand comes into play) and therefore, the rate of inflation increases.

So, does the Federal Reserve measure the overall money supply in the U.S.? It did until March 23, 2006. On this date, the Fed stopped publishing data on the M3 money supply (total measurement of our money supply). The following information was taken from Wikipedia:

“The most common measures are named M0 (narrowest), M1, M2, and M3. In the United States they are defined by the Federal Reserve as follows:
M0: The total of all physical currency, plus accounts at the central bank that can be exchanged for physical currency.
M1: M0 – those portions of M0 held as reserves or vault cash + the amount in demand accounts (“checking” or “current” accounts).
M2: M1 + most savings accounts, money market accounts, small denomination time deposits and certificate of deposit accounts (CDs) of under $100,000.
M3: M2 + all other CDs, deposits of eurodollars and repurchase agreements.
As of March 23, 2006, information regarding M3 will no longer be published by the Federal Reserve, ostensibly because it costs a lot to collect the data but doesn’t provide significantly useful data[1]. The other three money supply measures will continue to be provided in detail.
In an effort to reverse this change, Congressman Ron Paul introduced the now expired H.R.4892[2] on March 7th, 2006, and subsequently sponsored H.R.2754[3][4] on June 15th, 2007 which has been referred to the House Committee on Financial Services.”

The Fed has said that M3 data is not significant. Really? Apparently, it was important from 1979 to 1987 when they used the money supply to measure inflation very effectively. Why is it now not important? By not publishing this data, we don’t know how many dollars are in circulation throughout the world (coins, bills, checking accounts, foreign accounts, etc). Theoretically, you could estimate M3 from the other measures, but it would take alot of time and would only be an approximation. How much money are we talking about? At the time the Fed stopped publishing M3 data (March 2006), the total amount of our money supply equaled 10 trillion dollars. M3 data represented 3 trillion additional dollars in addition to M2. Not reporting 30% of our money supply is not significant? It is also interesting to note that the total value of our money supply has increased to 10 trillion dollars in 2006 from 4 trillion in 1990. So, our total ‘supply’ of dollars has more than doubled in only 16 years. Should it surprise us that the dollar is weakening against other currencies throughout the world? If the Fed was really concerned about inflation, why have they flooded the world’s markets with dollars and stopped publishing this data?

The final question we need to ask is this – is the Federal Reserve acting in our best interests (the nation) or is it acting in the interests of its owners? Do private companies act in the best interests of everyone or do they act in the best interests of their shareholders? What if the shareholders of the Fed have another motive for their actions? Remember, we are not talking about Godly people. If you are still not convinced that the Federal Reserve system is privately controlled, the following was taken from Wikipedia:

“In Lewis v. United States, the United States Court of Appeals for the Ninth Circuit stated that “the Reserve Banks are not federal instrumentalities for purposes of the FTCA [the Federal Tort Claims Act], but are independent, privately owned and locally controlled corporations.””

Let’s take a look at the Federal Reserve’s balance sheet. This information is taken from Wikipedia. The dollar amounts are in millions.

ASSETS:
Gold certificate account 11,037
Special drawing rights certificate acct. 2,200
Coin 932
Securities, repos and loans 812,372
Securities held outright 790,439
U.S. Treasury 790,439
Bills 277,019
Notes and bonds 513,420
Repurchase agreements 21,000
Loans 933
Items in process of collection 4,524
Bank premises 2,036
Other assets 37,767
Total Assets 870,868

So, the Federal Reserve has over $870 Billion dollars in assets.

The following analysis is also taken from Wikipedia. The figure that stands out to me is the amount of money the Federal Government (that’s you and me included) owes the Federal Reserve banking system. At the time this article was written (June 2007), the United States Government owes the Federal Reserve $790 Billion dollars. This represents 9% of our national debt. That’s the price we pay to the Fed to create our currency and manage the banking system. When the media discusses our national debt, why is this never mentioned? People in high places would prefer that we didn’t know.

Analyzing the Federal Reserve’s Balance Sheet reveals many interesting things:

• The Fed has over 11 billion in gold which is a holdover from the days the government used to back US Notes and Federal Reserve Notes with gold
• The Fed holds almost a billion in coinage not as a liability but as an asset. The Treasury Department is actually in charge of creating coins and US Notes. The Fed then buys coinage from the Treasury by increasing the liability assigned to the Treasury’s account
• The Fed holds 790 billion in US debt which means part of the national debt is held privately by the Federal Reserve.
• The Fed has about 21 billion in assets from Overnight Repurchase agreements. Repurchase agreements are the primary asset of choice for the Fed in dealing in the Open Market. Repo assets are bought by creating ‘Depository institution’ liabilities and directed to the bank the Primary Dealer uses when they sell into the Open Market.
• The 976 billion in Federal Reserve Note liabilities represents the total value of all dollar bills in existence
• The 16 billion in deposit liabilities of ‘Depository institutions’ shows that dollar bills are not the only source of government money. Banks can swap ‘Deposit Liabilities’ of the Fed for ‘Federal Reserve Notes’ back and forth as needed to match demand from customers, and the Fed can have the ‘Bureau of Engraving and Printing’ create the paper bills as needed to match demand from banks for paper money. The amount of money printed has no relation to the growth of the monetary base (M0).
• The 6 billion in Treasury liabilities shows that the Treasury Department doesn’t use a private banker but rather uses the Fed directly (the lone exception to this rule is Treasury Tax and Loan because government worries that pulling too much money out of the private banking system during tax time could be disruptive).
• The 96 million Foreign liability represents the amount of Federal Reserve deposits held by foreign central banks.
• The 6 billion in ‘Other liabilities and accrued dividends’ represents partly the amount of money owed so far in the year to private banks as part of the 6% dividend guarantee the Fed grants banks for not loaning out a percentage of their reserves
• Total capital represents the profit the Fed has earned which comes mostly from the assets they purchase with the deposit and note liabilities they create. Excess capital is then turned over to the Treasury Department and Congress to be included into the Federal Budget as “Miscellaneous Revenue”.

The question becomes – should the United States Government pay a private corporation to manage its money? I believe what we have all forgotten is that our money has no real value. Since 1971, our money is no longer, in any way, tied to the value of gold. So, our paper money is only good to use as long as everyone accepts it as money. If the dollar crashes on world markets, what will happen to our banking system? It won’t be good.

Starting to feel uncomfortable?

What if the private owners of the Federal Reserve are the same people who control much of our government behind the scenes? If you study all of the events of 9/11/2001, you will find that there were many suspicious financial transactions taking place before the event. Many ‘puts’ (bets that a stock will fall) were placed on airline stocks (including Boeing). The number of puts placed before the attacks were many times higher than the norm. Harddrives were recovered from ground zero that showed many millions of dollars in financial transactions related to the event that someone apparently thought would be ‘covered up’ and destroyed. Where are the billions of dollars worth of gold that was stored in the vaults of the World Trade Center? It seems to have vanished. Why doesn’t our mainstream media investigate these things? Whether you want to believe it or not, many people had prior knowledge of this event. It’s hard to believe, but it’s the truth.
So, what if this event was planned as a ‘false flag’ operation that would be used against us in order to slowly remove our freedoms in the name of the ‘war on terror’? Whether you want to believe it, this is exactly what is happening (Patriot and Military Commissions Act, the various ‘executive orders’ from President Bush). Don’t forget, we are dealing with very intelligent, deceptive people who place no value on your life or mine – they use our patriotism against us. What if, in connection with this event, the Federal Reserve lowered interest rates for a long time to give the appearance that they were helping us, but were, in effect, setting up the world for a major financial crisis? Is it a coincidence that at a time we are worrying about a future terrorist event, financial markets are experiencing a very high level of volatility? It’s as if we have been directed to the edge of a cliff, but we think that there’s no way we’re going over. It won’t happen – we’re America after all! We think we’re invincible. We’re being setup on many fronts – but are spiritually blind and can’t see our enemy. The world is going to tell us who can save us from these ‘terrorists’. The world will tell us who can restore financial stability. As Jesus told us – the father of lies is ruler of this world. Don’t trust the world. Place your faith in God and His truth.

Also keep in mind that President Bush has signed many executive orders that give him what amounts to dictatorship powers in the event of another ‘terrorist’ event. I wonder why mainstream media never reports on these things? Do you see where this is going? This ‘event’ will trigger not only the loss of our freedom, but could very well be the trigger for a worldwide financial collapse. Based on what is at stake, who do you think will be behind this event? What do you think will emerge from this event? There are people walking around today that could tell you exactly what is planned.

Still not convinced? What do some of the men who helped created the Federal Reserve have to say on the subject?

“Whoever controls the volume of money in any country is absolute master of all industry and commerce.”(Paul Warburg, drafter of the Federal Reserve Act)

“Permit me to issue and control the money of a nation and I care not who makes its laws.”(Mayer Amschel Rothschild)

It’s time to stop focusing on our pursuit of worldly things. God is giving us signs everywhere – we’re simply not paying any attention. This is going to change.
__________________________________________________

How Credit Got So Easy
And Why It’s Tightening
By GREG IP and JON E. HILSENRATH
August 7, 2007; Page A1

An extraordinary credit boom that created many first-time homeowners and financed a wave of corporate takeovers seems to be waning. Home buyers with poor credit are having trouble borrowing. Institutional investors from Milwaukee to Düsseldorf to Sydney are reporting losses. Banks are stuck with corporate debt that investors won’t buy. Stocks are on a roller coaster, with financial powerhouses like Bear Stearns Cos. and Blackstone Group coming under intense pressure.

The origins of the boom and this unfolding reversal predate last year’s mistakes. They trace to changes in the banking system provoked by the collapse of the savings-and-loan industry in the 1980s, the reaction of governments to the Asian financial crisis of the late 1990s, and the Federal Reserve’s response to the 2000-01 bursting of the tech-stock bubble.

When the Fed cut interest rates to the lowest level in a generation to avoid a severe downturn, then-Chairman Alan Greenspan anticipated that making short-term credit so cheap would have unintended consequences. “I don’t know what it is, but we’re doing some damage because this is not the way credit markets should operate,” he and a colleague recall him saying at the time.

Now the consequences of moves the Fed and others made are becoming clearer.
———————–
Fourth in a series
• Page One: Mortgage Mess Shines Light on Brokers’ Role
7/5/07
• Page One: How Wall Street Stoked The Mortgage Meltdown
6/27/07
• Page One: ‘Subprime’ Aftermath: Losing the Family Home
5/30/07
———————–

Low interest rates engineered by central banks and reinforced by a tidal wave of overseas savings fueled home prices and leveraged buyouts. Pension funds and endowments, unhappy with skimpy returns, shoved cash at hedge funds and private-equity firms, which borrowed heavily to make big bets. The investments of choice were opaque financial instruments that shifted default risk from lenders to global investors. The question now: When the dust settles, will the world be better off?
“These adverse periods are very painful, but they’re inevitable if we choose to maintain a system in which people are free to take risks, a necessary condition for maximum sustainable economic growth,” Mr. Greenspan says today. The evolving financial architecture is distributing risks away from highly leveraged banks toward investors better able to handle them, keeping the banks and economy more stable than in the past, he says. Economic growth, particularly outside the U.S., is strong, and even in the U.S., unemployment remains low. The financial system has absorbed the latest shock.

So far. But credit problems once seen as isolated to a few subprime-mortgage lenders are beginning to propagate across markets and borders in unpredicted ways and degrees. A system designed to distribute and absorb risk might, instead, have bred it, by making it so easy for investors to buy complex securities they didn’t fully understand. And the interconnectedness of markets could mean that a sudden change in sentiment by investors in all sorts of markets could destabilize the financial system and hurt economic growth.

Side Effects of Deflation Fight

When a technology stock and investment plunge and the Sept. 11 terrorist attacks pushed the economy into recession in 2001, the Fed slashed interest rates. But even by mid-2003, job creation and business investment were still anemic, and the inflation rate was slipping toward 1%. The Fed began to study Japan’s unhappy bout with deflation — generally declining prices — which made it harder to repay debts and left the central bank seemingly powerless to stimulate growth.

“Even though we perceive the risks [of deflation] as minor, the potential consequences are very substantial and could be quite negative,” Mr. Greenspan said in May 2003. A month later, the Fed cut the target for its key federal-funds interest rate, a benchmark for all short-term rates, to 1%. It said the rate would stay there as long as necessary, figuring low rates would bolster housing and consumer spending until business investment and exports recovered. The rate stayed at 1% for a year.

Mr. Greenspan raised vague fears with colleagues over the possibility this policy could create distortions in the economy, but he says today that such risks were an acceptable price for insuring against deflation. “Central banks cannot avoid taking risks. Such trade-offs are an integral part of policy. We were always confronted with choices.”

Fed officials who were there at the time generally maintain their policy was right, even in hindsight. The economy has grown steadily, avoiding both deflation and serious inflation. Yet some say they may have planted seeds of excess in the housing and subprime-loan markets.

Robert Eisenbeis, retired research director at the Federal Reserve Bank of Atlanta, says the Fed overreacted to the threat of deflation and kept rates low for too long. As a result, it “overstimulated the housing market, and now we’re dealing with the consequences.”

Edward Gramlich, a Fed governor in Washington from 1997 to 2005, says he failed to realize at the time that low rates were making it so easy for lenders to market subprime mortgages with low introductory rates. The Fed and other regulators could have prevented some of the resulting pain with more rigorous supervision of mortgage lenders besides banks, he says. “We didn’t have that, and we’re paying for it now.”
In June 2004, the Fed began to raise the short-term target rate, eventually taking it to 5.25%, where it has been for the past year. Such a boost usually leads to a rise, as well, in long-term rates, which are important to rates on 30-year conventional mortgages and corporate bonds. This time, it didn’t. Mr. Greenspan expressed concern that investors were willing to accept low returns for taking on risk. “What they perceive as newly abundant liquidity can readily disappear,” he said in August 2005, six months before retiring. “History has not dealt kindly with the aftermath of protracted periods of low risk premiums.”

Looking back, he says today: “We tried in 2004 to move long-term rates higher in order to get mortgage interest rates up and take some of the fizz out of the housing market. But we failed.”

Something besides Fed policy was at work. Both Mr. Greenspan and his successor, Ben Bernanke, point to an unanticipated surge in capital pouring into the U.S. from overseas.

‘Global Saving Glut’

In June 1998, U.S. Treasury officials made a plea to China that they would be reminded of repeatedly in the following years. Thailand had devalued its currency in 1997, touching off a crisis in the region that led other countries to devalue and in some cases default on foreign debt. The yen was sliding. Chinese officials, who pegged their currency to the U.S. dollar, “let it be known…that if things kept going this way they’d have no choice but to devalue,” recalls Ted Truman, a Treasury official at the time. The U.S., fearing such a move would trigger another round of devaluations, urged the Chinese to hold their peg, and praised them when they did so.

The Journal’s Jon Hilsenrath discusses the origins of the credit boom and some of the lessons to be learned from its demise.

But times changed. As recessions and depressed currencies held down imports and goosed exports in other Asian countries, the countries ran trade surpluses that replenished foreign-exchange reserves. Determined never to be so tied to the onerous conditions of the International Monetary Fund, they have kept those policies in place. Thai reserves, effectively exhausted in 1997, now stand at $73 billion.
Long after the crisis passed, China’s economic fundamentals suggested its currency should rise against the dollar. China let it rise only slowly, continuing to juice exports and produce trade surpluses that pushed China’s foreign-exchange reserves above $1 trillion. When the U.S. pressed China to let its currency float, China reminded the U.S. of the fixed exchange rate’s stabilizing role in 1998. China put much of its cash — part of what Mr. Bernanke has called a “global saving glut” — into U.S. Treasurys, helping hold down long-term U.S. interest rates. Chinese government entities also recently poured $3 billion into U.S. private-equity firm Blackstone.

Mortgages for All

Lou Barnes, co-owner of a small Colorado mortgage bank called Boulder West Inc., has been in the mortgage business since the late 1970s. For most of that time, a borrower had to fully document his income. Lenders offered the first no-documentation loans in the mid-1990s, but for no more than 70% of the value of the house being purchased. A few years back, he says, that began to change as Wall Street investment banks and wholesalers demanded ever more mortgages from even the least creditworthy — or “subprime” — customers.

“All of us felt the suction from Wall Street. One day you would get an email saying, ‘We will buy no-doc loans at 95% loan-to-value,’ and an old-timer like me had never seen one,” says Mr. Barnes. “It wasn’t long before the no-doc emails said 100%.”

Until the late 1990s, the subprime market was dominated by home-equity lines used by borrowers to consolidate debt and by loans on mobile homes. But when the Fed held rates down after 2001, lenders could offer borrowers with sketchy credit histories adjustable-rate mortgages with introductory rates that seemed affordable. Mr. Barnes says customers were asking about “2/28” subprime loans. These offered a low starter rate for two years, then adjusted for the remaining 28 to a rate that was often three percentage points higher than a prime customer normally paid. Customers, he says, seldom appreciated how high that rate could be once the Fed returned rates to normal levels.

Demand from consumers, on one side, and Wall Street and its customers on the other side prompted lenders to make more and more subprime loans. Originations rose to $600 billion or more in both 2005 and 2006 from $160 billion in 2001, according to Inside Mortgage Finance, an industry publication.

At first, delinquencies were surprisingly low. As a result, the credit ratings for bonds backed by the mortgages assumed a modest default rate. Standards for getting a mortgage fell. About 45% of all subprime loans in 2006 went to borrowers who didn’t fully document their income, making it easier for them to overstate their creditworthiness.

The delinquency rate was a mirage: It was low mainly because home prices were rising so much that borrowers who fell behind could easily refinance. When home prices stopped rising in 2006, and fell in some regions, that game ended. Borrowers with subprime loans made in 2006 fell behind on monthly payments much more quickly than mortgages made a year or two earlier.

When banks get in trouble, federal deposit insurance encourages depositors not to flee, and in extreme circumstances, banks can borrow directly from the Fed. But banks are no longer the dominant lenders. After the S&L crisis in the 1980s and early 1990s, regulators insisted banks and thrifts hold more capital against risky loans. This tipped the playing field in favor of unregulated lenders. They financed themselves not by deposits but by Wall Street credit lines and by “securitization” of their loans — in effect, the sale of the loans to investors.

The consequences proved painful. New Century Financial Corp., founded in 1995 by three former S&L executives, was the nation’s second largest subprime lender by 2006. When its borrowers began falling behind, Wall Street cut off its lines of credit and forced it to buy back some of its poorly performing loans. New Century couldn’t fall back on deposit insurance or the Fed. It filed for bankruptcy protection in April, wiping out shareholders and triggering market-wide fears about the health of the subprime business.

LBO Boom

Home buyers were not alone. In August 2002, Qwest Communications International Inc. — heavily indebted, beaten down by the telecom bust and under investigation by the Securities and Exchange Commission — decided to sell its Yellow Pages business. Private-equity firms Carlyle Group and Welsh, Carson, Anderson & Stowe agreed to buy it for $7 billion, about $5.5 billion of it borrowed. The business produced steady cash flow that could be used to pay down the debt.

The buyers were worried they might not be able to borrow as much as they needed. “We were coming out of a pretty bad credit cycle,” says Daniel Toscano, managing director at Deutsche Bank, which helped to manage the fund-raising. Instead, they tapped into a gusher. Within a year, Dex Media Inc., as the business became known, was back in the market. It borrowed $889 million to pay a dividend to Carlyle and Welsh Carson, and then $250 million more to pay another dividend. In just 15 months, the private-equity buyers made back most of their investment and still owned the company.

By 2006, the volume of such leveraged buyouts was smashing records from the 1980s. Generous credit markets enabled private-equity firms to do larger deals and pay themselves bigger dividends. They boosted returns — and attracted more investors, which enabled even bigger deals.

As in subprime mortgages, lenders began to ease borrowing requirements. They agreed, for instance, to “covenant-lite debt,” which dropped once-standard performance requirements, and “PIK-toggle” notes, which allowed borrowers to toggle interest payments on and off like a faucet.

Bankers began marketing debt deals for companies that, unlike Yellow Pages, didn’t have comfortable cash flow. There was Chrysler, burning cash rather than producing it. And there was First Data Corp., whose post-takeover cash flow would barely cover interest payments and capital spending, according to Standard & Poor’s LCD, a unit of S&P which tracks the high-yield market.

Last month, investors began to balk. Now many banks find themselves having committed to lend about $200 billion that they had intended to turn over to investors, but can’t.

Let’s All Look Like Yale

The subprime and LBO booms required willing lenders. The stock-market collapse and low interest rates of 2001 to 2004 nurtured a class of investors and products to fill that role. Managers of pension and endowment funds long had divided their assets among domestic stocks, bonds and cash. The funds saw their performance suffer when the stock market and then bond yields tumbled.

A few endowments, most notably at Yale and Harvard, had for years been spreading their investments more broadly, going into hedge funds, real estate, foreign stocks, even timberland. The goal was holdings that wouldn’t suffer in sync with stocks in a bear market. Sure enough, in 2000 and 2001, even as stocks tumbled, Harvard Management Co. earned returns of 32.2% and -2.7% respectively. Yale’s returns were 41% and 9.2%.

Other institutions wanted their money managed the same way, seeding a flood of hedge funds that bought other untraditional investments such as credit derivatives. University endowments poured roughly $40 billion into hedge funds between 2000 and 2006, according to Hedge Fund Intelligence, a newsletter. “I call it the ‘Let’s all look like Yale effect,'” says Jeremy Grantham, chairman of Boston money manager GMO LLC.

Low interest rates made many investors willing to buy exotic securities in an effort to boost returns. Wall Street had just the vehicle: securitization, or turning loans that once sat quietly on banks’ books into securities that can be sold in global markets.

Securitization, long common in conventional mortgages, had been supercharged in the early 1990s when the federal Resolution Trust Corp. took over S&Ls that held more than $400 billion of assets. Though some thought it would take the RTC a century to unload them, it took only a few years. The agency successfully securitized new classes of assets, such as delinquent home loans or commercial loans.

In the late 1990s, Wall Street went a step further, packaging bigger pools of securities into collateralized debt obligations, or CDOs, and carving them into “tranches,” each with a different level of risk and return. Riskier tranches suffered the first losses if some underlying loans defaulted. Other tranches offered lower returns because riskier tranches would take the first hits if the business went sour.

Because of the way they were structured, some CDO tranches got triple-A ratings from Moody’s Investors Service and Standard & Poor’s even though they contained subprime loans. That lured traditionally conservative investors such as commercial banks, insurance companies and pension funds.

The upside was evident: Many borrowers got loans they wouldn’t otherwise have had. The taxpayer-backed deposit fund was less likely to bear the cost of sloppy lending practices. Banks shifted risks to investors more willing to bear them — leaving the banks able to make more loans. Investors could pick either more-risky or less-risky slices. And Wall Street middlemen made handsome profits.

Now the downside, too, is painfully evident. Final investors were so many steps removed from the original loans that it became hard for them to know the true value and risk of securities they bought. Some were satisfied with a triple-A rating on a CDO — seemingly as safe as a U.S. Treasury bond but with more yield. Yet as defaults ate through the cushion of lower-rated tranches with unexpected speed, rating agencies were forced to rethink their models — and lower the ratings on many of these investments.

Some structures were so opaque that markets couldn’t value them. But ratings cuts sometimes forced an acknowledgment that securities owned weren’t worth as much as thought. In May, Swiss bank UBS AG shut down a hedge fund after a $124 million loss. In June, two Bear Stearns hedge funds saw as much as $1.6 billion of investor capital wiped out by bad mortgage bets and pulled credit lines. The trouble spread to hedge funds in Sydney, Australia, a mortgage insurer in Milwaukee and a bank in Düsseldorf, Germany.

Even Harvard has been hit. The university lost about $350 million through an investment in Sowood Capital Management, a hedge-fund firm founded by one of the university’s former in-house money managers.

Casino Night

Recent events show that financial innovations meant to distribute risk can end up multiplying it instead, in ways neither regulators nor investors fully understand. Mr. Grantham, the Boston money manager, says his portfolios are behaving in ways he hadn’t expected.

Fed officials believe that even if their policies led to housing and debt bubbles, the strength of the overall economy shows that the policy was, on balance, the right one. Of course, that assumes the current problems don’t culminate in a recession.
Market veterans predict the most egregious underwriting practices and products will disappear, but the benefits of innovation will continue.

Lessons have been learned — the hard way. “The structures are here to stay,” says Glenn Reynolds, chief executive of research firm CreditSights. “But you have to run it like a prudent risk-taking venture, not like it’s casino night and you’re on a bender.”

Write to Greg Ip at greg.ip@wsj.com and Jon E. Hilsenrath at jon.hilsenrath@wsj.com

Posted by: John Gilmore | September 16, 2006

The End (of Wall Street)

I wrote the articles on ‘wealth and the Bible’ sometime in early to mid 2007. At the time, it appeared that the sub-prime housing market was heading for some serious trouble. It also seemed like there was a lot of lying, cheating and stealing going on – from the information I could find. I also posed a question at one point – how long will God allow this to continue? How long will He allow a small group of wealthy men – to continue to take advantage of us? The answer – it turns out – was less than a year.

Today is November 13, 2008. Over the past 2 months, we’ve watched the world’s economy seize up – prices for everything (stocks, bonds, commodities, etc) are plummeting. As bad as things are – they’re going to get worse. As I have mentioned multiple times before – when our wealth is gone – which path will we take? We’ve watched where the world’s path takes us – destruction. Will we choose a different path this time?

The article below sums up what really goes on in Wall St. firms and describes how greed drove the housing market to ruin. It’s always best to learn the truth of what happened from someone who has been in the game. If you have purchased stocks, bonds, CDO’s – whatever – from Wall St. – this will explain exactly what you purchased – a lie.

jg

____________________________
The End

by Michael Lewis Nov 11 2008

The era that defined Wall Street is finally, officially over. Michael Lewis, who chronicled its excess in Liar’s Poker, returns to his old haunt to figure out what went wrong.

Photoillustration by: Ji Lee

To this day, the willingness of a Wall Street investment bank to pay me hundreds of thousands of dollars to dispense investment advice to grownups remains a mystery to me. I was 24 years old, with no experience of, or particular interest in, guessing which stocks and bonds would rise and which would fall. The essential function of Wall Street is to allocate capital—to decide who should get it and who should not. Believe me when I tell you that I hadn’t the first clue.

I’d never taken an accounting course, never run a business, never even had savings of my own to manage. I stumbled into a job at Salomon Brothers in 1985 and stumbled out much richer three years later, and even though I wrote a book about the experience, the whole thing still strikes me as preposterous—which is one of the reasons the money was so easy to walk away from. I figured the situation was unsustainable. Sooner rather than later, someone was going to identify me, along with a lot of people more or less like me, as a fraud. Sooner rather than later, there would come a Great Reckoning when Wall Street would wake up and hundreds if not thousands of young people like me, who had no business making huge bets with other people’s money, would be expelled from finance.

When I sat down to write my account of the experience in 1989—Liar’s Poker, it was called—it was in the spirit of a young man who thought he was getting out while the getting was good. I was merely scribbling down a message on my way out and stuffing it into a bottle for those who would pass through these parts in the far distant future.

Unless some insider got all of this down on paper, I figured, no future human would believe that it happened.

I thought I was writing a period piece about the 1980s in America. Not for a moment did I suspect that the financial 1980s would last two full decades longer or that the difference in degree between Wall Street and ordinary life would swell into a difference in kind. I expected readers of the future to be outraged that back in 1986, the C.E.O. of Salomon Brothers, John Gutfreund, was paid $3.1 million; I expected them to gape in horror when I reported that one of our traders, Howie Rubin, had moved to Merrill Lynch, where he lost $250 million; I assumed they’d be shocked to learn that a Wall Street C.E.O. had only the vaguest idea of the risks his traders were running. What I didn’t expect was that any future reader would look on my experience and say, “How quaint.”

I had no great agenda, apart from telling what I took to be a remarkable tale, but if you got a few drinks in me and then asked what effect I thought my book would have on the world, I might have said something like, “I hope that college students trying to figure out what to do with their lives will read it and decide that it’s silly to phony it up and abandon their passions to become financiers.” I hoped that some bright kid at, say, Ohio State University who really wanted to be an oceanographer would read my book, spurn the offer from Morgan Stanley, and set out to sea.

Somehow that message failed to come across. Six months after Liar’s Poker was published, I was knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share about Wall Street. They’d read my book as a how-to manual.

In the two decades since then, I had been waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents’ world when you can buy it, slice it up into tranches, and sell off the pieces?

At some point, I gave up waiting for the end. There was no scandal or reversal, I assumed, that could sink the system.

Then came Meredith Whitney with news. Whitney was an obscure analyst of financial firms for Oppenheimer Securities who, on October 31, 2007, ceased to be obscure. On that day, she predicted that Citigroup had so mismanaged its affairs that it would need to slash its dividend or go bust. It’s never entirely clear on any given day what causes what in the stock market, but it was pretty obvious that on October 31, Meredith Whitney caused the market in financial stocks to crash. By the end of the trading day, a woman whom basically no one had ever heard of had shaved $369 billion off the value of financial firms in the market. Four days later, Citigroup’s C.E.O., Chuck Prince, resigned. In January, Citigroup slashed its dividend.

From that moment, Whitney became E.F. Hutton: When she spoke, people listened. Her message was clear. If you want to know what these Wall Street firms are really worth, take a hard look at the crappy assets they bought with huge sums of ­borrowed money, and imagine what they’d fetch in a fire sale. The vast assemblages of highly paid people inside the firms were essentially worth nothing. For better than a year now, Whitney has responded to the claims by bankers and brokers that they had put their problems behind them with this write-down or that capital raise with a claim of her own: You’re wrong. You’re still not facing up to how badly you have mismanaged your business.

Rivals accused Whitney of being overrated; bloggers accused her of being lucky. What she was, mainly, was right. But it’s true that she was, in part, guessing. There was no way she could have known what was going to happen to these Wall Street firms. The C.E.O.’s themselves didn’t know.

Now, obviously, Meredith Whitney didn’t sink Wall Street. She just expressed most clearly and loudly a view that was, in retrospect, far more seditious to the financial order than, say, Eliot Spitzer’s campaign against Wall Street corruption. If mere scandal could have destroyed the big Wall Street investment banks, they’d have vanished long ago. This woman wasn’t saying that Wall Street bankers were corrupt. She was saying they were stupid. These people whose job it was to allocate capital apparently didn’t even know how to manage their own.

At some point, I could no longer contain myself: I called Whitney. This was back in March, when Wall Street’s fate still hung in the balance. I thought, If she’s right, then this really could be the end of Wall Street as we’ve known it. I was curious to see if she made sense but also to know where this young woman who was crashing the stock market with her every utterance had come from.

It turned out that she made a great deal of sense and that she’d arrived on Wall Street in 1993, from the Brown University history department. “I got to New York, and I didn’t even know research existed,” she says. She’d wound up at Oppenheimer and had the most incredible piece of luck: to be trained by a man who helped her establish not merely a career but a worldview. His name, she says, was Steve Eisman.

Eisman had moved on, but they kept in touch. “After I made the Citi call,” she says, “one of the best things that happened was when Steve called and told me how proud he was of me.”

Having never heard of Eisman, I didn’t think anything of this. But a few months later, I called Whitney again and asked her, as I was asking others, whom she knew who had anticipated the cataclysm and set themselves up to make a fortune from it. There’s a long list of people who now say they saw it coming all along but a far shorter one of people who actually did. Of those, even fewer had the nerve to bet on their vision. It’s not easy to stand apart from mass hysteria—to believe that most of what’s in the financial news is wrong or distorted, to believe that most important financial people are either lying or deluded—without actually being insane. A handful of people had been inside the black box, understood how it worked, and bet on it blowing up. Whitney rattled off a list with a half-dozen names on it. At the top was Steve Eisman.

Steve Eisman entered finance about the time I exited it. He’d grown up in New York City and gone to a Jewish day school, the University of Pennsylvania, and Harvard Law School. In 1991, he was a 30-year-old corporate lawyer. “I hated it,” he says. “I hated being a lawyer. My parents worked as brokers at Oppenheimer. They managed to finagle me a job. It’s not pretty, but that’s what happened.”

He was hired as a junior equity analyst, a helpmate who didn’t actually offer his opinions. That changed in December 1991, less than a year into his new job, when a subprime mortgage lender called Ames Financial went public and no one at Oppenheimer particularly cared to express an opinion about it. One of Oppenheimer’s investment bankers stomped around the research department looking for anyone who knew anything about the mortgage business. Recalls Eisman: “I’m a junior analyst and just trying to figure out which end is up, but I told him that as a lawyer I’d worked on a deal for the Money Store.” He was promptly appointed the lead analyst for Ames Financial. “What I didn’t tell him was that my job had been to proofread the ­documents and that I hadn’t understood a word of the [obscenity deleted] things.”

Ames Financial belonged to a category of firms known as nonbank financial institutions. The category didn’t include J.P. Morgan, but it did encompass many little-known companies that one way or another were involved in the early-1990s boom in subprime mortgage lending—the lower class of American finance.

The second company for which Eisman was given sole responsibility was Lomas Financial, which had just emerged from bankruptcy. “I put a sell rating on the thing because it was a piece of [obscenity deleted],” Eisman says. “I didn’t know that you weren’t supposed to put a sell rating on companies. I thought there were three boxes—buy, hold, sell—and you could pick the one you thought you should.” He was pressured generally to be a bit more upbeat, but upbeat wasn’t Steve Eisman’s style. Upbeat and Eisman didn’t occupy the same planet. A hedge fund manager who counts Eisman as a friend set out to explain him to me but quit a minute into it. After describing how Eisman exposed various important people as either liars or idiots, the hedge fund manager started to laugh. “He’s sort of a [obscenity deleted] in a way, but he’s smart and honest and fearless.”

“A lot of people don’t get Steve,” Whitney says. “But the people who get him love him.” Eisman stuck to his sell rating on Lomas Financial, even after the company announced that investors needn’t worry about its financial condition, as it had hedged its market risk. “The single greatest line I ever wrote as an analyst,” says Eisman, “was after Lomas said they were hedged.” He recited the line from memory: “ ‘The Lomas Financial Corp. is a perfectly hedged financial institution: It loses money in every conceivable interest-rate environment.’ I enjoyed writing that sentence more than any sentence I ever wrote.” A few months after he’d delivered that line in his report, Lomas Financial returned to bankruptcy.

Eisman wasn’t, in short, an analyst with a sunny disposition who expected the best of his fellow financial man and the companies he created. “You have to understand,” Eisman says in his defense, “I did subprime first. I lived with the worst first. These guys lied to infinity. What I learned from that experience was that Wall Street didn’t give a [obscenity deleted] what it sold.”

Harboring suspicions about ­people’s morals and telling investors that companies don’t deserve their capital wasn’t, in the 1990s or at any other time, the fast track to success on Wall Street. Eisman quit Oppenheimer in 2001 to work as an analyst at a hedge fund, but what he really wanted to do was run money. FrontPoint Partners, another hedge fund, hired him in 2004 to invest in financial stocks. Eisman’s brief was to evaluate Wall Street banks, homebuilders, mortgage originators, and any company (General Electric or General Motors, for instance) with a big financial-services division—anyone who touched American finance. An insurance company backed him with $50 million, a paltry sum. “Basically, we tried to raise money and didn’t really do it,” Eisman says.

Instead of money, he attracted people whose worldviews were as shaded as his own—Vincent Daniel, for instance, who became a partner and an analyst in charge of the mortgage sector. Now 36, Daniel grew up a lower-middle-class kid in Queens. One of his first jobs, as a junior accountant at Arthur Andersen, was to audit Salomon Brothers’ books. “It was shocking,” he says. “No one could explain to me what they were doing.” He left accounting in the middle of the internet boom to become a research analyst, looking at companies that made subprime loans. “I was the only guy I knew covering companies that were all going to go bust,” he says. “I saw how the sausage was made in the economy, and it was really freaky.” Danny Moses, who became Eisman’s head trader, was another who shared his perspective. Raised in Georgia, Moses, the son of a finance professor, was a bit less fatalistic than Daniel or Eisman, but he nevertheless shared a general sense that bad things can and do happen.

When a Wall Street firm helped him get into a trade that seemed perfect in every way, he said to the salesman, “I appreciate this, but I just want to know one thing: How are you going to screw me?”Heh heh heh, c’mon. We’d never do that, the trader started to say, but Moses was politely insistent: We both know that unadulterated good things like this trade don’t just happen between little hedge funds and big Wall Street firms. I’ll do it, but only after you explain to me how you are going to screw me. And the salesman explained how he was going to screw him. And Moses did the trade.

Both Daniel and Moses enjoyed, immensely, working with Steve Eisman. He put a fine point on the absurdity they saw everywhere around them. “Steve’s fun to take to any Wall Street meeting,” Daniel says. “Because he’ll say ‘Explain that to me’ 30 different times. Or ‘Could you explain that more, in English?’ Because once you do that, there’s a few things you learn. For a start, you figure out if they even know what they’re talking about. And a lot of times, they don’t!”

At the end of 2004, Eisman, Moses, and Daniel shared a sense that unhealthy things were going on in the U.S. housing market: Lots of firms were lending money to people who shouldn’t have been borrowing it. They thought Alan Greenspan’s decision after the internet bust to lower interest rates to 1 percent was a travesty that would lead to some terrible day of reckoning. Neither of these insights was entirely original. Ivy Zelman, at the time the housing-market analyst at Credit Suisse, had seen the bubble forming very early on. There’s a simple measure of sanity in housing prices: the ratio of median home price to income. Historically, it runs around 3 to 1; by late 2004, it had risen nationally to 4 to 1. “All these people were saying it was nearly as high in some other countries,” Zelman says. “But the problem wasn’t just that it was 4 to 1. In Los Angeles, it was 10 to 1, and in Miami, 8.5 to 1. And then you coupled that with the buyers. They weren’t real buyers. They were speculators.”

Zelman alienated clients with her pessimism, but she couldn’t pretend everything was good. “It wasn’t that hard in hindsight to see it,” she says. “It was very hard to know when it would stop.” Zelman spoke occasionally with Eisman and always left these conversations feeling better about her views and worse about the world. “You needed the occasional assurance that you weren’t nuts,” she says. She wasn’t nuts. The world was.By the spring of 2005, FrontPoint was fairly convinced that something was very screwed up not merely in a handful of companies but in the financial underpinnings of the entire U.S. mortgage market. In 2000, there had been $130 billion in subprime mortgage lending, with $55 billion of that repackaged as mortgage bonds. But in 2005, there was $625 billion in subprime mortgage loans, $507 billion of which found its way into mortgage bonds. Eisman couldn’t understand who was making all these loans or why. He had a from-the-ground-up understanding of both the U.S. housing market and Wall Street. But he’d spent his life in the stock market, and it was clear that the stock market was, in this story, largely irrelevant. “What most people don’t realize is that the fixed-income world dwarfs the equity world,” he says. “The equity world is like a [obscenity deleted] zit compared with the bond market.” He shorted companies that originated subprime loans, like New Century and Indy Mac, and companies that built the houses bought with the loans, such as Toll Brothers. Smart as these trades proved to be, they weren’t entirely satisfying. These companies paid high dividends, and their shares were often expensive to borrow; selling them short was a costly proposition.

Enter Greg Lippman, a mortgage-bond trader at Deutsche Bank. He arrived at FrontPoint bearing a 66-page presentation that described a better way for the fund to put its view of both Wall Street and the U.S. housing market into action. The smart trade, Lippman argued, was to sell short not New Century’s stock but its bonds that were backed by the subprime loans it had made. Eisman hadn’t known this was even possible—because until recently, it hadn’t been. But Lippman, along with traders at other Wall Street investment banks, had created a way to short the subprime bond market with precision.

Here’s where financial technology became suddenly, urgently relevant. The typical mortgage bond was still structured in much the same way it had been when I worked at Salomon Brothers. The loans went into a trust that was designed to pay off its investors not all at once but according to their rankings. The investors in the top tranche, rated AAA, received the first payment from the trust and, because their investment was the least risky, received the lowest interest rate on their money. The investors who held the trusts’ BBB tranche got the last payments—and bore the brunt of the first defaults. Because they were taking the most risk, they received the highest return. Eisman wanted to bet that some subprime borrowers would default, causing the trust to suffer losses. The way to express this view was to short the BBB tranche. The trouble was that the BBB tranche was only a tiny slice of the deal.

But the scarcity of truly crappy subprime-mortgage bonds no longer mattered. The big Wall Street firms had just made it possible to short even the tiniest and most obscure subprime-mortgage-backed bond by creating, in effect, a market of side bets. Instead of shorting the actual BBB bond, you could now enter into an agreement for a credit-default swap with Deutsche Bank or Goldman Sachs. It cost money to make this side bet, but nothing like what it cost to short the stocks, and the upside was far greater. The arrangement bore the same relation to actual finance as fantasy football bears to the N.F.L. Eisman was perplexed in particular about why Wall Street firms would be coming to him and asking him to sell short. “What Lippman did, to his credit, was he came around several times to me and said, ‘Short this market,’ ” Eisman says. “In my entire life, I never saw a sell-side guy come in and say, ‘Short my market.’ ” And short Eisman did—then he tried to get his mind around what he’d just done so he could do it better.

He’d call over to a big firm and ask for a list of mortgage bonds from all over the country. The juiciest shorts—the bonds ultimately backed by the mortgages most likely to default—had several characteristics. They’d be in what Wall Street people were now calling the sand states: Arizona, California, Florida, Nevada. The loans would have been made by one of the more dubious mortgage lenders; Long Beach Financial, wholly owned by Washington Mutual, was a great example. Long Beach Financial was moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. It specialized in asking home­owners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible. In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000.

More generally, the subprime market tapped a tranche of the American public that did not typically have anything to do with Wall Street. Lenders were making loans to people who, based on their credit ratings, were less creditworthy than 71 percent of the population. Eisman knew some of these people. One day, his housekeeper, a South American woman, told him that she was planning to buy a townhouse in Queens. “The price was absurd, and they were giving her a low-down-payment option-ARM,” says Eisman, who talked her into taking out a conventional fixed-rate mortgage. Next, the baby nurse he’d hired back in 1997 to take care of his newborn twin daughters phoned him. “She was this lovely woman from Jamaica,” he says. “One day she calls me and says she and her sister own five townhouses in Queens. I said, ‘How did that happen?’ ” It happened because after they bought the first one and its value rose, the lenders came and suggested they refinance and take out $250,000, which they used to buy another one. Then the price of that one rose too, and they repeated the experiment. “By the time they were done,” Eisman says, “they owned five of them, the market was falling, and they couldn’t make any of the payments.”

In retrospect, pretty much all of the riskiest subprime-backed bonds were worth betting against; they would all one day be worth zero. But at the time Eisman began to do it, in the fall of 2006, that wasn’t clear. He and his team set out to find the smelliest pile of loans they could so that they could make side bets against them with Goldman Sachs or Deutsche Bank. What they were doing, oddly enough, was the analysis of subprime lending that should have been done before the loans were made: Which poor Americans were likely to jump which way with their finances? How much did home prices need to fall for these loans to blow up? (It turned out they didn’t have to fall; they merely needed to stay flat.) The default rate in Georgia was five times higher than that in Florida even though the two states had the same unemployment rate. Why? Indiana had a 25 percent default rate; California’s was only 5 percent. Why?

Moses actually flew down to Miami and wandered around neighborhoods built with subprime loans to see how bad things were. “He’d call me and say, ‘Oh my God, this is a calamity here,’ ” recalls Eisman. All that was required for the BBB bonds to go to zero was for the default rate on the underlying loans to reach 14 percent. Eisman thought that, in certain sections of the country, it would go far, far higher.The funny thing, looking back on it, is how long it took for even someone who predicted the disaster to grasp its root causes. They were learning about this on the fly, shorting the bonds and then trying to figure out what they had done.

Eisman knew subprime lenders could be scumbags. What he underestimated was the total unabashed complicity of the upper class of American capitalism. For instance, he knew that the big Wall Street investment banks took huge piles of loans that in and of themselves might be rated BBB, threw them into a trust, carved the trust into tranches, and wound up with 60 percent of the new total being rated AAA. But he couldn’t figure out exactly how the rating agencies justified turning BBB loans into AAA-rated bonds. “I didn’t understand how they were turning all this garbage into gold,” he says. He brought some of the bond people from Goldman Sachs, Lehman Brothers, and UBS over for a visit. “We always asked the same question,” says Eisman. “Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.” He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number. “They were just assuming home prices would keep going up,” Eisman says.

As an investor, Eisman was allowed on the quarterly conference calls held by Moody’s but not allowed to ask questions. The people at Moody’s were polite about their brush-off, however. The C.E.O. even invited Eisman and his team to his office for a visit in June 2007. By then, Eisman was so certain that the world had been turned upside down that he just assumed this guy must know it too. “But we’re sitting there,” Daniel recalls, “and he says to us, like he actually means it, ‘I truly believe that our rating will prove accurate.’ And Steve shoots up in his chair and asks, ‘What did you just say?’ as if the guy had just uttered the most preposterous statement in the history of finance. He repeated it. And Eisman just laughed at him.”“With all due respect, sir,” Daniel told the C.E.O. deferentially as they left the meeting, “you’re delusional.” This wasn’t Fitch or even S&P. This was Moody’s, the aristocrats of the rating business, 20 percent owned by Warren Buffett. And the company’s C.E.O. was being told he was either a fool or a crook by one Vincent Daniel, from Queens.

A full nine months earlier, Daniel and ­Moses had flown to Orlando for an industry conference. It had a grand title—the American Securitization Forum—but it was essentially a trade show for the ­subprime-mortgage business: the people who originated subprime mortgages, the Wall Street firms that packaged and sold subprime mortgages, the fund managers who invested in nothing but subprime-mortgage-backed bonds, the agencies that rated subprime-­mortgage bonds, the lawyers who did whatever the lawyers did. Daniel and Moses thought they were paying a courtesy call on a cottage industry, but the cottage had become a castle. “There were like 6,000 people there,” Daniel says. “There were so many people being fed by this industry. The entire fixed-income department of each brokerage firm is built on this. Everyone there was the long side of the trade. The wrong side of the trade. And then there was us. That’s when the picture really started to become clearer, and we started to get more cynical, if that was possible. We went back home and said to Steve, ‘You gotta see this.’ 

”Eisman, Daniel, and Moses then flew out to Las Vegas for an even bigger subprime conference. By now, Eisman knew everything he needed to know about the quality of the loans being made. He still didn’t fully understand how the apparatus worked, but he knew that Wall Street had built a doomsday machine. He was at once opportunistic and outraged. Their first stop was a speech given by the C.E.O. of Option One, the mortgage originator owned by H&R Block. When the guy got to the part of his speech about Option One’s subprime-loan portfolio, he claimed to be expecting a modest default rate of 5 percent. Eisman raised his hand. Moses and Daniel sank into their chairs. “It wasn’t a Q&A,” says Moses. “The guy was giving a speech. He sees Steve’s hand and says, ‘Yes?’” “Would you say that 5 percent is a probability or a possibility?” Eisman asked. A probability, said the C.E.O., and he continued his speech.

Eisman had his hand up in the air again, waving it around. Oh, no, Moses thought. “The one thing Steve always says,” Daniel explains, “is you must assume they are lying to you. They will always lie to you.” Moses and Daniel both knew what Eisman thought of these subprime lenders but didn’t see the need for him to express it here in this manner. For Eisman wasn’t raising his hand to ask a question. He had his thumb and index finger in a big circle. He was using his fingers to speak on his behalf. Zero! they said. “Yes?” the C.E.O. said, obviously irritated. “Is that another question?”“No,” said Eisman. “It’s a zero. There is zero probability that your default rate will be 5 percent.” The losses on subprime loans would be much, much greater. Before the guy could reply, Eisman’s cell phone rang. Instead of shutting it off, Eisman reached into his pocket and answered it. “Excuse me,” he said, standing up. “But I need to take this call.” And with that, he walked out.

Eisman’s willingness to be abrasive in order to get to the heart of the matter was obvious to all; what was harder to see was his credulity: He actually wanted to believe in the system. As quick as he was to cry [obscenity deleted] when he saw it, he was still shocked by bad behavior. That night in Vegas, he was seated at dinner beside a really nice guy who invested in mortgage C.D.O.’s—collateralized debt obligations. By then, Eisman thought he knew what he needed to know about C.D.O.’s. He didn’t, it turned out. Later, when I sit down with Eisman, the very first thing he wants to explain is the importance of the mezzanine C.D.O. What you notice first about Eisman is his lips. He holds them pursed, waiting to speak. The second thing you notice is his short, light hair, cropped in a manner that suggests he cut it himself while thinking about something else. “

You have to understand this,” he says. “This was the engine of doom.” Then he draws a picture of several towers of debt. The first tower is made of the original subprime loans that had been piled together. At the top of this tower is the AAA tranche, just below it the AA tranche, and so on down to the riskiest, the BBB tranche—the bonds Eisman had shorted. But Wall Street had used these BBB tranches—the worst of the worst—to build yet another tower of bonds: a “particularly egregious” C.D.O. The reason they did this was that the rating agencies, presented with the pile of bonds backed by dubious loans, would pronounce most of them AAA. These bonds could then be sold to investors—pension funds, insurance companies—who were allowed to invest only in highly rated securities.

“I cannot [obscenity deleted] believe this is allowed—I must have said that a thousand times in the past two years,” Eisman says. His dinner companion in Las Vegas ran a fund of about $15 billion and managed C.D.O.’s backed by the BBB tranche of a mortgage bond, or as Eisman puts it, “the equivalent of three levels of dog [obscenity deleted] lower than the original bonds.” FrontPoint had spent a lot of time digging around in the dog [obscenity deleted] and knew that the default rates were already sufficient to wipe out this guy’s entire portfolio. “God, you must be having a hard time,” Eisman told his dinner companion. “No,” the guy said, “I’ve sold everything out.” After taking a fee, he passed them on to other investors. His job was to be the C.D.O. “expert,” but he actually didn’t spend any time at all thinking about what was in the C.D.O.’s. “He managed the C.D.O.’s,” says Eisman, “but managed what? I was just appalled. People would pay up to have someone manage their C.D.O.’s—as if this moron was helping you. I thought, You [obscenity deleted], you don’t give a [obscenity deleted] about the investors in this thing.”

Whatever rising anger Eisman felt was offset by the man’s genial disposition. Not only did he not mind that Eisman took a dim view of his C.D.O.’s; he saw it as a basis for friendship. “Then he said something that blew my mind,” Eisman tells me. “He says, ‘I love guys like you who short my market. Without you, I don’t have anything to buy.’ ”

That’s when Eisman finally got it. Here he’d been making these side bets with Goldman Sachs and Deutsche Bank on the fate of the BBB tranche without fully understanding why those firms were so eager to make the bets. Now he saw. There weren’t enough Americans with [obscenity deleted] credit taking out loans to satisfy investors’ appetite for the end product. The firms used Eisman’s bet to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when Eisman bought a credit-default swap, he enabled Deutsche Bank to create another bond identical in every respect but one to the original.

The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets Eisman and others made with firms like Goldman Sachs. Eisman, in effect, was paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all. “They weren’t satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn’t afford,” Eisman says. “They were creating them out of whole cloth. One hundred times over! That’s why the losses are so much greater than the loans. But that’s when I realized they needed us to keep the machine running. I was like, This is allowed?”

This particular dinner was hosted by Deutsche Bank, whose head trader, Greg Lippman, was the fellow who had introduced Eisman to the subprime bond market. Eisman went and found Lippman, pointed back to his own dinner companion, and said, “I want to short him.” Lippman thought he was joking; he wasn’t. “Greg, I want to short his paper,” Eisman repeated. “Sight unseen.” Eisman started out running a $60 million equity fund but was now short around $600 million of various ­subprime-related securities. In the spring of 2007, the market strengthened. But, says Eisman, “credit quality always gets better in March and April. And the reason it always gets better in March and April is that people get their tax refunds. You would think people in the securitization world would know this. We just thought that was moronic.”

He was already short the stocks of mortgage originators and the homebuilders. Now he took short positions in the rating agencies—“they were making 10 times more rating C.D.O.’s than they were rating G.M. bonds, and it was all going to end”—and, finally, the biggest Wall Street firms because of their exposure to C.D.O.’s. He wasn’t allowed to short Morgan Stanley because it owned a stake in his fund. But he shorted UBS, Lehman Brothers, and a few others. Not long after that, FrontPoint had a visit from Sanford C. Bernstein’s Brad Hintz, a prominent analyst who covered Wall Street firms. Hintz wanted to know what Eisman was up to. “We just shorted Merrill Lynch,” Eisman told him.“Why?” asked Hintz.“We have a simple thesis,” Eisman explained. “There is going to be a calamity, and whenever there is a calamity, Merrill is there.” When it came time to bankrupt Orange County with bad advice, Merrill was there. When the internet went bust, Merrill was there. Way back in the 1980s, when the first bond trader was let off his leash and lost hundreds of millions of dollars, Merrill was there to take the hit. That was Eisman’s logic—the logic of Wall Street’s pecking order. Goldman Sachs was the big kid who ran the games in this neighborhood. Merrill Lynch was the little fat kid assigned the least pleasant roles, just happy to be a part of things. The game, as Eisman saw it, was Crack the Whip. He assumed Merrill Lynch had taken its assigned place at the end of the chain.

There was only one thing that bothered Eisman, and it continued to trouble him as late as May 2007. “The thing we couldn’t figure out is: It’s so obvious. Why hasn’t everyone else figured out that the machine is done?” Eisman had long subscribed to Grant’s Interest Rate Observer, a newsletter famous in Wall Street circles and obscure outside them. Jim Grant, its editor, had been prophesying doom ever since the great debt cycle began, in the mid-1980s. In late 2006, he decided to investigate these things called C.D.O.’s. Or rather, he had asked his young assistant, Dan Gertner, a chemical engineer with an M.B.A., to see if he could understand them. Gertner went off with the documents that purported to explain C.D.O.’s to potential investors and for several days sweated and groaned and heaved and suffered. “Then he came back,” says Grant, “and said, ‘I can’t figure this thing out.’ And I said, ‘I think we have our story.’ ”
Eisman read Grant’s piece as independent confirmation of what he knew in his bones about the C.D.O.’s he had shorted. “When I read it, I thought, Oh my God. This is like owning a gold mine. When I read that, I was the only guy in the equity world who almost had an [obscenity deleted].”

On July 19, 2007, the same day that Federal Reserve Chairman Ben Bernanke told the U.S. Senate that he anticipated as much as $100 billion in losses in the subprime-mortgage market, FrontPoint did something unusual: It hosted its own conference call. It had had calls with its tiny population of investors, but this time FrontPoint opened it up. Steve Eisman had become a poorly kept secret. Five hundred people called in to hear what he had to say, and another 500 logged on afterward to listen to a recording of it. He explained the strange alchemy of the C.D.O. and said that he expected losses of up to $300 billion from this sliver of the market alone. To evaluate the situation, he urged his audience to “just throw your model in the garbage can. The models are all backward-looking. The models don’t have any idea of what this world has become….

For the first time in their lives, people in the asset-backed-securitization world are actually having to think.” He explained that the rating agencies were morally bankrupt and living in fear of becoming actually bankrupt. “The rating agencies are scared to death,” he said. “They’re scared to death about doing nothing because they’ll look like fools if they do nothing.”

On September 18, 2008, Danny Moses came to work as usual at 6:30 a.m. Earlier that week, Lehman Brothers had filed for bankruptcy. The day before, the Dow had fallen 449 points to its lowest level in four years. Overnight, European governments announced a ban on short-selling, but that served as faint warning for what happened next. At the market opening in the U.S., everything—every financial asset—went into free fall. “All hell was breaking loose in a way I had never seen in my career,” Moses says.

FrontPoint was net short the market, so this total collapse should have given Moses pleasure. He might have been forgiven if he stood up and cheered. After all, he’d been betting for two years that this sort of thing could happen, and now it was, more dramatically than he had ever imagined. Instead, he felt this terrifying shudder run through him. He had maybe 100 trades on, and he worked hard to keep a handle on them all. “I spent my morning trying to control all this energy and all this information,” he says, “and I lost control. I looked at the screens. I was staring into the abyss. The end. I felt this shooting pain in my head. I don’t get headaches. At first, I thought I was having an aneurysm.”Moses stood up, wobbled, then turned to Daniel and said, “I gotta leave. Get out of here. Now.” Daniel thought about calling an ambulance but instead took Moses out for a walk.

Outside it was gorgeous, the blue sky reaching down through the tall buildings and warming the soul. Eisman was at a Goldman Sachs conference for hedge fund managers, raising capital. Moses and Daniel got him on the phone, and he left the conference and met them on the steps of St. Patrick’s Cathedral. “We just sat there,” Moses says. “Watching the people pass.” This was what they had been waiting for: total collapse. “The investment-banking industry is [obscenity deleted],” Eisman had told me a few weeks earlier. “These guys are only beginning to understand how [obscenity deleted] they are. It’s like being a Scholastic, prior to Newton. Newton comes along, and one morning you wake up: ‘Holy [obscenity deleted], I’m wrong!’ ”

Now Lehman Brothers had vanished, Merrill had surrendered, and Goldman Sachs and Morgan Stanley were just a week away from ceasing to be investment banks. The investment banks were not just [obscenity deleted]; they were extinct. Not so for hedge fund managers who had seen it coming. “As we sat there, we were weirdly calm,” Moses says. “We felt insulated from the whole market reality. It was an out-of-body experience. We just sat and watched the people pass and talked about what might happen next. How many of these people were going to lose their jobs. Who was going to rent these buildings after all the Wall Street firms collapsed.”

Eisman was appalled. “Look,” he said. “I’m short. I don’t want the country to go into a depression. I just want it to [obscenity deleted] deleverage.” He had tried a thousand times in a thousand ways to explain how screwed up the business was, and no one wanted to hear it. “That Wall Street has gone down because of this is justice,” he says. “They [obscenity deleted] people. They built a castle to rip people off. Not once in all these years have I come across a person inside a big Wall Street firm who was having a crisis of conscience.”

Truth to tell, there wasn’t a whole lot of hand-wringing inside FrontPoint either. The only one among them who wrestled a bit with his conscience was Daniel. “Vinny, being from Queens, needs to see the dark side of everything,” Eisman says. To which Daniel replies, “The way we thought about it was, ‘By shorting this market we’re creating the liquidity to keep the market going.’ ”“It was like feeding the monster,” Eisman says of the market for subprime bonds. “We fed the monster until it blew up.”

About the time they were sitting on the steps of the midtown cathedral, I sat in a booth in a restaurant on the East Side, waiting for John Gutfreund to arrive for lunch, and wondered, among other things, why any restaurant would seat side by side two men without the slightest interest in touching each other.There was an umbilical cord running from the belly of the exploded beast back to the financial 1980s. A friend of mine created the first mortgage derivative in 1986, a year after we left the Salomon Brothers trading program. (“The problem isn’t the tools,” he likes to say. “It’s who is using the tools. Derivatives are like guns.”)

When I published my book, the 1980s were supposed to be ending. I received a lot of undeserved credit for my timing. The social disruption caused by the collapse of the savings-and-loan industry and the rise of hostile takeovers and leveraged buyouts had given way to a brief period of recriminations. Just as most students at Ohio State read Liar’s Poker as a manual, most TV and radio interviewers regarded me as a whistleblower. (The big exception was Geraldo Rivera. He put me on a show called “People Who Succeed Too Early in Life” along with some child actors who’d gone on to become drug addicts.) Anti-Wall Street feeling ran high—high enough for Rudy Giuliani to float a political career on it—but the result felt more like a witch hunt than an honest reappraisal of the financial order.

The public lynchings of Gutfreund and junk-bond king Michael Milken were excuses not to deal with the disturbing forces underpinning their rise. Ditto the cleaning up of Wall Street’s trading culture. The surface rippled, but down below, in the depths, the bonus pool remained undisturbed. Wall Street firms would soon be frowning upon profanity, firing traders for so much as glancing at a stripper, and forcing male employees to treat women almost as equals. Lehman Brothers circa 2008 more closely resembled a normal corporation with solid American values than did any Wall Street firm circa 1985.

The changes were camouflage. They helped distract outsiders from the truly profane event: the growing misalignment of interests between the people who trafficked in financial risk and the wider culture.

I’d not seen Gutfreund since I quit Wall Street. I’d met him, nervously, a couple of times on the trading floor. A few months before I left, my bosses asked me to explain to Gutfreund what at the time seemed like exotic trades in derivatives I’d done with a European hedge fund. I tried. He claimed not to be smart enough to understand any of it, and I assumed that was how a Wall Street C.E.O. showed he was the boss, by rising above the details. There was no reason for him to remember any of these encounters, and he didn’t: When my book came out and became a public-relations nuisance to him, he told reporters we’d never met. Over the years, I’d heard bits and pieces about Gutfreund. I knew that after he’d been forced to resign from Salomon Brothers he’d fallen on harder times. I heard later that a few years ago he’d sat on a panel about Wall Street at Columbia Business School. When his turn came to speak, he advised students to find something more meaningful to do with their lives. As he began to describe his career, he broke down and wept.When I emailed him to invite him to lunch, he could not have been more polite or more gracious. That attitude persisted as he was escorted to the table, made chitchat with the owner, and ordered his food.

He’d lost a half-step and was more deliberate in his movements, but otherwise he was completely recognizable. The same veneer of denatured courtliness masked the same animal need to see the world as it was, rather than as it should be. We spent 20 minutes or so determining that our presence at the same lunch table was not going to cause the earth to explode. We discovered we had a mutual acquaintance in New Orleans. We agreed that the Wall Street C.E.O. had no real ability to keep track of the frantic innovation occurring inside his firm. (“I didn’t understand all the product lines, and they don’t either,” he said.) We agreed, further, that the chief of the Wall Street investment bank had little control over his subordinates. (“They’re buttering you up and then doing whatever the [obscenity deleted] they want to do.”)

He thought the cause of the financial crisis was “simple. Greed on both sides—greed of investors and the greed of the bankers.” I thought it was more complicated. Greed on Wall Street was a given—almost an obligation. The problem was the system of incentives that channeled the greed. But I didn’t argue with him. For just as you revert to being about nine years old when you visit your parents, you revert to total subordination when you are in the presence of your former C.E.O. John Gutfreund was still the King of Wall Street, and I was still a geek. He spoke in declarative statements; I spoke in questions. But as he spoke, my eyes kept drifting to his hands. His alarmingly thick and meaty hands. They weren’t the hands of a soft Wall Street banker but of a boxer. I looked up. The boxer was smiling—though it was less a smile than a placeholder expression.

And he was saying, very deliberately, “Your…[obscenity deleted]…book.” I smiled back, though it wasn’t quite a smile.“Your [obscenity deleted] book destroyed my career, and it made yours,” he said.I didn’t think of it that way and said so, sort of.

“Why did you ask me to lunch?” he asked, though pleasantly. He was genuinely curious.You can’t really tell someone that you asked him to lunch to let him know that you don’t think of him as evil. Nor can you tell him that you asked him to lunch because you thought that you could trace the biggest financial crisis in the history of the world back to a decision he had made. John Gutfreund did violence to the Wall Street social order—and got himself dubbed the King of Wall Street—when he turned Salomon Brothers from a private partnership into Wall Street’s first public corporation. He ignored the outrage of Salomon’s retired partners. (“I was disgusted by his materialism,” William Salomon, the son of the firm’s founder, who had made Gutfreund C.E.O. only after he’d promised never to sell the firm, had told me.)

He lifted a giant middle finger at the moral disapproval of his fellow Wall Street C.E.O.’s. And he seized the day. He and the other partners not only made a quick killing; they transferred the ultimate financial risk from themselves to their shareholders. It didn’t, in the end, make a great deal of sense for the shareholders. (A share of Salomon Brothers purchased when I arrived on the trading floor, in 1986, at a then market price of $42, would be worth 2.26 shares of Citigroup today—market value: $27.) But it made fantastic sense for the investment bankers. From that moment, though, the Wall Street firm became a black box.

The shareholders who financed the risks had no real understanding of what the risk takers were doing, and as the risk-taking grew ever more complex, their understanding diminished. The moment Salomon Brothers demonstrated the potential gains to be had by the investment bank as public corporation, the psychological foundations of Wall Street shifted from trust to blind faith. No investment bank owned by its employees would have levered itself 35 to 1 or bought and held $50 billion in mezzanine C.D.O.’s. I doubt any partnership would have sought to game the rating agencies or leap into bed with loan sharks or even allow mezzanine C.D.O.’s to be sold to its customers. The hoped-for short-term gain would not have justified the long-term hit.

No partnership, for that matter, would have hired me or anyone remotely like me. Was there ever any correlation between the ability to get in and out of Princeton and a talent for taking financial risk? Now I asked Gutfreund about his biggest decision. “Yes,” he said. “They—the heads of the other Wall Street firms—all said what an awful thing it was to go public and how could you do such a thing. But when the temptation arose, they all gave in to it.” He agreed that the main effect of turning a partnership into a corporation was to transfer the financial risk to the shareholders. “When things go wrong, it’s their problem,” he said—and obviously not theirs alone. When a Wall Street investment bank screwed up badly enough, its risks became the problem of the U.S. government.

“It’s laissez-faire until you get in deep [obscenity deleted],” he said, with a half chuckle. He was out of the game. It was now all someone else’s fault.He watched me curiously as I scribbled down his words. “What’s this for?” he asked. I told him I thought it might be worth revisiting the world I’d described in Liar’s Poker, now that it was finally dying. Maybe bring out a 20th-anniversary edition. “That’s nauseating,” he said.Hard as it was for him to enjoy my company, it was harder for me not to enjoy his. He was still tough, as straight and blunt as a butcher. He’d helped create a monster, but he still had in him a lot of the old Wall Street, where people said things like “A man’s word is his bond.” On that Wall Street, people didn’t walk out of their firms and cause trouble for their former bosses by writing books about them. “No,” he said, “I think we can agree about this: Your [obscenity deleted] book destroyed my career, and it made yours.” With that, the former king of a former Wall Street lifted the plate that held his appetizer and asked sweetly, “Would you like a deviled egg?”

Until that moment, I hadn’t paid much attention to what he’d been eating. Now I saw he’d ordered the best thing in the house, this gorgeous frothy confection of an earlier age. Who ever dreamed up the deviled egg? Who knew that a simple egg could be made so complicated and yet so appealing? I reached over and took one. Something for nothing. It never loses its charm.

Posted by: John Gilmore | September 16, 2006

His Empire in Tatters, German Billionaire Takes Life

I have mentioned in previous articles how people who are focused on the world are likely to be greatly affected by negative events. This is especially true of wealthy people. As I’ve said before – if your life is focused squarely on money and that money is taken away – worldly people have nothing left to fall back on – no money equals no hope.

Our enemy is very good at setting people up by promising them everything and then delivering only misery. Follow him and you might live a life of privilege – for awhile. The problem is that he is in the business of killing, stealing and destroying – so any privilege or gain that might benefit you temporarily from following his ways – will eventually lead to your destruction. We are seeing this often as the financial crisis continues to erode wealth across the globe. We are beginning to see wealthy people lose their wealth – and their lives. I can hear the whispers – how will you survive? How will you feed your family? How will you deal with the humiliation? You have no power, no wealth – you are nothing – let me show you the way out. Instead of falling on their knees and asking God for help – they listen to our enemy – and seal their fate for eternity – which was the goal of our enemy from the beginning. As I have mentioned before – he knows his fate and he wants to take as many of us with him as possible.

I don’t know what else to say except – don’t believe our enemy’s lies. There is hope – but you won’t find what you’re looking for in this world. If you are on the edge of hopelessness – maybe at the point of giving up – you’ll need to trust me. It’s not a coincidence that you are reading this now. We can get out of this mess – but we can’t do it alone. Say a quiet prayer and ask God to come into your life and help you. Ask him to show you the truth and to give you faith and hope. Pray that we all turn away from our evil ways and focus on our Creator and His will for us. Ask him to shift your focus from the world – to Him.

There is a Heaven – and He wants you to be with Him there.

jg – January 7, 2009
______________________________________

JANUARY 7, 2009

His Empire in Tatters, German Billionaire Takes Life
By MIKE ESTERL
Wall St. Journal

FRANKFURT — Adolf Merckle, one of Germany’s wealthiest men, committed suicide after his family business empire began unraveling amid mounting debt, his family said Tuesday.
The suicide of the 74-year-old multibillionaire, whose holding company had roughly €30 billion, or $40 billion, in annual revenue, is one of several deaths of businesspeople tied to the global financial crisis.

The news of Mr. Merckle’s suicide came after a consortium of about 30 creditor banks put the finishing touches on a bridge loan of roughly €400 million to the family holding company, VEM Vermögensverwaltung GmbH, which oversees dozens of firms in industries from drugs to cement.

But VEM had to hand over significant collateral to the banks as a prelude to a broader restructuring in the coming months that is expected to strip the holding company of many assets, said people familiar with the matter.

Mr. Merckle, who shied away from the spotlight, inherited his family’s pharmaceutical company in the 1960s and expanded aggressively. He eventually controlled major stakes in Phoenix Pharmahandel, a German pharmaceutical wholesaler with about €20 billion in revenue; publicly listed HeidelbergCement AG, with more than €10 billion in sales; and generic drug maker Ratiopharm International GmbH, with about €2 billion in revenue.

But Mr. Merckle lost hundreds of millions of euros last year in misplaced stock-market bets, said people familiar with the matter. Much of the loss was tied to short positions in Volkswagen AG, in which he wagered that the stock price would fall. Instead, it skyrocketed late last year in what market participants have described as one of the most dramatic short squeezes ever. In a short squeeze, investors who were betting against a company are forced into the market to buy back stock after the price rises.

Bankers say Mr. Merckle also overstretched with highly leveraged acquisitions. He increased his indebtedness in 2007 when HeidelbergCement acquired U.K. building-materials company Hanson PLC for about £8 billion, or $11.6 billion. VEM confirmed late last year it was in refinancing talks with creditors.

HeidelbergCement’s share price fell 6.2% Tuesday on Frankfurt’s stock exchange to €31.26 a share. That is sharply off its 52-week high of €115.47 reached last March. Mr. Merckle increased his family firm’s stake in Germany’s largest cement company to about 80% in recent years.
Mr. Merckle’s body was discovered Monday night near train tracks outside the southern German city of Ulm in what local police described Tuesday as a “railway accident.” There are no signs that anyone else was to blame, they added in a statement.

His family said Tuesday that he had committed suicide. “The distress to firms caused by the financial crisis and the related uncertainties of recent weeks, along with the helplessness of no longer being able to act, broke the passionate family businessman, and he ended his life,” the family said in a brief statement.

Refinancing talks with banks in recent weeks proved difficult because creditors were wary of extending VEM new funds without sizable guarantees and Mr. Merckle was reluctant to concede too much control, said people familiar with the matter. Talks were further complicated by the number of banks involved, they added.

In a rare interview last month, Mr. Merckle told the German newspaper Frankfurter Allgemeine Zeitung he had survived “many so-called stock-market crashes” but that he “couldn’t calculate a banking and financial crisis of this dimension.”

Mr. Merckle’s wealth was estimated by Forbes magazine last year at $9.2 billion. VEM also owns stakes in companies making goods ranging from all-terrain vehicles to textiles.
In recent days, Ludwig Merckle, one of Mr. Merckle’s four children, took the lead role for the family in negotiating the bridge loan with banks, according to a person familiar with the talks. Ludwig helped his father manage the investments through VEM, taking on an increasingly important role in recent years.

The roughly €400 million loan is designed to give VEM and creditors about three months to craft a broader restructuring blueprint for the Merckle family empire. But swift asset sales are expected to be difficult amid the tough market conditions. A VEM spokeswoman declined to comment Tuesday on any possible asset sales.

The dramatic fall of Mr. Merckle’s business fortunes shocked many in Germany’s financial community, where he enjoyed a reputation as a savvy investor.

Other Deaths

Thierry Magon de La Villehuchet, 65 Founder, Access International Advisors Date of Death: Dec. 23
Workers discovered the body of Mr. de La Villehuchet in his firm’s New York office. Mr. de La Villehuchet’s firm oversaw a fund with assets invested by Bernard L. Madoff, according to a person familiar with the situation. An attorney for the firm told detectives that Mr. de La Villehuchet’s firm had lost $1.5 billion in the Madoff scandal.
* * *
Alex Widmer, 52 Chief Executive, Bank Julius Baer Date of Death: Dec. 3
Overseeing the private bank, Mr. Widmer turned the Zurich firm into a leading bank for wealthy clients. Julius Baer officials said Mr. Widmer’s death wasn’t linked to problems at the bank.
* * *
Kirk Stephenson, 47 Chief Operating Officer, Olivant Ltd. Date of Death: Sept. 25

In late September, Mr. Stephenson drove to a rail station about 30 miles from his London home and stepped onto the tracks as an express train approached. Mr. Stephenson co-founded the investment firm in 2006. Olivant began accumulating a 2.8% stake in UBS and leading a revolt to turn around the Swiss banking giant. The UBS shares were put in a Lehman Brothers Holdings account with a proviso that allowed Lehman to use the assets as collateral. With Lehman in bankruptcy Olivant may never recover the assets.

One senior German banker described Mr. Merckle’s business style as “down-to-earth and very cost-conscious.” The billionaire businessman lived in Swabia, a region of Germany with a reputation for “frugality, where you turn every penny twice,” and that’s how Mr. Merckle was viewed by many investors, the banker added.

Mr. Merckle voiced distress about the rapidly changing opinions of his business dealings as reports surfaced in recent weeks about his debt problems. “We are being thrown into the same pot as hedge funds,” he told Frankfurter Allegemeine Zeitung last month.

But he insisted that his holding company was suffering from a “pure liquidity problem” and that his focus had always remained building up solid businesses.

As Mr. Merckle grew increasingly desperate to keep his empire afloat, he lobbied the regional government in his home state of Baden-Württemberg late last year for temporary financial backing but was turned down.

German police said Mr. Merckle’s family reported the businessman missing late Monday, “after he left the house in the afternoon and didn’t return as usual.” Around 7:30 the same night, a railroad worker noticed a body near Blaubeuren, where Mr. Merckle lived, police added in a statement Tuesday. Blaubeuren is about 100 miles west of Munich in southwestern Germany.

Mr. Merckle’s death isn’t the first linked to the financial crisis. French financier Thierry Magon de La Villehuchet, founder of Access International Advisors, was found dead in his Manhattan office just before Christmas. He reportedly lost $1.5 billion on behalf of customers in Bernard L. Madoff’s alleged Ponzi scheme. Police, who called it an apparent suicide, found a box cutter as well as what appeared to be sleeping pills.

Earlier, an investment-fund executive at Olivant Ltd. in London and a veteran Bear Stearns Cos. manager in New York committed suicide.

Write to Mike Esterl at mike.esterl@wsj.com

Posted by: John Gilmore | September 16, 2006

Our Monetary System – Part II – Market Volatility

It’s been about eight months since I wrote the post on our monetary system (Our Monetary System – How Central Banks Control the World’s Economy). Obviously, a lot has happened since that first article. Over the past two months (September and October), we’ve seen the U.S. economy begin to contract and we’ve also seen extreme volatility in stock markets around the world. In this post, we’re going to review how our monetary system is currently impacting the world’s financial system and why we are seeing such extreme volatility in the world’s markets.

Let’s start by reviewing the Chicago Board Options Exchange Volatility Index (VIX). This is a widely used measure of stock market volatility. It is a measure of the implied volatility of S&P 500 index options. A higher VIX value reflects more volatility in the market. As a baseline to what we’re seeing today – the VIX index briefly moved above 40 a couple of times in 2001 and 2002 during the dot com bust – reflecting high volatility as technology stocks declined. From 2003 through 2007, a value of 30 indicated a fairly volatile market – it typically moved in a range between 10 and 20. High volatility typically corresponds with stocks moving significantly lower as many investors issue sell orders. As you can see from the chart below, the index has not moved below 30 since the middle of September (2008) and briefly moved above 80 around October 27th. Obviously, it’s not hard to see that stock markets have been extremely volatile. It hasn’t been uncommon for the Dow Jones Industrial Average to swing 500, 600, 700 – even 1000 points in one day. I’m guessing that there are stock traders around the world eating a lot of antacid these days.

So, the 64,000 dollar question is – what is causing this volatility? Is it just the economy showing signs of weakness or is something more ominous at work here? Before we answer this question, let’s take a look at a couple of other things happening within the world’s financial system.

VIX: 6 Months

(Source: Yahoo! Finance)

As in previous years where volatility has been high, we again see that stocks are also showing significant declines. As we see from the chart below – the Dow Jones Industrial Average (DJIA) has declined as volatility has increased. This really shouldn’t be surprising – as prices become more volatile, people begin to lose confidence that their investments are stable/safe – so they move more of their money into investments that are perceived to be safer and less volatile – leading stocks lower. As we’re going to see – what the world perceives as ‘stable’ or ‘safe’ – isn’t safe at all. Take note of what the DJIA chart of the past 2 months looks like (below) – because you’re going to see the same pattern again and again.

Also note that the DJIA tracks 30 ‘blue-chip’ stocks – large companies like American Express and Bank of America (Banking & Finance), IBM and Intel (Technology) and Chevron and ExxonMobil (Energy) – a wide range of companies and industries.

DJIA – 2 Months (includes Volume & Volatility)

(Source: Wall St. Journal Online)

Let’s now look at the NASDAQ composite index. This is an index of all the stocks listed on the NASDAQ stock market. These are typically technology companies – companies like Apple Computer, Microsoft and Oracle. As you view the graph below – notice anything similar to the DJIA graph above? Although the values are different – they are both moving in the same direction, by approximately the same percentage – at the same time. So, an index that encompasses a wide range of large companies in many different industries (DJIA) is moving in tandem with an index (NASDAQ Composite) that is comprised of almost 3,000 technology companies. Is this a coincidence or will we see the same pattern continue across other stock markets?

NASDAQ Composite – 2 Months (includes Volatility)

(Source: Wall St. Journal Online)

Let’s take a look at the S&P 500 stock index. The S&P 500 includes 500 large cap U.S. stocks – and like the DJIA – includes companies across many different industries. 3M, AllState, Amazon, Monsanto are a few of the companies included in the S&P 500.

S&P 500 Index – 2 Months (includes Volatility)

(Source: Wall St. Journal Online)

At first glance, it appears that I’ve copied either the DJIA or NASDAQ graph above – because all three look almost exactly the same. The values of each index are different (reflecting the different overall dollar values of each index), but they are all moving in the same direction, by the same percentage – at the same time. You’ve probably noticed this yourself at times, but didn’t think much about it. We should pay close attention – because this is indicating another fundamental flaw inherent in the world’s financial system. We’ll get to this after a few more graphs.

Let’s look at the NIKKEI Index – an index that tracks the Tokyo Stock Exchange. Once again we see that although the values are different – Japanese stocks are moving in the same direction, by approximately the same percentage – at the same time as their American counterparts.

NIKKEI Index – 2 Months (includes Volatility)

(Source: Wall St. Journal Online)

We see the same trends in European stocks. The following is a Dow Jones stock index for European companies.

DJ Stoxx 50 – 2 Months (Europe – includes Volatility)

(Source: Wall St. Journal Online)

….and the same trends in Australia.

Australia ASX Index – 2 Months (includes Volatility)

(Source: Wall St. Journal Online)

The Dow Jones World Index (a composite of the world’s stock markets) looks almost identical to all of the stock indexes above. What do these graphs show you? Are you diversifying your portfolio by investing in different stock markets around the world? No – you’re not. The world’s financial system is now so closely interconnected – that all of the world’s stock exchanges are moving in tandem – acting like one big stock exchange. Stocks around the world are moving up together and moving down together – and are all very volatile and declining in value. Is stock market volatility a good thing? Absolutely not. Stocks are the most volatile investments on the planet and continued volatility can cause panics – which we’ve already seen in October. When the stampede out of stocks begins sometime in the near future – it’s going to be a worldwide stampede.

DJ World Index – 2 Months (includes Volatility)

(Source: Wall St. Journal Online)

If stocks are going to significantly decline in value, where do we invest our money? The next investment option is usually bonds. Bonds are less volatile – right? Not in this current crisis. Let’s look at one of the most widely purchased bonds – the 10 year U.S. Treasury bond.

The graph below shows the yield on the 10 year T-bill over the past 2 months.

10 Year Treasury Yield – 2 Months

(Source: Wall St. Journal Online)

Stock market volatility is spilling over into bonds (even bonds considered safe – U.S. T-bills) because investors have gotten into and out of bonds as stock markets have gone on a rollercoaster ride. When stock market volatility rises – investors will tend to move to ‘safer’ investments – which is why you see the swings in the 10 year t-bill above. Prices for T-bills have also been volatile – they move inversely to yields.

10 year Treasury Yields over the past year look just as volatile.

10 Year Treasury Yield – 1 Year

(Source: Wall St. Journal Online)

Look at the 3 month Treasury yield below. When stock market volatility began to rise significantly in September, investors fled to T-bills – driving the yields to almost nothing. This means that investors were willing to buy t-bills with no yield in exchange for safety. Investors were investing their money in something that paid them nothing in return. This would be like parking all of your money in a checking account with no interest – simply because you trust the bank and fear any of the alternatives. What would cause the world’s investors to do such a thing? One word – fear. Not a good thing for financial/stock markets.

3 Month Treasury Yield – 3 Months

(Source: Wall St. Journal Online)

The index below tracks municipal bond prices (comprised of 40 municipal bonds rated A or better). Once again, we see more volatility.

Bond Buyer Muni Index – 3 Months

(Source: Wall St. Journal Online)
The Dow Jones Corporate Bond Index is an equally weighted basket of 96 investment grade corporate bonds. Do you see any stability here? Nope.

DJ Corporate Bond – 3 Months

(Source: Wall St. Journal Online)

The Dow Jones Chicago Board of Trade Treasury Index (DJ CBOT) is made up of CBOT 5-year, 10-year and bond futures contracts. See any stability here? Again, the answer is no.

DJ CBOT Corporate Treasury – 3 Months

(Source: Wall St. Journal Online)

What about the convertible bond market? You may have heard about convertible bonds recently in the news – corporations and hedge funds often use this market for short term financing needs. What is a convertible bond? As stated by the Wall St. Journal:

“Convertible bonds are part stocks, part bonds. They act like bonds and usually pay interest. But, as an added kicker, they give holders the right to convert the securities into stocks at a certain price. The market is normally less volatile than stocks, but the securities can have the same upside if a company rebounds.”

How has this market fared this year? The following excerpt from the Wall St. Journal says it all.

“Overall, the $200 billion convertible-bond market has lost 36% so far this year, a bit more than the stock market, according to Merrill Lynch. But the average convertible-bond hedge fund has lost about 50% in that time, including a 35% plunge in October, according to Hedge Fund Research Inc.”

We see more volatility and more wealth evaporating.

So, we now see that both stocks and bonds have been extremely volatile and we see both stocks and bonds declining significantly in value. If you add up the declines in the graphs above – you see trillions of dollars vanishing.

Until the recent crisis – money market funds have been considered as safe as cash. Not now – the following excerpt from an article on CNN sums up the risks with money market funds:

“A soured investment in Lehman Brothers Holdings Inc. debt slashed two-thirds of the asset value of the oldest money-market fund in the United States, exposing clients to losses despite investments in a financial product seen as a safe haven even in volatile markets.

The sudden setback at the Reserve Primary Fund caused it to “break the buck” — leaving investors unlikely to get back all the cash they put in because the fund failed to maintain assets of at least $1 for every dollar invested.”

In a previous post I discussed how the market for Auction Rate securities has also collapsed – commercial and investment banks have recently agreed to pay billions to investors who felt they were misled into believing these securities were as safe as cash.

If we also consider that banks are struggling with rising loan defaults (17 U.S. banks have failed to date this year), it is becoming clear that even our checking and savings accounts are at risk. You may think that the FDIC will insure your deposits – but the FDIC has funding for approximately 1% of current bank deposits. Not exactly reassuring.

It is becoming increasingly clear that there are no safe havens in the world’s financial system – except maybe your mattress – and it’s not really part of the financial system.

The next stop on this journey is commodities. Let’s take a look at prices of some of the most widely traded commodities. Let’s start with oil. The following shows the price of oil over the past 3 months. After climbing above $140 a barrel this summer, the price has now dropped rapidly below $70. In approximately two weeks, the price of a gallon of gasoline in Atlanta has dropped from $4 to $2. It’s easy to cheer such a drop in gas prices – until you study why it’s dropping so dramatically.

Crude Oil – 3 Months

(Source: Wall St. Journal Online)

It’s easy to see that market volatility is not isolated to stocks, bonds and financial derivatives – it’s also present within commodity prices. We’re going to see that this volatility and price deflation present in oil also exists across all types of commodities. The question we’re going to explore is – why?

Let’s take a look at metals. Copper prices have dropped over 40% in three months as demand has declined dramatically.

Copper – 3 Months

(Source: Wall St. Journal Online)

Even gold has been volatile – as investors buy and sell gold to cover margins in other investments and diversify their holdings. I believe that although gold has been somewhat volatile – it’s still the best investment in an uncertain financial system since its value is not tied to interest rates and it can always be used as money. Try buying some actual gold – it’s hard to find. The U.S. mint has even stopped minting certain gold coins since demand is far exceeding supply.

Gold – 3 months

(Source: Wall St. Journal Online)

What about agriculture? We see the same trends. Corn prices have declined over 30% in three months.

Corn – 3 Months

(Source: Wall St. Journal Online)

Same situation with Soybeans – prices have declined over 30% in three months.

Soybeans – 3 Months

(Source: Wall St. Journal Online)

Wheat prices are down almost 40% in three months.

Wheat – 3 Months

(Source: Wall St. Journal Online)

What about livestock? The same trends are present everywhere. Hog prices are down over 25% in three months.

Lean Hogs – 3 Months

(Source: Wall St. Journal Online)

Cattle prices are down over 15% in three months.

Live Cattle – 3 Months

(Source: Wall St. Journal Online)

The obvious question is – why are we seeing such widespread price deflation in the world’s financial markets? If you read my first article on our monetary system, then you know that I initially believed we would probably see some type of hyper-inflation as Central Banks pumped more and more money into the system. If you’ve been following the crisis – then you know that inflation has been a concern for Central Banks for some time as prices increased dramatically for a wide range of products and services. We can see this in the chart below. If we measure inflation using the standard measure used by our government until the early 80’s – we see inflation approached almost 14% before beginning to decline recently.

(Source: Shadowstats.com)

So, what is happening to tame inflation? Why are prices declining at such a rapid pace? The biggest pieces of the puzzle are (once again) our money supply and debt. Take a look at our money supply growth rates.

(Source: Shadowstats.com)

We are seeing money supply growth slow considerably. Why is this happening? Because the world’s private banking system is failing. Banks have dramatically reduced lending due to rising defaults and borrowers have dramatically reduced taking on more debt – because their debt levels are already at unmanageable levels. The current debt of governments, corporations and individuals is crushing the world’s economy. Central banks are now attempting to revive the world’s economy by lowering interest rates (again), lowering reserve requirements and recommending that governments continue with economic ‘stimulus’ packages. Someone must continue creating debt (and therefore – money) or the system will begin a freefall collapse. As I’ve said before – they are only delaying the inevitable. You can only service debt at these levels for so long – before something catastrophic happens.


What happens when a debt-based monetary system begins to collapse? You’re watching it happen everyday now – extreme volatility ripples throughout the financial system as the entire system shudders under the weight of the debt it has created. The world simply can’t sustain the debt creation necessary to keep the system going. Very few people understand what is happening – so we’re seeing wild swings in prices and volumes as people are blindly looking to somehow save their money from vanishing.

Prices for everything are now rapidly declining because we don’t have the money – or access to needed credit – to buy things. Our economy actually began contracting in 2004 (when viewing real data) – but as you can see – it appears that we are now falling off the cliff.

(Source: Shadowstats.com)

This is why auto-makers the world over are now reporting drastically reduced sales numbers (and financial results) and why 3rd quarter earnings from all kinds of companies in all kinds of industries around the world are showing serious declines and/or issuing guidance warnings. We simply don’t have the money and/or access to credit to keep the system running.

This is why we see abysmal economic data like this:


We hear economists talk a lot about ‘bubbles’ – asset bubbles, stock bubbles, housing bubbles, etc. As you will see below – the world’s financial system has created one, very big bubble across the entire system – and it’s about to pop.

It’s easy to see that stocks are on the way down from the top of the mountain.

World Stock Index (DJ World Index):

(Source: Wall St. Journal Online)

U.S. Stocks (DJIA):

(Source: Wall St. Journal Online)

European Stocks (DJ Stoxx 50) :

(Source: Wall St. Journal Online)

Japanese Stocks (NIKKEI):

(Source: Wall St. Journal Online)

Latin America (DJ Americas):

(Source: Wall St. Journal Online)

Much of the blame for the current crisis has been placed on the U.S. and U.K. housing market collapse. A housing bubble has certainly been created in both countries, but as you will see – this is a worldwide problem.

(Source: MarketOracle.co.uk)

The following excerpt is taken from the Economist.com website:

(Source: IMF)

“WHERE are house prices most overvalued? As the rest of the world watches the bursting of America’s housing bubble, that question should be at the top of everyone’s mind. The answer is not comforting: many countries have had far hotter housing markets than America and are also suffering from tightening lending conditions thanks to the credit crisis.

In the latest World Economic Outlook, Roberto Cardarelli of the IMF calculates the share of the increase in real house prices between 1997 and 2007 that cannot be accounted for by fundamental factors such as lower interest rates and rising incomes. This “house-price gap” is greatest for Ireland, the Netherlands and Britain, where prices are about 30% higher than can be justified by fundamentals. France, Australia and Spain have house-price gaps of around 20%. In America, where prices were already falling in 2007, the gap is just over 10%.” –Economist.com

Energy prices have certainly been through a bubble:

Crude Oil:

(Source: Wall St. Journal Online)

Natural Gas Henry Hub Pit (Nymex):

(Source: Wall St. Journal Online)

Food prices across the board have gone through a bubble:

Corn:

(Source: Wall St. Journal Online)

Wheat:

(Source: Wall St. Journal Online)

Cattle:

(Source: Wall St. Journal Online)

Let’s look again at what is behind all of this: our money supply.

(Source: NowandFutures.com)

Our total money supply (M3 – dollars) is now approximately $14 trillion, but the rate of growth is now slowing. If we see a dramatic decrease in lending from banks, what is sustaining the money supply growth? Here’s the answer:

The total amount of money (dollars) controlled by the Fed & Treasury has more than doubled in 2008 to over $4 trillion dollars. As I’ve said before – someone has to keep the supply of money growing – which is why we see Central Banks pumping billions of dollars into the system and telling governments to provide additional economic stimulus packages.

Is there anything else that has contributed to these bubbles and all of this volatility? The Federal Reserve (and mainstream media) tells us that they adjust the Fed Funds Rate in response to economic conditions. The truth is that the Fed drives the economy (and behavior) with interest rates (coupled with reserve requirements). The Fed isn’t responding to a rollercoaster ride – it created the rollercoaster.

(Source: MoneyCafe.com)

What happens when volatility finally cause the bubbles to burst completely? We’ll need a new, heavily regulated, worldwide financial system.

If you were wondering if the Fed really does own a large portion of our debt – this pie chart should answer the question. The Federal Reserve owns over 50% of the U.S. Federal debt. Remember – this is a cartel of private international bankers. I wonder why we never hear this on the nightly news?

(Source: wikipedia.org)

What does the Bible say about the relationship between a lender and a borrower?

‘the borrower is servant to the lender’ (Proverbs 22:7)

“Do not be a man who strikes hands in pledge or puts up security for debts; if you lack the means to pay, your very bed will be snatched from under you.” (Proverbs 22:26-27)

And here we see the impact on the Fed’s balance sheet from all the recent ‘bailout’ activity. Notice that their ‘assets’ are increasing substantially.

(Source: Federal Reserve)

The Lord has warned humanity for thousands of years about the very thing happening to us today – and our nation has joined a growing list of nations throughout history – that have ignored His warnings.

Here’s a good parable to summarize what is happening. Our Father tells us that He will build us a nice house – not too big, not too fancy – but it will shelter us and provide us all that we need – a good, stable house that will last. It won’t cost us anything – we only need to believe that He will provide for us and to trust Him. Our Father also warns us about other builders in the world. While we’re thinking about this, another builder makes us an offer. We don’t know this builder – but He promises to build us the nicest house the world has ever seen. It will require a little bit of debt, but it will be far nicer than the home our Father said He would build for us. We begin thinking about how nice it would be to have the nicest house in the world – so we reject our Father’s offer, we choose not to heed His warnings – and we hire the builder. We think this new mansion is complete with everything we could ever ask for – built with the finest fixtures, the finest furniture, the most beautiful lawn – the nicest looking house in the world. The world envies our home because it’s so big and beautiful. There’s only one problem – we didn’t lay a good foundation for our house. Unbeknownst to us – the builder of our home built it on sand – because he is devious and we weren’t paying attention. We noticed after moving in – that every once in awhile – the whole house shakes. We pause – wondering what is causing the problem – but the shaking subsides and we don’t take the time to find out what is causing the problem – we’re too enamored with the beauty of our home. Eventually, one day the whole house comes crashing down – and we all look around – wondering what could have caused such a thing. Now – we don’t even have a roof over our head. Now – we no longer care about how beautiful our home is – we just want some shelter. The same devious builder then tells us that he’ll build us a better, more secure house this time – just trust him. It will only cost us a little bit more than the first home. Even though we rejected our Father the first time – He comes to us again – and again offers to build us a house with a solid foundation that is not too big, not too fancy – but will last our entire lives. He only asks that we humble ourselves, ask for forgiveness for following the world – and to trust Him. Who will we choose to build our next house?
What does all of this mean? It means we better not put our faith and hope in the world – because the world is lying to us.

I’ll finish this with one of Chris Martenson’s blog posts. Pay close attention – because we’re watching history repeat itself – once again.

jg – Nov 5, 2008
_____________________________________
Tuesday, October 28, 2008, 3:06 pm, by cmartenson

Below, I’ve liberally excerpted from an article I read a couple years back that always stuck with me.

Since our challenge today is to know whom to trust and which story to believe, I thought I’d bring this one back to the forefront, because the parallels are so striking between the late 1920’s and now.

Below is a graph of the Dow Jones during the years of the 1920’s bubble, the stock market crash of 1929, and the onset of the Great Depression. The numbers in bubbles indicate when one or more quotes from a famous expert were captured.

I happen to believe that we are somewhere between points #8 and #18.

I get chills every time I re-read them…

Link to original article at Gold-Eagle.com


Number 7:
“The decline is in paper values, not in tangible goods and services…America is now in the eighth year of prosperity as commercially defined. The former great periods of prosperity in America averaged eleven years. On this basis we now have three more years to go before the tailspin.” – Stuart Chase , NY Herald Tribune, November 1, 1929

“Hysteria has now disappeared from Wall Street.”
– The Times of London, November 2, 1929

“The Wall Street crash doesn’t mean that there will be any general or serious business depression… For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game… Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before.”
– Business Week, November 2, 1929

“…despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression such as would entail prolonged further liquidation…”
– Harvard Economic Society (HES), November 2, 1929

Number 8:
“… a serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall.”
– HES, November 10, 1929

“The end of the decline of the Stock Market will probably not be long, only a few more days at most.”
– Irving Fisher, Professor of Economics at Yale University, November 14, 1929

“In most of the cities and towns of this country, this Wall Street panic will have no effect.”
– Paul Block (Pres. of the Block newspaper chain), editorial, November 15, 1929

“Financial storm definitely passed.”
– Bernard Baruch, cablegram to Winston Churchill, November 15, 1929

Number 9:
“I see nothing in the present situation that is either menacing or warrants pessimism… I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress.”
– Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929

“I am convinced that through these measures we have reestablished confidence.”
– Herbert Hoover, December 1929

“[1930 will be] a splendid employment year.”
– U.S. Dept. of Labor, New Year’s Forecast, December 1929

Number 10:
“For the immediate future, at least, the outlook (stocks) is bright.”
– Irving Fisher, Ph.D. in Economics, in early 1930

Number 11:
“…there are indications that the severest phase of the recession is over…”
– Harvard Economic Society (HES) Jan 18, 1930

Number 12:
“There is nothing in the situation to be disturbed about.”
– Secretary of the Treasury Andrew Mellon, Feb 1930

Number 13:
“The spring of 1930 marks the end of a period of grave concern…American business is steadily coming back to a normal level of prosperity.”
– Julius Barnes, head of Hoover’s National Business Survey Conference, Mar 16, 1930

“… the outlook continues favorable…”
– HES Mar 29, 1930

Number 14:
“… the outlook is favorable…”
– HES Apr 19, 1930

Number 15:
“While the crash only took place six months ago, I am convinced we have now passed through the worst — and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.”
– Herbert Hoover, President of the United States, May 1, 1930

“…by May or June the spring recovery forecast in our letters of last December and November should clearly be apparent…”
– HES May 17, 1930

“Gentleman, you have come sixty days too late. The depression is over.”
– Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930

Number 16:
“… irregular and conflicting movements of business should soon give way to a sustained recovery…”
– HES June 28, 1930

Number 17:
“… the present depression has about spent its force…”
– HES, Aug 30, 1930

Number 18:
“We are now near the end of the declining phase of the depression.”
– HES Nov 15, 1930

Number 19:
“Stabilization at [present] levels is clearly possible.”
– HES Oct 31, 1931

Number 20:
“All safe deposit boxes in banks or financial institutions have been sealed… and may only be opened in the presence of an agent of the I.R.S.”
– President F.D. Roosevelt, 1933

If you are a Christian and have had discussions on the ‘mark of the beast’ and how only those with the ‘mark’ will be able to buy and sell at some point in the future, you have probably wondered how this could happen. How could anyone really gain financial control of the entire world? If you are not a Christian, chances are that you have heard about this ‘mark’ and its control over the world’s financial system and have rejected this as being completely ridiculous – how could anyone control the world’s financial system? If you throw in the popular Christian interpretations of end time prophecies – that one future ruler of the world will somehow unite the world’s government, the world’s religion and the world’s financial system – all within a period of 7 years – it becomes almost unbelievable. How could someone – anyone – do all of this within a 7 year time period? If I were not a Christian and had never heard about these things and someone told me that all of these things will happen within 7 years – I would find it very difficult to believe – if not impossible – the world simply does not cooperate this easily. As you’ve seen in previous posts, Satan’s control of the world’s government and religion is not taking place during 7 years – and financial control of the world is no different. What you will find as you read this post, is that a few men have already gained worldwide financial control – and they did it before you and I were born. It didn’t take 7 years – it took hundreds of years. You and I rely on an economic system that has placed us in financial bondage – and most of us don’t even know it. What you will find, once again, is that our spiritual enemy is much more cunning and deceptive than you have been led to believe.

Let’s start this with a simple question – do you know how our money is created? Whether you are wealthy or poor, highly educated or not – chances are this question causes you some concern – because you really don’t know the answer. Most people (and I was included) would say that the United States creates our own money through the U.S. Treasury – correct? No. It did until the early 20th Century. It is correct that the U.S. Mint and the Bureau of Engraving and Printing (agencies of the U.S. Government) create the hard currency we use, but the U.S. Treasury is not responsible for creating and managing our money supply. Who then, is responsible for creating and managing our money supply? A private corporation – The Federal Reserve Banking System.

If the U.S. Government needs $20 billion in hard currency (paper and coins), the Federal Reserve creates this $20 billion out of nothing (there is nothing of value that backs our currency), the U.S. Mint and the Bureau of Engraving and Printing creates the paper and coin currency and the U.S. Government gives the Federal Reserve an IOU for $20 billion in exchange. The U.S. Government then pays interest on this $20 billion. On the surface, it may seem to you that this is logical – what’s wrong with the U.S. Government paying a private bank/corporation to print our money? Actually, there is a whole lot wrong with it. This is what I’m going to explain in this post.

We’ve seen how physical currency is created and added to our economy, but physical currency – coins and paper – makes up less than 5% of the overall dollars in circulation in the world. The other 95% is made up of all of the electronic dollars in checking accounts, savings accounts, CD’s, money market accounts, etc. How is this money created? The majority of our money is created by private banks. This is where things get interesting.

If you have purchased a home, then you know that you apply for and receive a mortgage to pay for your home. The question then becomes – where does the bank get the money to pay for your home? If you are like most Americans (and I was certainly included in this group), you assume that this money somehow comes out of the bank’s profits or from deposits made at the bank. It seems logical, but this isn’t what happens. By authority of the bank’s charter, it has the ability to create the dollars needed for your home. In the same manner that the Federal Reserve creates money out of nothing, your bank once again creates money out of nothing and places the dollars needed into your account. The funds are then used to pay for your home. I know what you’re thinking – this is the most ridiculous thing you’ve ever heard, there’s no way this is what happens. You’d be wrong. In our current monetary system (commonly referred to as a Fractional Reserve System), your act of signing for debt – creates money. Every time someone signs for an auto loan, home loan, home equity loan, etc. – money is created. This is how money is created in our system. In our current monetary system, money is not created from value, money is created from debt. It doesn’t matter if our money is created because the U.S. Government needs hard currency or if it is created through bank loans, the only way money is created in our current system is through debt. Get ready – because this leads to some very interesting analysis.

If you’re thinking this through, then you’re beginning to feel very uncomfortable – and you should. Even though it may seem strange to you that our money is created by debt, it might initially seem like this could work – that our economy has – and will continue to – function under this system. There’s one very big problem inherent in this system. If you’ve seen the movie ‘The Matrix’, then you remember that the massive computer simulation in the movie had a flaw in the program – an anomaly that over a long period of time would eventually crash the system. We have the same type of ‘anomaly’ in our current economic system that over time – will have the same result. What is the ‘anomaly’ in our system? Interest. When you take out a loan for $200,000 to pay for your home, is this all you need to pay back? Of course not. You must pay the $200,000 plus interest. The total amount of money you will pay back with interest will be more than $400,000 if you have a 30 year fixed rate (around 6%) and don’t pay it off early. Remember, our money is created from the principle, not the principle plus interest. So, you bought a house for $200,000, and as a result, added $200,000 to our total money supply of dollars. Do you see the problem? If our money is only created from the principle payment, where do we get the money to pay interest? This is where things really start to get interesting.

Let’s look at another example. Let’s say that the total debt (new debt – retired debt) created in a given year in the United States is $1 trillion dollars. Based on our current system, $1 trillion dollars would then be added to our money supply. As I mentioned above, because this is debt, the total actually owed is much higher – let’s say the total debt actually owed is $2 trillion. So, we have created $2 trillion in liabilities that must be repaid, but we’ve only created $1 trillion dollars in the system to pay this debt. Do you see the problem? We never add enough money into our economy to pay for the debt. Our debt continues to rise and our money supply continues to rise – but the money supply can never equal the total amount owed. What this means is that we can never pay off our debt under our current monetary system.
Let’s make it really simple. If you and I each owe $100 and there’s only $150 in currency available to us – one of us isn’t going to have enough to pay our debts. It’s a catch-22 that we cannot get out of. In our current system, there will always be a certain percentage of people and businesses that cannot get enough money to pay their bills, debts, etc. It’s mathematically impossible for everyone to have enough money to pay what they owe. We can talk all day about why certain businesses fail (poor management, supply and demand, changing markets, etc), why businesses and people go bankrupt, but the bottom line is this – if there’s not enough money in our economy to pay for all outstanding debts, it doesn’t matter what we do, how we manage our budgets, we will never pay off our debts as a nation – never. Of course I’m talking about our nation as a whole. Individually, we can make good financial decisions and manage our money in a prudent manner, but on a national level, we are in a never ending cycle of ever increasing debt – personal debt, corporate debt, government debt, etc. If our system never changes, it is mathematically impossible for us to ever pay off our national debt.
I now find it interesting when I hear our President or members of Congress debating ‘fiscal irresponsibility’ or when I hear our leaders talking about reducing our national debt. The truth is that all of us – our Government included – must continue to create debt in order to keep our economy from crashing. The meter is always running on the current interest (which is now enormous). In order to keep creating additional money to pay for our ever increasing debt, we must create more debt to create more money. I know what you’re thinking – this has to be the most ridiculous economic system ever devised. It’s actually quite ingenious – when you realize why it exists. We’ll examine this more later.

Since our money is created from debt, as our debts increase – our money supply increases. The only thing that has prevented this system from collapsing years ago is due to the lag time we have to pay back the interest on our loans. We are not required to immediately pay back the principle plus interest. Although this system seems to have worked for a very long time, we’re going to see that it cannot continue forever. You will see that it’s mathematically impossible for our economic system to continue without eventually collapsing.

If this hasn’t blown your mind yet, consider what would happen if we paid off all of our debt – personal debt (home loans, auto loans, etc), corporate debt and Government debt. Since debt equals money in our system, if there is no debt, there would be no money! I know – it keeps getting more ridiculous. Your mind wants to reject this outright. This is crazy! Unfortunately, it’s the truth. Our entire economy is based on the creation of debt. Without debt, our economy would crash completely. You now know the real reasons why we are all always fighting to get enough money to pay our bills and debts (there’s not enough money in the system for all of us). You now know why we consistently have a steady stream of people and businesses that file for bankruptcy (there’s never enough money in our economy), why inflation has dramatically reduced the buying power of the dollar in the past few decades (our money supply is always increasing – it never stabilizes), why the total volume of dollars in the world economy has sky-rocketed in recent decades (leading to a decline in the value of the dollar – worldwide) and why we’re always being bombarded with loan offers (home, auto, home equity, etc), credit cards, etc. Without debt, we have no economy. How is this possible you ask? Why would anyone allow this to happen? How did this happen? The most important question that you should be asking yourself is this – if we are creating so much debt, who are we indebted to? What you will find later in this post is that this is all very deliberate – it’s not by chance. There is a plan at work here – and it’s evil. The honest truth is that every person in the United States has been placed in financial bondage since 1913 – and most don’t even know it. Have I mentioned how deceptive our spiritual enemy is? Keep reading.

I mentioned earlier that our current banking system is referred to as a Fractional Reserve System. Basically, this means that banks can issue loans for much more money than they have on hand. It depends on the type of account, but as an example, let’s say that the Federal Reserve sets the reserve requirement at 9:1 (or a 10% reserve ratio). The Federal Reserve Board of Governors also has the power to change this ratio within limits set by law. This means that for every dollar that a bank has held in ‘reserve’ at the Federal Reserve, it can lend out 9 times that amount. Let’s say that a new bank holds approximately $1,111 dollars at the Federal Reserve. It can then lend up to $10,000 dollars (9 x $1111 = $10,000). Money on reserve at the Fed is sometimes referred to as ‘super’ money – since the banks get to multiply its volume. The bank then loans this $10,000 to you for a new car. You pay the car seller who then deposits the money in their checking account. Their bank (this is a closed loop system – it doesn’t matter which bank receives the deposit) then takes the $10,000 – adds $1,000 of it to their reserves (the same 9:1 reserve ratio – reversed) – and loans out $9,000 to someone else who then deposits the money in their checking account. Their bank takes the $9,000 – adds $900 to their reserves (9:1 reserve ratio) – and loans out $8,100 to someone else. At this point, the original reserve of $1,111 has generated $27,100 in new money ($10,000 + $9,000 + $8,100). If we do the math and continue to carry this through (and everyone deposits their money in a bank – not in a mattress), then this original reserve of $1,111 generates just under $100,000 of currency in our economy. It’s like a huge game of musical chairs – as long as we’re creating money from debt, the music doesn’t stop playing. Also remember – the original reserve deposit at the Fed ($1,111) was money created by debt – it has no value. Some types of accounts in this system only require a 20:1 or 30:1 reserve ratio and some accounts do not require a reserve at all. Should anyone be surprised that we always have inflation?

What happens when the Federal Reserve changes the reserve ratio? Is this significant? Absolutely. Let’s examine this more closely. If the current ratio is 9:1 and the Fed changes this to 5:1 – what impact does this have? If you’re a bank that has loaned millions of dollars at a ratio of 9:1, and have planned future loans around this ratio, what happens to you if the ratio changes to 5:1 (the reserve requirement increases)? If you don’t have additional reserves to meet the new requirement – you instantly become under-capitalized. Here’s a simple example: if a bank has a reserve of $1,000 and plans to make a loan of $9,000 – it can no longer make the loan if the reserve ratio is reduced to 5:1. At 5:1, the reserve requirement on $9,000 would be $1800. The real world result is – the bank must generate significantly more capital to increase its reserves or stop lending in order to meet the new reserve requirement.
What should we learn from this? Most of us know that the Federal Reserve has the power to raise and lower interest rates and therefore, has the power to raise and lower overall prices within our economy. What most people don’t realize is that they also have the power to raise and lower the total volume of dollars in our economy. If they raise the reserve requirement (requiring banks to have more reserves at the Fed), banks will lend less money and since our money is based on the creation of debt, less money is created. If this happens, the gap between the amount owed within our economy (interest never stops accumulating) and the amount of money to pay the debt – widens. We are often told that this is used to fight inflation – inflation that is caused by this system of money creation through debt. The truth is that an increase in the reserve requirement results in even less money in the overall economy to pay back debt – which could easily lead to a recession or depression. This is the continual game central banks around the world play every day – more money in the economy means economic growth, but higher inflation – reducing the money supply reduces inflation, but will also cause economic growth to slow or contract.

The following chart shows the impact of the reserve ratio on our money supply. It’s easy to see that as the reserve amount required is lowered, the amount of money generated increases significantly. The reverse is also true – as the reserve required by the Fed is raised, the amount of money generated decreases.

(Source: wikipedia.org)

What really happens when our money supply contracts? Periods of recession or depression. What we’re consistently told is that periods of economic growth and periods of economic contraction are unavoidable, when the truth tells us something different. The Federal Reserve has the power to create periods of growth (increased money supply coupled with low interest rates) and periods of contraction (reduced money supply coupled with higher interest rates). How are we told to categorize these periods of growth and contraction? This is the ‘business cycle’. While everyday business transactions certainly affect our overall economy – there is nothing that private business or individuals can do that will overcome the debt based economic system we’ve been placed under.

You have also learned why the current credit ‘crunch’ is being referred to as a ‘crisis’. What happens if banks reduce lending and consumers reduce taking on more debt? Less money is created in the system – and a vicious cycle starts. Wall Street refers to this as ‘de-leveraging’. We’re going to explore the real reasons this happens. Before we look closely at what is going on today, let’s examine another problem with our current economic system. We have discussed how our economy must continue to grow in order for debt creation to continue in order to create additional money in order to pay the debt – a never-ending cycle of debt creation. The question becomes – can this continue forever?

If you were to ask people about economic growth, some will know that our economic (GDP – Gross Domestic Product) growth rate typically averages about 3% (annually) in recent years. Most of us assume this is a linear growth rate. A linear growth rate looks like this:


The problem is that our economic growth is not linear. As an example, let’s assume that the current overall value of our economy is $100. If our economy grows 3% this year, then the overall value at the end of this year is $103. If our economy grows an additional 3% next year, will the overall value of our economy be $106 at the end of next year? No. Since we grew our economy 3% this year, next year’s growth will be 3% of $103 and the total value of our economy at the end of next year will be $106.09 ($103*.03 + $103). Our economy does not grow linearly, it grows exponentially. What this means is that 3% growth this year is actually more growth than 3% last year since our growth is compounded annually. This is what exponential growth looks like:


You are probably starting to feel uncomfortable, because you are beginning to see where this is going. In theory, exponential growth remains relatively low for a given period of time – but as you can see, as each year’s growth compounds on the previous year, overall growth begins to accelerate rapidly at a given point in time. A simple example of this phenomenon can be seen in the growth of a company. A company that plans to grow 10% with annual revenues of $10 million only needs to grow $1 million. A company that plans to grow 10% with annual revenues of $10 billion needs to grow $1 billion. As growth compounds upon itself, the system requires ever more resources to grow the same amount (%).

In our current economic system that relies on continual growth to stave off a collapse, we must continually burn through more and more natural resources to keep the system going. In a theoretical world, this exponential curve continues on to infinity. Is this possible in a finite world with finite resources? Of course not. If we take a logical look at our economic system, mathematics tells us one of two things must happen to our current system. The first scenario is that we burn through all of our resources and the system collapses. We can certainly see the beginning of this from a global perspective. As more economies around the world have instituted the same economic system as ours, we are seeing more and more concern that natural resources (oil, forests, water, etc.) are being depleted at an alarming rate – demand is outstripping supply – adding to inflationary pressures. Although this is certainly possible in our distant future, since we are much farther along the exponential curve than other economies in the world, there is a much more likely scenario for the United States.

The second scenario is that our current system collapses under the weight of the debt it has created. If the rate of debt increases much more quickly than the rate of the supply of money in the system, eventually the amount of money in the system will not be able to support the increased debt. There will not be enough money to make interest payments, pay utilities, buy consumer goods and create additional money. As the exponential curve gets steeper and steeper – it will be more and more difficult to grow our economy, while supporting the existing debt in the system. At some point, since we live in the real world, our monetary system will collapse under the weight of its debt – long before we burn through all of our resources.

Before we get too far into this – let’s ask a question. Where are we on this exponential curve? If we look at trends of some of the most widely used economic indicators, can we determine if we should be worried about imminent collapse? As you will see, we have reason to be concerned.

Let’s start by looking at our debt. The following is a graph of our nation’s federal debt:

Does this look linear or exponential? You don’t have to be a mathematician to see the answer.

The following is a different look at our national debt that calculates the debt as a percentage of GDP:

(Source: U.S. White House)

We hear politicians and economists talk about how there’s nothing to worry about since our debt remains in line with past years – as a percentage of GDP. The problem is that they are only focusing on the amount of debt as a % of GDP in a given year and not the effect of our cumulative debt. As we’ll soon see, what is even more important is the ratio of debt to the money supply.

We also have much more debt than just the federal debt. The following chart shows total debt over time (state, federal, personal, corporate). Once again, we see an exponential curve.

(Source: Michael Hodges, Federal Reserve, U.S. Treasury)

What about our money supply? We should expect to see the same trend – and we do.

(Source: wikipedia.org)

Hard currency appears to be somewhat linear, but it’s an illusion. If we reduce the scale (since hard currency is such a small percentage of the total money supply), we see the same trend:

(Source: wikipedia.org)

Since the Federal Reserve stopped publishing M3 (total amount of dollars in circulation) money supply data in 2006, a couple of economists have worked to re-create it. The next graph was created by John Williams at shadowstats.com. Take note of how the year over year growth of our money supply has steadily increased since early 2005. Also note how the rate of growth is beginning to slow since the beginning of 2008. (I originally wrote this post in early 2008 – I have updated the graph below to show money supply growth through the first few months of 2009 – you can see how the current credit ‘crisis’ is affecting money supply growth).

I believe we’re going to see our money supply growth continue to slow since we are now at the point that we cannot create enough new money (through debt) to support the existing debt. If we’re not able to create enough new money (through debt) each year to service the interest on the existing debt – the system begins to collapse (loan defaults & bankruptcies begin to increase). The world tells us that our economy is ‘maturing’, which is why our economy’s growth is slowing. The truth, as you see, is much different. We are beginning to see the very real signs of an economy on the brink of collapse under the weight of its monetary system. We’ll talk about these signs later in this post.

Let’s continue by viewing inflation. Once again, we hear the world tell us that inflation is running at a rate of 3% a year and we all accept this as normal – and we forget that this rate is compounded year after year. If we see our money supply increase at such a fast pace, we should expect to see inflation also rise at an exponential rate – and we do.

(Source: Federal Reserve)

Now you know why cars that once cost $3,000 now cost $30,000 or a loaf of bread that once cost $0.25 now costs $2.50. Prices increase within the system if the volume of money increases at a higher rate than economic activity (goods & services). More people with more money to spend places upward pressure on prices for everything – cars, fuel, food, natural resources, etc. As money supplies throughout the world increase at an exponential rate, we see inflation skyrocketing across the globe. More on this below.

What about other economic indicators? We see the same trend.

Government Spending:

(Source: wikipedia.org)

Government Revenues:

(Source: Mark Wieczorek)

Commercial Bank Credit:

(Source: Federal Reserve)

Total Revolving Credit:

(Source: Federal Reserve)

Total Consumer Credit:

(Source: Federal Reserve)

These are all interesting, but the most important graph will show us the rate of increase of our debt and the rate of increase of our income. If we see a widening gap between the two, then we know that the system is beginning to break down as the rate of increase in debt (new debt – retired debt + interest) is outpacing our ability to service the debt and keep the system from collapsing.

(Source: Michael Hodges, Federal Reserve, U.S. Treasury)

Sobering isn’t it? What you are seeing is a system on the brink of total collapse. With no way to ultimately pay off our debts (since money is created by debt), this was inevitable at some point. Even though our money supply is also on an exponential curve, it cannot (mathematically) keep up with the runaway debt. We are nearing the end of an inevitable cycle. A cycle that ends with the economic collapse of the United States. As I mentioned earlier, this would not be a surprise to the men who created the system in the U.S. in 1913, nor is it a surprise to the men who are controlling the system today.

What about the rest of the world? Can’t they continue to finance our debt? Won’t this help delay our collapse? What you are about to see is that every major world economy also has a Central Bank – and therefore is on the same exponential curve as us. At some point, the entire world system will be unable to sustain itself unless the entire system changes. We’ll just take a look at money supplies of some of the world’s biggest economies. As you view these graphs, also take note of the total amount of Euros (European Union) in circulation compared to the amount of dollars in circulation. If you consider that there are trillions more dollars in circulation throughout the world compared to pounds and euros and also consider the massive amount of U.S. debt – it shouldn’t surprise anyone that the overall value of the dollar is declining against the world’s major currencies.

Global Money Supply:

(Source: Dollardaze.org)

European Union:

(Source: wikipedia.org)

Australia:

(Source: wikipedia.org)

New Zealand:

(Source: wikipedia.org)

India:

(Source: wikipedia.org)

In addition, in recent months China’s money supply (M1+M2) has been growing at a 16-18% annualized rate. So, it’s easy to see that the same insane economic/monetary system has been instituted the world over. The question is – why? Before we answer this, let’s take a look at what is going on in the U.S. economy today.

Let’s think about what we would expect to see if the economic system of the United States begins to collapse due to this monetary system. As the amount of total debt continues to increase faster than the money supply, we would expect the number of personal and corporate bankruptcies to continue to increase. As global inflation also continues to increase prices on a broad range of products and commodities (due to increases in money supplies the world over), we would expect this to also negatively affect individuals and corporations in America. We would also expect to see those of us with the lowest cash reserves to be affected first. Are we seeing these things? Absolutely. We see them everyday in our news. The current ‘credit crisis’ began when subprime borrowers began defaulting on their home loans. Now, we see that the number of Alt-A and Prime borrowers falling behind on their mortgages is also increasing. Home prices are now decreasing across the nation as a result. How does this affect the money supply? If a homeowner defaults on a loan, the bank must ‘foreclose’ and take a loss on its books. The bank then must sell the home – but sell it in a depressed housing market. If the home was originally purchased for $100,000; and the bank can only get $75,000 now – based on what we now know about how money is created – you can see how the money supply will begin to be affected in a very big way. As home prices decline, the amount of money generated from the home loans from consumers also declines. As banks tighten credit due to the rising defaults, the vicious cycle continues – fewer loans and lower prices equals less money created (thanks to this debt based monetary system). Less money created means less money to loan and less money to buy things – and the exponential money creation cycle from debt begins to reverse itself. It’s also easy to see that falling housing prices and falling housing sales are not the only problem here – all of the suppliers, subcontractors, etc. are also affected. The rapid increase in the money supply generated by private banks that we’ve seen over the past decade is beginning to slow significantly. But as you know, this isn’t all that’s happening.

You’ve watched as the value of CDO’s (Collateralized Debt Obligations), CLO’s (Collateralized Loan Obligations), SIV’s (Structured Investment Vehicles) and other derivatives are now plunging in value resulting in huge write-offs for banks. As foreclosures have risen, the value of the bonds created from these mortgages have plunged in value – even those bonds based on ‘prime’ mortgages. All of these things are reducing the money supply. If you have an investment that you thought was worth $100, but now is only worth $60 on the open market, your access to money has been substantially reduced. Auction rate securities, once thought as safe as cash, now can’t be sold – there are no buyers. What you are seeing are the cracks beginning to form in the dam.

What is the Federal Reserve doing? Basically, they are trying to plug the holes by injecting money into our economy to delay the inevitable. Money creation through the private banking system is faltering, so someone has to step in or something catastrophic is going to happen. As the process has accelerated, not only are banks slowing their lending to consumers, they have also significantly reduced lending to each other. In order to get the capital they need, many banks are now borrowing more money directly from the Federal Reserve discount window. Remember, the Fed isn’t giving the money away; banks are borrowing this money from a private corporation. We can see the impact from the current credit crisis from the graph below.

(Source: Bloomberg)

We see this problem developing with the money supply, but there is one area of our financial system that has yet to suffer a significant drop in value – the stock market. It’s been very volatile, but has not really suffered a prolonged decrease in value. Think about this – what happens when financial conditions worsen, people can’t pay their bills/debts, all other investments have significantly declined in value and there’s only one remaining large source of wealth remaining? People will sell their stocks to survive. There’s an obvious problem with this – if a large number of people start selling – what happens? Prices drop significantly. Since stocks are one of the most volatile investments in the world, the coming decline in the stock market will, in all probability, be much worse than the current decline in value of CDOs/SIVs, Auction Rate Securities and other bonds. One thing is for certain, it’s not a matter of if, but when this will happen.
Dow Jones Industrial Average (1970 – 2008):

(Source: Wall St. Journal Online)

Take a look at the above graph of the Dow Jones Industrial Average (Share volume is also shown). Look familiar? Once again, we see an exponential curve. The DJIA is shadowing both our debt and our money supply. Why? Think about how the world tells us to invest. We’re constantly told that stocks offer the best long term returns. If you only look at stock returns over the past 30 years – this would appear to be good advice (if you ignore the possibility of something negative happening tomorrow). The problem is that there are two very good reasons why the stock market has continued to increase over this time period – and they have nothing to do with the stock market itself. As money has increased exponentially over the past 30 years – more and more liquidity has been placed in the hands of investors. What is another consequence of this exponential money growth? Inflation has also increased exponentially. We have more and more money in a system where inflation is eroding the value of this money. In this situation, everyone is trying to at least maintain the value of their money – by trying to earn a return higher than the inflation rate. So, we see more and more people investing more and more money into risky investments (stocks, hedge funds, CDO’s, SIV’s, Auction-Rate Securities, etc.) in an attempt to outrun the inflation rate.

There’s also another problem that no one in the mainstream media is discussing. We assume that our inflation rate has been approximately 1%-5% in recent years because this is what our government tells us. The problem is that since the early 1980’s, the government has changed the way it measures inflation. I won’t go into details here (please watch Chris Martenson’s video for further information on how our government has changed how it calculates inflation and other economic data: http://www.chrismartenson.com/fuzzy_numbers). The truth is that the actual annual consumer inflation rate has been between 8%-12% over the past 10 years – which means that you would need to average an annual return of around 10% over the past 10 years just to break even. The current rate of inflation is closer to 13% and increasing – not 5% as we’ve been told (I have updated the graph in 2009 to show how the current crisis is causing deflationary pressures).

(Source: Shadowstats.com)

If we also consider the impact that the actual inflation rate has on real GDP (inflation is subtracted from nominal GDP to calculate real GDP) – we see why businesses and consumers are telling us that we’re in a recession – while our government tells us that our economy is still growing. The current state of our economy starts to make sense when we see inflation in double digits and negative GDP for several quarters.

(Source: Shadowstats.com)

Do you know people who have lost their jobs recently? Wonder why it’s difficult to find a job right now? It’s because the current unemployment rate is closer to 13% – not the 5% that we’ve been told (I have updated the graph in 2009 to show the continuing impact of the current recession/depression – real unemployment is now approaching 20%). The government selectively removes ‘discouraged workers’ from total unemployment in order to calculate the lower rate. It’s simply a way for our government to manipulate the data to show more favorable percentages.

(Source: Shadowstats.com)

What is going to happen to the stock market as our money supply growth continues to slow, GDP continues to contract, inflation continues to increase, housing prices continue to fall and more people lose their jobs? The stock market will, once again, shadow our money supply straight down as the system collapses. We’re beginning to see how this is affecting the stock market today. The market has been extremely volatile as earnings reports from companies seem to contradict government economic data. When it becomes clear to everyone that we’re in serious trouble – we’re going to see a mass exodus from stock markets worldwide.

If you’re wealthy, you may feel somewhat secure that you’ve got a nice nest egg to see this through. Where is your money? It’s most likely in dollar currency in the system – checking/savings accounts, money market funds, stocks, bonds, 401(k)’s, retirement accounts, etc. What happens if it’s not just a segment of the system that collapses, but the entire system? It won’t matter what you have – $5 or $5 million – your wealth will vanish before your eyes. We are facing a far worse scenario than 1929. From 1929 through 1933, our money supply contracted approximately 30% after a period of money supply expansion in the 1920’s. As you can see from the money supply trends in previous charts, we have also been through a period of significant money supply expansion from 1995 until 2007. It appears that 1929 was a trial run for what will happen in the near future to us.

Was wealth destroyed during the Great Depression? No. Wealth was transferred. If you read the biographies of some of the great bankers of that era (J.P. Morgan and others), you will see that the majority of them did not have their money in stocks. Earlier in 1929, they moved their investment holdings to cash and gold. For them, the crash of 1929 was not a catastrophe, it was a buying opportunity. A buying opportunity they created. The price of assets dropped dramatically during this time – and guess who happened to have the cash on hand to buy assets at depressed values?

Until now, you’ve probably thought that we’re all playing by the same rules – we’re not. This really isn’t about money – it’s about power and control of the world. It’s about a ruling elite enslaving humanity on a worldwide scale. A ruling elite given power by the world’s spiritual ruler. Now you know a little more about why the Lord has warned us. He warned us that this beast would be deceptive and would deceive the whole world – and you’re beginning to see why. When God tells us in His Word that something in our future will be deceptive on a worldwide scale – it’s a warning we should heed.

This leads us to why our monetary system exists. In 1913, the battle for the control of the United States banking system was lost – and the Federal Reserve Bank was created. The name of this private corporation should tell us all we need to know – it’s a lie. It’s a bank that is not Federal and there are no reserves. The truth is that this ingenious monetary system was created by some highly intelligent men for one purpose – global power. Whoever controls interest rates and the volume of money in a nation controls the nation (and ultimately the world). In a world focused on money and the pursuit of money, whoever controls our money has the power – absolute power. These men created a monetary system that forever places our nation in debt and one that can be manipulated by them for their purposes. What is going to happen when markets collapse? Guess who, once again, will be there to acquire depressed assets?

As I’ve said before, this was inevitable. If you give a banking system, in our evil world, the ability to control the money supply and the ability to charge interest on the money they create, the bankers will slowly, over time, exchange worthless money (paper and electronic fiat currency) for real assets – gold, silver, land and property. If you view this from a spiritual standpoint, you begin to understand why Jesus told us that building the foundation of your life on the things of this world is not wise. As has happened before, and will happen again, wealthy people of this world will see the foundation of their lives (money) slowly sift away through their fingers. Our wealth is an illusion. Satan has offered wealth and power to many in this nation and they have gladly accepted. They are about to witness what happens when you do a deal with the devil. Take him on by yourself and sooner or later – he’s going to find a way to get his tentacles into you. What happens when wealth is taken away from people who are focused on wealth? It’s not pretty. How do we overcome? As I’ve said before, and will continue to say until I leave this world – you will not overcome this world and its ruler until you humbly ask forgiveness from God. Until you acknowledge your sins and truly believe the Lord’s promise of salvation through His Son, you will never get free of the world. You will always be susceptible to the world’s many disappointments. When you truly repent and are born again, what happens in the world no longer matters because you know the Lord and the Lord stands with you – until the end.

At some point you’ve probably wondered how on earth this monetary system has survived until now. If you read the many quotes throughout recent history from bankers, world leaders, economists and tycoons about central banks – and really pay attention to what they’re saying – it’s no secret that those in power knew what was happening (I have listed many of these quotes on my website). Why hasn’t anyone stopped this madness? It’s not hard to figure out – fear. If you attain a position of power and are told to look the other way or face the consequences – what do you do? Most people in the world will gladly take the money and power….and look the other way. Why place my life at risk when I can continue living this nice lifestyle by not rocking the boat? Yes – I said that by standing against this beast – you place your life at risk. I’m not saying this merely to make a hypothetical point. Take a look at this list. These men had three things in common.

Abraham Lincoln
James Garfield
John F. Kennedy

All were Presidents of the United States. Each man spoke out against the issuance of money by anyone other than our Government and made it clear who they were targeting with these comments – and all were assassinated. Lincoln refused to attain loans from the European banks to finance the Civil War (he was offered loans at 24%+ interest) and instead had the U.S. Treasury issue its own money. JFK gave a speech in 1961 about a worldwide ‘monolithic and ruthless conspiracy’ which is ‘a system that has conscripted vast human and material resources into the building of a tightly knit, highly efficient machine that combines military, diplomatic, intelligence, economic, scientific and political operations’. I have added a link to the speech on my website. (Here’s the link: http://www.youtube.com/watch?v=QeYgLLahHv8) JFK even had the audacity in the summer of 1963 to give the U.S. Government the authority to, once again, create its own money via Executive Order 11110 (based on a Silver standard). The U.S. Treasury actually began to print its own money in 1963….but as we all know, this didn’t last long.

As you read the quotes below, notice carefully what these men are telling us. They didn’t realize it at the time they made these statements, but each one of them learned about and then commented on – one of the beasts of Revelation 13. Some of them paid the ultimate price for doing so. The Lord doesn’t arbitrarily label something a ‘beast’ without reason. He uses the term ‘beast’ to tell us who and what we’re dealing with – an organization that will kill, steal and destroy anyone and anything in its path – anything that opposes it. This beast obeys its father – the father of lies and deceit who walks in complete darkness. There is only one way in this world that you and I can oppose this beast and survive – by standing with and obeying the Lord.

“The very word secrecy is repugnant in a free and open society – and we are, as a people, inherently and historically, opposed to secret societies, to secret oaths and to secret proceedings.” –JFK

“We are opposed around the world by a monolithic and ruthless conspiracy that relies primarily on covet means for expanding its sphere of influence – on infiltration instead of invasion – on subversion instead of elections – on intimidation instead of free choice. It is a system that has conscripted vast human and material resources into the building of a tightly knit, highly efficient machine – that combines military, diplomatic, intelligence, economic, scientific and political operations. Its preparations are concealed, not published. Its mistakes are buried, not headlined. Its dissenters are silenced, not praised. No expenditure is questioned, no secret is revealed.” -JFK

“I am asking your help in the tremendous task of informing and alerting the American people.” –JFK referring to the worldwide conspiracy mentioned above

“Whoever controls the volume of money in our country is absolute master of all industry and commerce….and when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.” -James A. Garfield

“The Government should create, issue and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. The privilege of creating and issuing money is not only the supreme prerogative of government, but it is the government’s greatest creative opportunity.” -Abraham Lincoln

“We are grateful to the Washington Post, the New York Times, Time Magazine and other great publications whose directors have attended our meetings and respected the promises of discretion for almost forty years. It would have been impossible for us to develop our plan for the world if we had been subject to the bright lights of publicity during those years. But, the world is now more sophisticated and prepared to march towards a world government. The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the National auto-determination practiced in past centuries.” –David Rockefeller in an address to Trilateral Commission Meeting, 1991

“If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that willgrow up around them (around the banks), will deprive the people of their propertyuntil their children will wake up homeless on the continent their fathers conquered.” –Thomas Jefferson

“Capital must protect itself in every way… Debts must be collected and loans and mortgages foreclosed as soon as possible. When, through a process of law, the common people have lost their homes, they will be more tractable and more easily governed by the strong arm of the law applied by the central power of leading financiers. People without homes will not quarrel with their leaders. This is well known among our principle men now engaged in forming an imperialism of capitalism to govern the world. By dividing the people we can get them to expend their energies in fighting over questions of no importance to us except as teachers of the common herd.” -J.P. Morgan

“We shall have World Government, whether or not we like it. The only question is whether World Government will be achieved by conquest or consent.” –James Paul Warburg (Chairman of the Council on Foreign Relations, speaking before the U.S. Senate, 1950)

“The real truth of the matter is, as you and I know, that a financial element in the large centers has owned the government of the U.S. since the days of Andrew Jackson. History depicts Andrew Jackson as the last truly honorable and incorruptible American president.” –Franklin D. Roosevelt

“[The task is to] covertly lower the standard of living, the whole socialstructure, of America so that we can be merged with all other nations.” –Rowan Gaither (President of the Ford Foundation, 1954)

“I am myself persuaded, on the basis of extensive study of the historical evidence, that… the severity of each of the contractions – 1920-21, 1929-33, and 1937-38 – is directly attributable to acts of commission and omission by the Reserve authorities and would not have occurred under earlier monetary and banking arrangements.” –Milton Friedman (Nobel Prize-winning economist, economic advisor to President Ronald Reagan)

“Since I entered politics, I have chiefly had men’s views confided to me privately. Some of the biggest men in the U.S., in the field of commerce and manufacturing, are afraid of somebody, are afraid of something. They know that there is a power somewhere so organized, so subtle, so watchful, so interlocked, so complete, so pervasive, that they had better not speak above their breath when they speak in condemnation of it.” –Woodrow Wilson

“A great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men who, even if their action be honest and intended for the public interest, are necessarily concentrated upon the great undertakings in which their own money is involved and who necessarily, by very reason of their own limitations, chill and check and destroy genuine economic freedom.” -Woodrow Wilson

“We have restricted credit, we have restricted opportunity, we have controlled development, and we have come to be one of the worst ruled, one of the most completely controlled and dominated, governments in the civilized world–no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and the duress of small groups of dominant men.” –Woodrow Wilson

“This Act (the Federal Reserve Act, Dec. 23rd 1913) establishes the most gigantic trust on earth. When the President (Woodrow Wilson) signs the Bill, the invisible government of the Monetary Power will be legalized… The worst legislative crime of the ages is perpetrated by this banking and currency Bill.” –Charles A. Lindbergh Sr. (Congressman and father of the famous aviator)

“The most wonderful thing of all is that the distinguished Lutheran andCalvinist theologians who belong to our order really believe that they see in it (Illuminati) the true and genuine sense of Christian Religion. Oh mortal man, is there anything you cannot be made to believe?” – Adam Weishophf upon establishing his “Order of the Illuminati”, on May 1, 1776

“It is ironical that the only nation which affirmatively expresses a dependence upon and belief in Almighty God in its birth certificate, should now be in mortal combat for its very existence with a godless conspiracy intent upon conquering the world, and reverting human society to the hazards and indignities of the Dark Ages.” –Loyd Wright (Former President of the American Bar Association, 1961)

“From the days of Spartacus, Weishophf, Karl Marx, Trotski, Belacoon, Rosa Luxenburg, and Ema Goldman, this world conspiracy has been steadily growing. This conspiracy played a definite recognizable role in the tragedy of the French revolution. It has been the mainspring of every subversive movement during the 19th Century. And now at last this band of extraordinary personalities from the underworld of the great cities of Europe and America have gripped the Russian people by the hair of their head and have become the undisputed masters of that enormous empire.” –Winston Churchill, 1920

“The real menace of our Republic is the invisible government which like a giant octopus sprawls its slimy legs over our cities, states and nation. At the head is a small group of banking houses generally referred to as ‘international bankers.’ This little coterie… run our government for their own selfish ends. It operates under cover of a self-created screen…[and] seizes…our executive officers… legislative bodies… schools… courts… newspapers and every agency created for the public protection.” –John Hylan (Mayor of New York, 1918-1925)

“The sovereignty fetish is still so strong in the public mind, that there would appear to be little chance of winning popular assent to American membership in anything approaching a super-state organization. Much will depend on the kind of approach which is used in further popular education.” (Council on Foreign Relations, 1944)
If you spend some time studying these international bankers who have instituted this debt based monetary system worldwide, you will find that at the top echelon of power there are approximately 300 names. These are the same 300 families who own stock in the Federal Reserve of the United States and all of the other central banks the world over. These are the people who wield the world’s real power from the shadows and provide the wealth and power needed to infiltrate the world’s monetary and political systems. These are the people the Lord describes in Revelation 13 – this ‘beast out of the earth’.

If you continue to study how they have gained this power, you will be led back in time to the early 1690’s to the founding of the Bank of England – the world’s first central bank. And if you continue to search for the truth, you will find that all roads on this journey eventually lead to one name – Rothschild. The world will tell you that the Rothschild’s banking empire has been reduced to a ‘niche’ bank – catering mainly to very wealthy investors. The truth is that they control approximately 70%-80% of the world’s wealth from the shadows. If I had told you this at the beginning of this post, you would have probably rejected this statement outright. Now you know how it’s possible – they print the world’s money and exchange it for the world’s real assets. As I mentioned at the beginning, it’s really an ingenious plan – when you realize why it was created. It’s evil, but ingenious. The Rothschilds and every member of these ‘elite’ families would tell you that this plan was devised by them for their purposes – but we know the truth. The Lord has told us Satan’s plans – they’re simply obeying the one they serve.

We now see how the world’s financial system has been overtaken by a few very powerful men. If we take what we know and think about the ‘mark of the beast’, we realize that control of the world’s financial system isn’t enough to satisfy the prophecies about the ‘mark’. Controlling the world’s financial system is one piece of the puzzle, but something else is needed – enforcement. Everyone throughout the world will be ‘forced’ to accept the mark. These powerful men need a way in which to deceive us into believing that humanity needs protecting – and now we know why the Lord tells us in the book of Revelation about ‘miraculous signs’ used by this beast. The beast creates these ‘signs’ to strike fear among us – fear that will eventually drive humanity to give over its freedom to the beast – and Satan. We’ve seen many of these ‘signs’ already, but they are only the beginning.

When it comes to spiritual deception, you are beginning to see just how blind we really are in this world when we walk away from our Creator. We focus on the things in the world – money, careers, cars, houses, addictions, stuff, etc. – and we forget about the subtle things that are missing from our lives. Some of these things are big picture – How did we come into being? Why are we here? Does God really exist? If He exists, why can’t I see Him? Can I really know God – personally? Where do I go when I die? Am I really alone in this fallen world? How can I get free of this mess? Other questions are smaller picture, but would also lead us to the truth if we would just slow down for awhile and think about what we’re consistently told in this world and compare it to God’s truth – could someone really consolidate the world’s government, world’s religion and world’s financial system within 7 years? If God has allowed His children to experience pain and suffering throughout human history in order to strengthen them in this world, why would He change now? Sometimes it’s a very simple question that leads us to some very important answers – how is our money created? Think about how many times in your life – friends, parents, teachers, professors – someone has explained our monetary system to you. Never? You’re not alone – and there’s a reason it’s being hidden. If I were to ask 1000 Americans today what is the greatest threat to our nation’s sovereignty – how many do you think would respond – ‘the war on terror’? My guess is that 99% of us would agree that ‘the war on terror’ is our greatest threat. Our spiritual enemy has created a perceived threat – while his true ‘beasts’ gain control of the world through deceptive means – subversion, infiltration and intimidation. Again, an ingenious plan – and not of this world. The only way to overcome it is to obey the One spiritual being that Satan cannot deceive, intimidate or overcome – our Father in heaven.

The truth is that never before, in the history of the United States, have we faced a greater threat to our national sovereignty as we do now – never. We are facing an enemy that is much more intelligent and powerful than you and I – an enemy that has not used brute force against us, but works in the shadows to deceive and infiltrate. At times in the past I would think about the book of Revelation and wonder how the people of the world could ever allow themselves to be subjected to an evil world government. I simply didn’t want to believe it was possible and I, like most people today, disregarded the Lord’s warnings about how this beast would deceive the whole world. Now that I’ve humbled myself and know the truth, I listen to this beast talk to us everyday through corporate, governmental, banking and religious leaders – leaders of the United States. It’s no longer a mystery. Their plan has almost come to fruition. At some point, you might think that all hope is lost – that they are too powerful and the plan is too far along. How can we possible stop this? I’m not fearful of these things because I know that God could see this coming since the creation of the world – and I don’t need to figure out what to do on my own. I will simply continue to seek the Lord’s will for me – His plan, not mine. What you are about to see throughout the world is that God is going to go on the offensive – and he’s going to do it with you and me. Now is not the time for weak people with weak ministries to proclaim a weak message. Now is the time to allow ourselves to be strengthened spiritually. Now is the time to stand in the face of overwhelming odds – and succeed.

At different times in your life you have probably felt that something wasn’t quite right. You could ‘sense’ it, but you couldn’t ‘see’ it. You couldn’t really explain it, but you knew that there was something not quite right about the world you live in. The economy is up – the economy is down. Life is good – life is not so good. Chaos seems to rule the world. It’s like we’re walking on very thin ice that is constantly cracking – about to give way. You are now beginning to understand that there is a method to the madness. When the world chose death over life, sin over righteousness – when we chose to believe lies instead of the Truth – this was the inevitable result. What gets the true Christian through all of this is that this isn’t the end – it’s only the beginning – and we’re not alone. The end is glorious for us – end of story.

You’ve seen me reference the movie ‘The Matrix’ and how many aspects of the movie are similar to the spiritual battle being waged in the world. I’m going to end this post with some dialog from the movie because it certainly relates to most of us. The following scene takes place right before Neo learns the truth about his world.

Morpheus: I imagine that right now, you’re feeling a bit like Alice. Hmm? Tumbling down the rabbit hole?
Neo: You could say that.
Morpheus: I see it in your eyes. You have the look of a man who accepts what he sees because he is expecting to wake up. Ironically, that’s not far from the truth. Do you believe in fate, Neo?
Neo: No.
Morpheus: Why not?
Neo: Because I don’t like the idea that I’m not in control of my life.
Morpheus: I know *exactly* what you mean. Let me tell you why you’re here. You’re here because you know something. What you know you can’t explain, but you feel it. You’ve felt it your entire life, that there’s something wrong with the world. You don’t know what it is, but it’s there, like a splinter in your mind, driving you mad. It is this feeling that has brought you to me. Do you know what I’m talking about?
Neo: The Matrix.
Morpheus: Do you want to know what it is?
Neo: Yes.
Morpheus: The Matrix is everywhere. It is all around us. Even now, in this very room. You can see it when you look out your window or when you turn on your television. You can feel it when you go to work… when you go to church… when you pay your taxes. It is the world that has been pulled over your eyes to blind you from the truth.
Neo: What truth?
Morpheus: That you are a slave, Neo. Like everyone else you were born into bondage. Into a prison that you cannot taste or see or touch. A prison for your mind.

I finally found a video that does an excellent job of explaining our monetary system in simple terms. I recommend that you watch it to get a better understanding of what I have discussed here. The video was created by Paul Grignon and is only 47 minutes long. Available at:  http://youtu.be/0K5_JE_gOys  (copy into your web browser). I have used a couple of Paul’s examples in this post.

http://moneyasdebt.net/

http://johngilmore.org/

Posted by: John Gilmore | September 16, 2006

Exponential Growth in a Finite World

The greatest shortcoming of the human race is our inability to understand the exponential function. ~Dr. Albert Bartlett

In the previous post, we reviewed the United State’s monetary system and how that system has placed our money supply, debt, inflation, and overall economic growth on exponential curves. We reviewed who is behind this system and why it was created. We also demonstrated that this monetary system has been adopted the world over by every major world power. There are now only a few nations throughout the world who do not have a central bank and debt-based monetary system that is growing exponentially (Not coincidentally – Iraq and Afghanistan were two of them). In case you haven’t read the previous post, I have included graphs below that show the growth of our money supply and Federal debt. It’s not hard to see that both are growing exponentially – and it’s easy to see that we are now on the steep inclines of an exponential curve in both cases. The previous discussion explained why these trends cannot continue indefinitely without a collapse of our economic system.


As I began studying and praying about these things over the past 3 years, I began to wonder – is the world’s monetary system the only thing following exponential growth? The answer, not surprisingly, is – no. What you are about to see is that many systems present in the world today are growing exponentially – not just our monetary and economic systems. You will also see – similar to our monetary system – that all of these systems are now climbing the steep incline of an exponential curve.

In this post, we’re going to take a look at some of the systems in the world today that are growing exponentially and what it means for our future. You will also see – similar to our monetary system – that the exponential growth of these systems is going to cause us serious problems in the very near future. You may ask – what does this have to do with Bible prophecies? How can studying exponential functions help us understand the Lord’s prophecies? After all, this is just math! You’re probably thinking that you didn’t like math in high school/college – and you don’t like it now. In this case, math gives us some very important clues to our future. You probably thought that your high school math teacher was crazy when he or she told you that math has practical ‘real world’ applications. I’m here to tell you that your teacher was more correct than even they knew. The truth is that we can see significant mathematical trends in the world today and how they relate to Bible prophecy if we will take the time to pay attention. I believe that the Lord has made it very clear what is happening in the world and why – if we’d only pay attention to Him and what is happening in our world. If you’ve read my posts on the judgments of Revelation, then you know that the Lord has given us warnings about our future in His Word – warnings regarding our oceans, atmosphere, earth’s temperature, plant life, famine, drinking water, etc. You’re about to see how exponential growth in the world today is pointing to serious problems regarding all of these things.

As you read through this post, you will probably ask yourself – why couldn’t I see this before? These things seem obvious – why couldn’t I see them? Remember, as always, that the world’s spiritual ruler tries to suppress the truth at all costs. How is your knowledge of Bible prophecy? How’s your Biblical knowledge? The truth is that most of us lack the Biblical knowledge required (I was certainly included) to know how events in the world today relate to God’s Word. This is not by accident. Our enemy has very deceptively led us away from the truth – just focus on your life in the here and now – and has blinded us to what is really happening in the world. Satan will always focus us on short term gains – not the long term consequences of our actions. When it comes to sin, we can certainly see this in our own lives – the consequences of making wrong choices and disobeying God. What we haven’t paid attention to – is how wrong choices will affect us on a worldwide scale.

Let’s start by looking at the most important exponential curve in the world today. The world’s population growth. The world’s population has averaged just over 1% growth throughout our history, so it has taken some time to turn the corner. It’s not hard to see that we are now on the steep incline of an exponential growth curve.

What affect has this had on the world? Resources the world over are strained (food, water, energy, etc) – and pollution is becoming a serious issue the world over. What has human population growth done to animal species throughout the world? They’re becoming extinct – at an exponential rate. It is estimated that 1/3 of the world’s species will become extinct by 2050 (Thomas et al., 2004 (Nature 427:145-148)).

(Source: Dr. Edward Wilson)

How could this trend relate to Bible prophecies? Before we answer this question, let’s take a look at another graph.

In 1950, the world’s fish catch equaled approximately 20 million metric tons. In 2002, the world’s fish catch equaled approximately 90 million metric tons. What affect is this having on overall fish stocks? It is reported that approximately 75% of the major marine fish stocks are either depleted, over exploited or being fished at their biological limit (Source: UN FAO FISHSTAT Database). World fish stocks are plummeting. Take a look at what is happening in the North Atlantic. There has been a 90% decline in predatory fish populations.


What is one of the final judgments on the world?

“The second angel poured out his bowl on the sea, and it turned into blood like that of a dead man, and every living thing in the sea died.” (Revelation 16:3)

Today, we can see that pollution, global warming and over-fishing trends are having adverse effects on sea life (see other links on my website relating to coral death, ocean dead zones, melting arctic ice, wildfires, etc.) – and we see where the Lord tells us in His Word about these things. It should not surprise us that these things are happening on a worldwide scale.

Let’s take a look at other trends following the same exponential growth curve as the world’s population. What is happening to our atmosphere as the world’s population increases exponentially? Greenhouse gases (Carbon Dioxide, Methane, etc) are increasing exponentially.

The following charts show us carbon dioxide emissions from human activities. Once again, we see the exponential curve.


It’s easy to see that the U.S. is the biggest contributor to carbon emissions (charts below). Based on what we’ve learned about our economic system (requiring ever-increasing amounts of resources to sustain the system), this shouldn’t surprise us. With only 5% of the world’s population, we consume 25% of the world’s resources and use approximately 50% of the world’s gasoline. We constantly hear how China’s growing economy is contributing to greenhouse gases, but if you view the data – it’s not hard to understand why China doesn’t really want to hear our concerns. We’re not doing anything about it – why should they?


If we view CO2 concentrations over the past 1,000 years, we see the affects of human population on our atmosphere – and the growth trend is definitely exponential.


What about methane? Methane is another greenhouse gas that could also affect our atmosphere over time – to an even larger degree. As you can see – methane is also increasing at an exponential rate. Methane concentration in our atmosphere has increased approximately 150% since 1750.

What are the possible long term consequences of increasing atmospheric concentrations of carbon dioxide and methane? There is one, overriding concern. It’s easy to see in the following graph. This graph shows the relationship of greenhouse gas concentrations to earth’s temperature.

It’s easy to observe that global temperatures move in line with carbon dioxide concentrations. When CO2 concentrations increase – global temperatures increase as well. The problem is that we’re entering uncharted territory. Global atmospheric carbon dioxide concentrations are expected to rise to levels we have never seen. Based on past trends, it’s certainly possible that global temperatures will follow this trend upward.

If we look at just the past 150 years – what do we see? We see the beginning of an exponential curve for both carbon dioxide emissions and global surface temperatures.


What affect will global temperature increases have on our oceans?

We can see that ocean temperatures are heading in the same direction. Ocean temperature rise results in coral bleaching, sea level rise and loss of sea ice. As I mentioned in another post, if ocean temperatures rise six degrees Celsius, there is a very real possibility that our oceans will become marine wastelands – unable to support life.

We see these temperature trends – does anything in the Bible warn us about this? Absolutely.

“The fourth angel poured out his bowl on the sun, and the sun was given power to scorch people with fire. They were seared by the intense heat and they cursed the name of God, who had control over these plagues, but they refused to repent and glorify him.” (Revelation 16:8-9)

What other problems could increased temperatures create in our world? Deserts could spread across the globe, fresh water supplies could become even more scarce and food production could be significantly reduced. Are all of these things mentioned in the Bible? Yes – see other posts on the judgments of Revelation for a complete review.

World per capita cereal production, 1961–2000

World cereal yield, 1961–2000

The above graphs shows world cereal production per capita and world cereal yield. How much more land do we have in the world to grow food? How much more yield can we extract out of existing farmland? You’ll notice that the per capita trend above is beginning to decline as our population increases. We see the same trends for other food – corn, livestock, etc.

If we consider that the world’s population is increasing exponentially and we consider the possible impact of a changing climate – it’s easy to see that it will be very difficult for world food production to keep pace with the needs of the world’s population.

We could continue to look at other trends – world oil consumption, world energy needs, etc. – and see the same exponential curves. We could look at literally hundreds of graphs – and see that each one is approaching the near vertical phase of an exponential curve. What does this mean for us? My personal belief is that these exponential growth curves are not mere coincidences. I believe it’s yet another way that our Creator is giving us a message. A message that we are nearing the end of this present evil age.

There is something that we all need to keep in mind as we consider these trends and how they relate to Bible prophecy. Almost all of these exponential growth rates are a direct result of the exponential growth of the world’s population. If you study the illuminati and their plans for world government – you’ll find that population control is one of their priorities. They are very aware of the trends we have discussed here and are planning to solve the problem. This is why the Lord gives us information regarding this world government – its actions are evil.

“Then I saw another beast, coming out of the earth. He had two horns like a lamb, but he spoke like a dragon.” (Revelation 13:11)

Here are a couple of excellent articles/videos relating to exponential growth and current trends:

http://globalpublicmedia.com/transcripts/645

http://www.chrismartenson.com/exponential_growth

http://www.chrismartenson.com/compounding_is_the_problem

http://www.chrismartenson.com/growth_vs_prosperity

Posted by: John Gilmore | September 16, 2006

Lehman Employees and the Wall Street Compensation Model

I would like for us all to stop and really think a minute about what is happening on Wall Street. Bear Sterns has collapsed and Lehman Brothers will soon follow. I have written a couple of prior articles on greed and Wall Street and what the Bible has to say about focusing your life on wealth – and where this leads. I believe it’s important that we all get a firm grasp on what is happening – because it’s going to affect all of us in very big ways – and soon.

Wall Street recorded record profits from 2004-2007. Everything seemed to be going gangbusters – and greed blinded almost everyone to the warning signs. We now see that these record profits have come at a very high cost – Wall St. loses are now exceeding those profits and stock prices of financial firms are plummeting. The housing market continues to decline and the overall stock market is extremely volatile. We have explored in a blog post what is happening to our economy – it’s collapsing. It doesn’t take a PhD in Economics to see this – only an understanding of basic mathematics. Our monetary system requires infinite growth in a finite world – the math simply doesn’t work. What happens to infinite systems in a finite world? At some point – they will collapse. I have listened to many people (Economists included) who have said that the current economic imbalances present in the world economy cannot continue forever – but will correct themselves at some point before things get completely out of hand. This is based on the flawed assumption that the authorities in charge (political and financial leaders) would never let the world’s economy collapse. It’s a very big assumption – and it’s wrong. Things are going to get worse – much worse.

Again, from the world’s perspective – we can come up with many reasons why all of this is happening – our monetary system, ‘credit crunch’, very poor decisions by people in power, etc. It takes a true child of God – someone who can hear His voice – to truly understand what is happening. Our nation has become squarely focused on money and wealth – it permeates our entire society. It’s really just a symptom of what has really happened to us – we have turned away from God and His ways and have decided to follow the world and its ruler. Wealth is only one symptom – there are many. We live in the most violent society on earth. We are the most incarcerated nation on earth (#1 by a long shot). We allow and even promote abortion and celebrate homosexuality. There are now only a few in the world today who will call this what it is – an utter and complete rejection of God and His laws. We like to tell the world we are a Christian nation – we are not. Let’s stop living in denial and face the truth. There is a remnant of true believers in this country – but they are few. Through them – will we listen to God and turn away from the path we’re on?

Ladies and Gentlemen, in the coming months, the United States of America will watch its wealth evaporate. What was once the world’s richest, most powerful nation – will be plunged into financial ruin. The world will be amazed at how quickly this happens. All of us will see the Lord’s promises put into practice – walk away from Him and you become naked and blind – and think that you’re on top of the world. Wealth will not be the end of this. If we remain on this evil path – expect famine and continued harsh weather patterns (droughts, floods, hurricanes, wildfires). Also remember, we have many enemies in this world who will laugh at our predicament – they will try to exploit our weakness. This is the way of the world – it offers no protection. We thought we had real power and security and could fight off any enemy – and learned that it wasn’t our power that gave us protection. We have learned that the Lord has removed His hand of protection and the devil has taken us over from within. Why use brute force when you can infiltrate and deceive and gain the same results? We cannot take him on alone.

We must get on our knees and return to the Lord – or the United States of America will cease to exist as a sovereign nation in the very near future. I give us maybe 20 years if we remain on this path. There will be no freedom in this world.

I recommend that we all read Ezekiel chapter 14 until we completely understand. It’s time to believe the truth and reject the lies. It’s time to take a stand and fight – according to God’s will – using His weapons. The political ‘beast’ will not gain control of the world without a fight – even if there are only a few of the Lord’s warriors in the world who are on the field of battle.
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September 12, 2008, 5:29 pm
Lehman Employees and the Wall Street Compensation Model
Posted by Heidi N. Moore
Wall St. Journal
Lehman Brothers Holdings has so much phone volume right now that callers are being warned to prepare for long delays. The same goes for many of the securities firm’s 24,000 employees, whose hard work the past five years is being wiped out by Lehman’s plummeting stock price.

That is because Lehman, like many other investment banks, lavished stock on its employees for two reasons: to align employees’ interests with those of other shareholders and to keep them in their seats while paying less cash, which would deplete balance sheets. (Compensation is by far the biggest cost for Wall Street firms, typically 45% to 55% of revenue).

Most of Lehman’s top bankers receive their stock in restricted stock units, about one-third of which vest after three years and two-thirds of which cliff-vest after five years. For 10 years, such RSUs have helped build and preserve Lehman’s tight-knit culture of employee ownership–they hold roughly 30% of the company’s stock. A headhunter said a few years ago: “Anyone who has been at Lehman since at least 1998 is basically unhireable by another firm, because they have something like $20 million in stock.” As Lehman itself pointed out in this filing: “The vesting provisions….mean that a Managing Director at Lehman Brothers, on average, holds more than two times their annual total compensation in the form of equity at any point in time. This creates a strong incentive for the firm’s employees to preserve and grow shareholder value.”

But now, Lehman’s plunging stock price is wiping out a fairly large part of the pay employees got for the record profits earned in the boom years of 2004-2007. Then again, the record losses being posted now have wiped out those boom-year profits and then some.

It is the same across Wall Street. Bear Stearns’ bankers and traders had their net worth slashed by the plunging stock price of their firm. Bankers at Merrill Lynch and Morgan Stanley bemoan the falling value of their company’s stock, too. At J.P. Morgan Chase and Citigroup, the highest-earning bankers received 5% to 10% more of their pay in stock this year than last year. That means a J.P. Morgan banker earning $1.5 million will receive 60% of his pay in cash and 40% in stock this year. J.P. Morgan’s stock packages for its top bankers call for half to vest after two years and the remainder after three years. Merrill Lynch, which used to pay bonuses to investment bankers that were about 75% cash and 25% stock, this year paid 60% cash and 40% stock.

Paying large amounts of employee bonuses in stock is based on the idea that employees would refrain from taking oversize risks if their own net worth was tied up in long-term stock. But, as the credit crunch shows, that alignment hasn’t exactly worked. Some employees, particularly those involved in mortgage securities, took huge risks that have weighed down Lehman.

In the end, there is the irony of a Wall Street that preaches diversification to its clients, but whose employees are concentrated in a single stock.

Posted by: John Gilmore | September 16, 2006

Fed to Give A.I.G. $85 Billion Loan and Take 80% Stake

It has been a very eventful couple of days It shows you just how bad things are becoming. It appears (as Aesop said – appearances are often deceiving) that our Government and the Federal Reserve are doing everything they can to prevent a collapse of our financial system. Let’s think about what is really happening. Remember – who caused this mess? The Federal Reserve – by its monetary policy. Who is solving this mess? The Federal Reserve – by printing money to buy real assets. Where did the Federal Reserve get this $85 billion? As Chris mentions below – out of thin air. They create this money.

Wouldn’t it be nice if you could print your own money to pay your bills or buy things? Not really – think it through. What would happen if everyone had their own printing presses and printed as much money as they wanted? You guessed it – money would quickly become worthless. This is exactly what is happening to the dollar. The Fed is printing vast amounts of money to prop up our failing monetary/economic system. What is going to happen to our money? The same thing will happen as we described above – inflation will skyrocket and our money will become worthless. It’s inevitable.

I’m sure that the stock market will rise tomorrow as people hail this move – we’re saved! Unfortunately, this bailout does nothing to solve the massive underlying problems that are causing all of this. This is simply another symptom of the much bigger problem our monetary system has created. What will the government do with Washington Mutual? When will we reach the point that we can’t bailout any more of these banks/corporations? We are rapidly approaching a cliff – much more quickly than anyone anticipated. When we fall off the cliff – you can bet that there is a plan waiting in the wings to somehow rescue us – which is what this is all about.
What is also very interesting is that you will never hear in the mainstream media how the Federal Reserve gets the money to bailout these institutions. Ever wonder why?

John Gilmore – 9/16/2008
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WOW(!!) – Fed to Give A.I.G. $85 Billion Loan and Take 80% Stake
Dr. Chris Martenson
9/16/2008
This is an incredible turn of events. This is the biggest news of the decade.
I was not expecting this sort of activity for another year or two yet.

The Federal Reserve has bought a majority stake in a private company in exchange for cash. Where did the Fed get this cash? It was created out of thin air.
In just in the past five days the Fed has vastly expanded its Treasuries for Trash(tm) program,begun accepting equities from stricken companies in exchange for cash or higher quality assets, and now has actually bought a gigantic insurance company.

I’ll let this article from the NYT fill in the details.

Quote:
In an extraordinary turn, the Federal Reserve agreed Tuesday night to take a nearly 80 percent stake in the troubled giant insurance company, the American International Group, in exchange for an $85 billion loan, according to people with knowledge of the negotiations.

The Federal Reserve and Goldman Sachs and JPMorgan Chase had been trying to arrange a $75 billion loan for the company to stave off the financial crisis caused by complex debt securities and credit default swaps. The Federal Reserve stepped in after it became clear Tuesday afternoon that the banking consortium would not be able to complete the deal.

Without the help, A.I.G. was expected to be forced to file for bankruptcy protection.

The need for the loans became necessary after the major credit ratings agencies downgraded A.I.G. late Monday, a move that likely to have forced the company to turn over billions of dollars in collateral to its derivatives trading partners worsening its financial health.

Until this week, it would have been unthinkable for the Federal Reserve to bail out an insurance company, and A.I.G.’s request for help from the Fed of just a few days ago was rebuffed.

But with the prospect of a giant bankruptcy looming — one with unpredictable consequences for the world financial system — the Fed abandoned precedent and agreed to let the money flow.
Link to Article (no additional content, I posted the whole thing)
Here’s my very direct and simple thought; the US dollar is toast.
The other central banks are doing what they can to stem the tide but, mark my words, sooner or later reality will catch up and the dollar will plummet. How can it not?
Think about it…the dollar is indirectly the obligation of the US but more directly the obligation of the Federal Reserve.

The Federal Reserve now sports a completely ruined balance sheet. So you would be right in asking yourself “what does a dollar represent, after all?”
If you find yourself stumped, you will be in the company of the rest of the world. Let me put it this way, if I were a Saudi Prince I’d be asking myself, “what exactly is the long-term direction of a currency that is backed by defective loans, unsaleable assets, and positions in failed companies?”
Indeed, that now describes the balance sheet of the Federal Reserve.

I cannot state this strongly enough – the stage is now set for a major dollar collapse and whether it does or not depends completely on the behavior of non-US financial entities. The die are cast and it remains to be seen if they turn up snake-eyes or not.

Posted by: John Gilmore | September 16, 2006

Bush Tries to Build Support for Plan

I don’t know what else to say except – our President is lying to us. He couldn’t push through this bailout plan quickly – there is growing opposition – so he resorts to a primetime address to the nation. He’s threatening us in the same manner as Bernanke – accept this bailout or else. These are not incompetent people – they know that this bailout plan will not solve our economic problems. Why are they pushing this? Because they are weak and are told to do so by people in power. Our nation’s finances are being systematically destroyed.

What is really happening? What do we see if we ignore the rhetoric? We see our government and the Federal Reserve taking control of everything – our financial institutions, our mortgages and our very livelihood – and the plan appears to be working.

No one – in the history of the United States – has done more to destroy our nation than George W. Bush. Our constitution, our financial institutions, our military and our middle class are being assaulted – and we’re losing the battle.

I would like to ask our President what it feels like to sell himself out to something as evil as this. What does it feel like every night, lying in bed – knowing that you are destroying the United States and the lives of Americans? What does it feel like to gain the world – and lose your soul? I would like to think that somewhere, deep down – he regrets the path that he has followed. After watching him over the past couple of years – I have my doubts.

jg
9/24/2008
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SEPTEMBER 24, 2008, 9:32 P.M. ET
Bush Tries to Build Support for Plan
WASHINGTON — President George W. Bush on Wednesday warned Americans and legislators reluctant to pass a historic financial rescue plan that failing to act fast risks wiping out retirement savings, rising foreclosures, lost jobs, closed business and “a long and painful recession.”
Associated Press

In this video image from APTN, President Bush speaks in a prime-time address from the Cross Hall of the White House in Washington, Wednesday.

He spoke just after inviting Democrat Sen. Barack Obama and Republican Sen. John McCain, one of whom will inherit the mess in four months, and key congressional leaders to an extraordinary White House meeting Thursday to hammer out a compromise.
“Without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold,” Mr. Bush said in a prime-time address from the White House East Room that he hoped would help rescue his tough-sell bailout package.
Mr. Bush explicitly endorsed several of the changes that have been demanded in recent days from the right and left. But he warned that he would draw the line at regulations he determined would hamper economic growth.

“It should be enacted as soon as possible,” the president said.

The president’s high-stakes speech reflects the difficulties he is experiencing in selling the plan, which would benefit large financial institutions – and their executives – at a time when ordinary Americans are feeling their own pain from the weak economy, high energy prices and rising unemployment.

So far, the White House has relied largely on the credibility of Treasury Secretary Henry Paulson – a former Goldman Sachs CEO – and Federal Reserve Chairman Ben Bernanke to convince a skeptical Congress.

But many lawmakers are hesitating, as they’re being deluged with complaints about the plan from voters just weeks before the November election.

The White House now is playing its top card – a presidential address to the nation – to persuade the public that the plan is really needed, and that everyone will suffer if the government doesn’t act. The administration’s hope is that Congress still can pass the plan within days to prevent more dangerous lockups in credit markets. But the risk is that Mr. Bush, with his popularity near its lowest point and less than four months left to go in his term, won’t be able to seal the deal either, and the administration will have to alter the plan dramatically.

In particular, Mr. Bush is seeking to sell the plan to many members of his own party, who’ve been among its most prominent critics so far. Republican support has been so soft that some Democrats worry they’ll have to take on most of the responsibility for passing it, exposing themselves to big political risk. Alternatively, Democrats worry they would be blamed for the financial fallout if they reject the bill. So some Democrats on Tuesday specifically called on Mr. Bush to give the address to the nation, hoping to spread the political risk.

White House press secretary Dana Perino said the administration chose tonight for the speech because Congress is getting closer to a solution, and the president feels he should speak directly to the American people. “Everyone will tune in tonight because we are facing a once-in-a-century crisis in our financial markets,” she said.

Posted by: John Gilmore | September 16, 2006

Central Banks Power Expanding Throughout the World

We’re seeing governments around the world nationalizing banks, buying toxic securities and giving Central Banks expanded powers. We’re told this is being done in order to give Central Banks the ability to fight the current financial ‘crisis’. This is happening the world over – same game plan. These policies are giving the fox greater authority over the hen house. From a distance, it appears that everyone is doing whatever they can to ‘contain’ this financial meltdown. Now that we know who controls Central Banks the world over (a cartel of international bankers) and their overall game plan, it’s not hard to see what is really happening. Our political leaders and Central Bank authorities are simply playing their roles in a grand game. They have created a financial crisis and are solving it by giving governments and central banks greater control over us. We are slowly moving to socialism the world over.

Once again, I must admit that this is an ingenious plan – it’s patient and is certainly working. The world is deceived into believing that our leaders are doing their best to ensure our security – when the opposite is true. This is how our enemy operates – he is slowly gaining control of the world – very deceptively. The Lord has told us this in his Word – it shouldn’t surprise anyone that this is happening – the problem is that most of us are spiritually blind and cannot see the truth through the world’s lies.

Watch carefully – over the coming months/years we’re going to see more and more people in power talking about how to solve the world’s financial crisis – by consolidating political and financial power – a one world government and a one world financial system. The people in power in the shadows have written the script – our political and financial leaders are simply playing their parts – and doing it very well

jg

October 7, 2008
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OCTOBER 7, 2008
Brazil Expands Bank’s Authority
Wall St. Journal

BRASILIA — Brazil’s government will issue a decree granting the country’s central bank expanded powers to reinforce local credit supply, Central Bank President Henrique Meirelles said.

The measures, effective Tuesday, aim to give greater agility to the central bank to respond to adverse regional conditions during the global credit crisis.
The measures include authorization for the central bank to purchase credit portfolios from small banks suffering from reduced liquidity in the financial system.
The operations will be offered through the central bank’s discount window on the basis of a repurchase agreement. The central bank will act as guarantor for the portfolios, while the selling banks continue to administer them and remain responsible for any defaults.
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Iceland Scrambles to Shore Up Its Finances
Wall St. Journal

OCTOBER 7, 2008, 8:52 A.M. ET

REYKJAVIK, Iceland — Iceland nationalized its second-largest bank on Tuesday and negotiated a €4 billion ($5.41 billion) loan from Russia to shore up the nation’s finances amid a full-blown financial crisis.

The moves came a day after trading in shares of major banks was suspended, the Icelandic krona lost a quarter of its value against the euro, and the government rushed through emergency legislation giving it new powers to deal with the financial meltdown.

“As declared by the government, all domestic deposits are fully guaranteed,” the Financial Supervisory Authority said. “Landsbanki’s domestic branches, call centers, cash machines (ATMs) and Internet operations will be open for business as usual.”
The Russian loan supports the government’s efforts to gain control of an increasingly dire financial situation. Landsbanki is the country’s second bank to be nationalized in less than two weeks. Last week, Iceland effectively nationalized the country’s third-largest bank, Glitnir Bank hf, taking a 75% stake for €600 million ($811.1 million), while Landsbanki sold the majority of its foreign operations to Icelandic investment bank Straumur-Burdaras hf.

The country’s biggest bank, Kaupthing Bank hf, said Tuesday it hadn’t been approached by the regulator regarding any intervention in its operations. Kaupthing added that Iceland’s central bank has provided it with a €500 million loan to assist operations.

Iceland is paying the price for an economic boom of recent years that saw its newly affluent companies go on an acquisition spree across Europe and its banking sector grow to dwarf the rest of the economy. Bank assets are nine times annual gross domestic product of €14 billion. Investors are now punishing the whole country for the banking sector’s heavy exposure to the global credit squeeze — its currency has gone through the floor, imports have fallen and inflation is soaring.

A person familiar with the situation said that Iceland’s central bank will peg its currency to a basket of currencies, which will then give a euro-Icelandic krona exchange rate of 131. Euro/krona exchange rates have been quoted in recent days at around 200, according to unofficial accounts from currency traders, as official trading in the currency has all but broken down with Iceland fighting for financial survival.

Prime Minister Geir H. Haarde warned late Monday that the heavy exposure of the tiny country’s banking sector to the global financial turmoil raised the specter of national bankruptcy. “In the perilous situation which exists now on the world’s financial markets, providing the banks with a secure life line poses a great risk for the Icelandic nation,” Mr. Haarde said in a televised address to the nation. “There is a very real danger, fellow citizens, that the Icelandic economy, in the worst case, could be sucked with the banks into the whirlpool and the result could be national bankruptcy.” (See related article.)

Just hours earlier, Mr. Haarde had said that no special measures were necessary — but credit lines to banks then seized up on speculation about the solvency of the country’s major banks. The new laws gave the Central Bank of Iceland and the Icelandic Financial Supervisory Authority detailed and vast authority to intervene in the control and operation of Icelandic financial institutions, including the ability to take over or create new institutions, call shareholder meetings and limit the authority of boards.

Earlier Monday, the Icelandic Financial Supervisory Authority suspended trading in financial instruments issued by Kaupthing, Landsbanki, Glitnir, Straumur-Burdaras, Exista and Spron. The government also put 100% guarantees on savers’ deposits, following in the footsteps of Ireland, Germany, Austria, Greece and Denmark.
Tuesday, Icelandic insurer Exista hf said it was selling its 20% stake in Finnish insurer Sampo Oyj through a bookbuilding process. Exista also holds a 4.7% stake in Norwegian insurer Storebrand as well as a 24.7% stake in Kaupthing. Exista and Kaupthing, in turn, own around 29% in Storebrand directly and indirectly, and analysts say a stake sale in Storebrand could be next. Exista Chairman Lydur Gudmundsson said in a statement that Exista has no plans to sell other assets.
A collapse of the Icelandic financial system could reverberate across Europe, given the heavy investment by Icelandic banks and companies across the continent.
One of the country’s biggest companies, retailing investment group Baugur, owns or has stakes in dozens of major European retailers — including enough to make it the largest private company in Britain, where it owns a handful of well-known stores such as the famous toy store Hamley’s.

—The Associated Press and Anna Molin and Joel Sherwood of Dow Jones Newswires contributed to this article.

Write to the Online Journal’s editors at newseditors@wsj.com

Posted by: John Gilmore | September 16, 2006

U.S. Treasury Considers Buying Stakes in Banks

We are seeing governments and central banks around the world ‘injecting’ capital into the financial system. You’ll notice that when a government and/or central bank ‘injects’ money (also referred to as a ‘bailout’) into a private corporation (Example: AIG) or bank, often the government and/or central bank receives equity in that corporation or bank in return (article below). As an example, the Federal Reserve received an 80% equity stake in AIG when it provided $85 billion in funding. Where did they get this $85 billion? It was created out of thin air and $85 billion was added to the debt of the United States government. Nice arrangement if you can get it. It also appears that $85 billion wasn’t enough – yesterday AIG needed an additional $37 billion from the Fed. Things are beginning to get really ugly.

If we, once again, strip away the rhetoric – what is really happening? Governments (United States included) and central banks (around the world) are buying majority stakes in corporations and banks. It is being done under the guise of shoring up the financial system – deceptive, but effective. While the people of the world think that governments and central banks are doing whatever they can to alleviate the financial ‘crisis’ – there is actually a long term plan at work here. Control of the financial/banking system is being consolidated rapidly under the central banking system (now including investment banks). We even see the Federal Reserve considering loaning money directly to corporations (articles began appearing yesterday) – bypassing the crippled banking system. When was the last time they did this? The Great Depression.

This is not an ‘inevitable’ result of the current crisis. If we stop listening to the lies – we begin to see what is really happening – financial control of the world continues to be consolidated into the hands of a very few, powerful people.

Yesterday, central banks around the world lowered short-term interest rates by 50 basis points. Is the current financial crisis a result of the ‘cost’ of money or is this a ‘liquidity’ problem? It’s a liquidity problem – banks aren’t lending and credit markets are frozen. Does it matter that it costs you less to borrow money if you can’t borrow money? No, it doesn’t. So, why would all of these central banks lower interest rates in this environment? I believe it’s all about appearances. By doing this, they ‘appear’ to be doing something that will positively impact stock markets. The reality is that this does nothing to help or solve the problem. The charade continues.

As I’ve said before – the underlying problem isn’t the credit markets or the banks or any of the hundreds of reasons we hear about on the news everyday. The problem is our monetary system that requires exponential growth. This will not correct itself until the monetary system changes. Where does all of this lead? Can governments bailout financial/banking firms forever? Of course not. This financial ‘crisis’ will eventually spread to governments the world over. Governments receive revenue from this ‘system’ and are already saddled with massive debt. It won’t be long before we start hearing that the entire system needs to change. How will it change? We’ll be told that we need a ‘coordinated’ financial system without national boundaries – without national currencies – eventually leading to world government controlling a coordinated world financial system.

Of course the Bible tells us all of this. We’re simply living during times when we can watch all of the details play out.

jg – October 9, 2008
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U.S. Treasury Considers Buying Stakes in Banks
New Tack Comes Amid World-Wide Emergency Rate Cuts
By DEBORAH SOLOMON
Wall St. Journal
October 9, 2008

WASHINGTON—The Treasury Department is considering ways to inject capital directly into banks, possibly by taking equity stakes, as the financial crisis continues to worsen.

Treasury Secretary Henry Paulson, in a marked shift in rhetoric, played up Treasury’s newfound authority to “to inject capital into financial institutions” in remarks Wednesday. Mr. Paulson, who won approval from Congress to buy $700 billion worth of distressed assets, had previously focused on Treasury’s plan to buy mortgage-related securities from financial institutions that are having trouble getting the assets off their books.

As the financial crisis continues to escalate, Treasury has begun fleshing out ways to use its authority to make direct injections into financial institutions, according to a person familiar with the matter. Treasury is figuring out how to structure such infusions so that banks can recapitalize and begin lending.
No such moves are imminent, but the fact that the department is engaging in such discussions is an indication of how the crisis is constantly morphing. Such a move was not under consideration just a few days ago but has become more of a possibility in recent days as the stock market has plunged and the credit crunch shows no signs of easing.

Treasury wants to design something voluntary that encourages healthy institutions to participate. Treasury is discussing whether to buy preferred stock or find some other way to inject capital into the firms.

In remarks to reporters on Wednesday, Mr. Paulson said its new authority extends beyond just mortgage-related assets to “any other troubled assets that the Treasury and the Federal Reserve deem necessary to promote financial market stability.”
The U.K. government this week announced a plan to take stakes in a range of domestic banks.

Coordinated Rate Cuts

On Wednesday morning, the world’s central banks launched a large coordinated attack against the widening global financial crisis, lowering short-term interest rates in unison.

U.S. Treasury Secretary Henry Paulson and Federal Reserve Board Chairman Ben Bernanke testify before the House Financial Services Committee on Sept. 24.
The emergency interest-rate action, which involved the Fed, the European Central Bank, the Bank of England and others, is a sign that fears that the financial crisis could cripple the global economy are spreading rapidly.

But the rate move failed to soothe jittery investors. The Dow Jones Industrial Average closed Wednesday at 9258.10, down 189 points, or 2%. The index has fallen 14.6% so far this month. Oil fell $1.11 to $88.95 a barrel, on signs of weakening global demand. Investors continued to flock to safe-haven U.S. Treasury bills, and away from riskier debt such as junk bonds.

One of the chief threats to the global economy is that banks and other financial institutions are hoarding cash, which makes it harder for businesses and households to finance their day-to-day affairs. Lower interest rates reduce the cost of borrowing for banks, businesses and households, and potentially boost confidence. But it’s far from clear whether the lower rates will make banks and other lenders, which are gripped by fears of defaults by borrowers, any more willing to lend.
The U.K. government this week announced a plan to take stakes in a range of domestic banks. As recently as a few days ago, the U.S. Treasury was not considering any capital injections. But it has become more of a possibility as the stock market has plunged and the credit crunch shows no signs of easing.

Treasury wants to design something voluntary that encourages healthy institutions to participate. It is discussing whether to buy preferred stock or find some other way to inject capital into the firms.

In remarks to reporters on Wednesday, Mr. Paulson said its new authority extends beyond just mortgage-related assets to “any other troubled assets that the Treasury and the Federal Reserve deem necessary to promote financial market stability.”
On Wednesday, central banks in the U.S., the euro zone, the U.K., Canada, Sweden and Switzerland each cut short-term interest rates by a half percentage point, noting that “the recent intensification of the financial crisis has augmented the downside risks to growth.” Acting on its own, the People’s Bank of China also cut rates, as did Australia’s central bank, a day earlier. Later, central banks in South Korean and Taiwan cut interest rates, too, and Brazil’s central bank cut reserve requirements on cash and term deposits.
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Central Banks in Global Show of Force

Central banks around the world acted in concert Monday, hoping a half-percentage-point rate cut would restore confidence to battered markets, WSJ’s David Wessel reports. (Oct. 8)

The global scope of the move was unprecedented, and the cuts marked the first time central banks across the Atlantic have moved in tandem on interest-rate policy since just after the Sept. 11, 2001, terrorist attacks in the U.S. The Fed has not moved rates since April, when it lowered them to 2%.

The moves likely mark just the beginning of broadened government efforts to keep the world-wide credit freeze from strangling the global economy. “For all central banks, this is not the end of the story,” says Laurence Meyer, vice chairman of Macroeconomic Advisers, a forecasting firm, and a former Federal Reserve governor. “We’re facing a potentially severe recession.”

—Jon Hilsenrath, Joellen Perry and Sudeep Reddy contributed to this article.
Write to Deborah Solomon at deborah.solomon@wsj.com

Posted by: John Gilmore | September 16, 2006

Leaders May Close World’s Markets

I mentioned yesterday that we would begin seeing comments relating to how this financial crisis would need to be solved ‘globally’. It’s already starting. This is an article by Chris Martenson posted this morning.

John – Oct 10, 2008

Berlusconi Says Leaders May Close World’s Markets
Friday, October 10, 2008, 12:15 pm, by cmartenson

An interesting bit of news:

Quote:

Oct. 10 (Bloomberg) — Italian Prime Minister Silvio Berlusconi said political leaders are discussing the idea of closing the world’s financial markets while they “rewrite the rules of international finance.”

“The idea of suspending the markets for the time it takes to rewrite the rules is being discussed,” Berlusconi said today after a Cabinet meeting in Naples, Italy. A solution to the financial crisis “can’t just be for one country, or even just for Europe, but global.”

The really interesting part is here where he hints that a second aim is to revisit the Bretton Woods agreement.

Translation: The US dollar’s role as the world’s reserve currency is up for debate.
Quote:

Berlusconi didn’t give any details about what kind of rules leaders were looking to change, except to say that leaders are “talking about a new Bretton Woods.”

The Bretton Woods Agreements were adopted to rebuild the international economic system after World War II in a hotel in Bretton Woods, New Hampshire. The aim of the agreements was to establish a monetary management system, initially by pegging currencies to gold. The IMF was set up later to help manage the international financial system.

Posted by: John Gilmore | September 16, 2006

Handouts to Wall Street Announced

Handouts to Wall Street Announced
By: Dr. Chris Martenson

Dr. Martenson adds some additional comments on the recent developments concerning the government’s investment in our banks.
Handouts to Wall Street Announced

By: Dr. Chris Martenson
Monday, October 13, 2008, 9:00 pm, by cmartenson

Once again, the “will of the people” was overridden by Congress in their haste to respond to an “emergency,” and, once again, it turns out the people’s instincts were right.

Remember the initial $250 billion that was going to be used to buy troubled assets which “we had to do right away!” because otherwise there would have been untold misery and millions of jobs lost?

Turns out we don’t need to buy any of those assets right away after all.
Who knew?

Quote:

WASHINGTON — The Treasury Department, in its boldest move yet, is expected to announce a plan Tuesday to invest up to $250 billion in large and small banks, according to officials. The United States is also expected to guarantee new debt issued by banks for a period of three years, officials said.

Instead, the money will be used to buy bank stock, which is a great deal if you are a bank, because you get cash equity and probably a nice boost to your stock price (I am cynically assuming that the government is not going to get the best price here….). And these purchases will be non-dilutive to existing shareholders. I was okay with the notion of capital infusions, but I am astounded to hear that they will be done in this manner to save existing shareholders.

Even more startling to me is that, instead of slapping the banks firmly on the wrist for being reckless, the government is also “expected to guarantee new debt issued by banks for a period of three years.” To put it bluntly, that is just not the way to combat the moral hazard that is clearly endemic to our current banking system. I think the banks should be kept fully on the hook for any loans they make from here on out….mess up again, and your institution goes under.

Next, if you read the list of handouts below, things get even more troublesome (if your measure is “enormous rewards for Wall Street for misbehaving bother me”).
Citigroup and JPMorgan Chase were told they would each get $25 billion; Bank of America and Wells Fargo, $20 billion each (plus an additional $5 billion for their recent acquisitions); Goldman Sachs and Morgan Stanley, $10 billion each, with Bank of New York Mellon and State Street each receiving $2 to 3 billion. Wells Fargo will get $5 billion for its acquisition of Wachovia, and Bank of America the same for amount for its purchase of Merrill Lynch.

A few of those companies are not even in trouble, at all, and yet they are about to receive billions and billions of dollars. Apparently there is a $5 billion reward for acquiring a competitor….I wonder how many knew about that when they were at the bargaining table? I would bet quite a few of them.

Wait, it get’s better:

The goal is to inject massive liquidity into the banking system. The government will purchase perpetual preferred shares in all the largest U.S. banking companies. The shares will not be dilutive to current shareholders, a concern to banking chief executives, because perpetual preferred stock holders are paid a dividend, not a portion of earnings.

First, this is NOT a liquidity injection, this is a capital injection, and there’s a big difference. Second, this deal could not possibly be any sweeter for any of the bankers or their shareholders. It amounts to a gigantic reward for playing risky and getting caught. Executive positions and shareholders are to be spared.
I am now squinting anew at the market sell-off last week, because it served to inject a lot of fear into the government and G7 negotiations at a critical moment that paved the way for the largest and most massive bailout ever in history. Strangely good timing, for the banks.

I called this a looting operation at the outset, and my suspicions are now largely confirmed.

After these trillions of dollars have been spent and distributed to the least worthy institutions on the planet, you will discover a few oddities along the way:
• Government debts will balloon enormously.
• No new jobs will be created.
• House prices will continue to fall and foreclosures will continue to mount.
• The real economy will have received practically zero benefit.
• Bridges, roads, and schools will still be in poor repair.
• States will still be hurting for revenues.
• We will still have no national energy plan.

In short, none of this money is directed at the real economy. All of it is directed at the institutions that created this mess in the first place, and which, honestly, feast on the productive economy.

This was, quite simply, the largest-ever transfer of public monies to private parties with the least amount of public gain.

We’re going to be paying for this for a long, long time.

Oh, well, I suppose it is all history now. Time to sit back and see how the bond markets respond to all this new borrowing.

Posted by: John Gilmore | September 16, 2006

U.S. Announces Plan to Buy Stakes in Largest Banks

How was the recent $700 billion bailout sold to the American people? It’s only been about a week – have we all forgotten this? If you will remember, this bailout was sold to us as the only way for the financial system to recover. What was causing all of the problems? Toxic securities (CDO’s, etc.). Our government was going to buy these securities and take them off the books of banks/financial institutions. So, what has the Treasury done with the first blank check? They have purchased equity stakes in our largest banks – moving towards nationalizing our banking system. I find this very interesting. What does it tell us? It tells us that our leaders have lied to us so that they could get what amounts to endless funding for nationalizing our banking system – plain and simple. We see the same game plan being played out the world over. Iceland has nationalized their banking system. The U.K. has nationalized their largest banks. Europe is moving in the same direction.
I’m sure that our government will purchase toxic securities at some point. Think about what’s going to happen to our government when the economy doesn’t recover and it has all of this additional toxic debt on its balance sheet. We’re already insolvent – this isn’t going to help anything – except accelerate our government’s decline.
jg – Oct 14, 2008
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OCTOBER 14, 2008, 10:31 A.M. ET
U.S. Announces Plan to Buy Stakes in Largest Banks

Recipients Include Citi, Bank of America, Goldman; Government Pressures All to Accept Money as Part of Broadened Rescue Effort

By DEBORAH SOLOMON, DAMIAN PALETTA, JON HILSENRATH and AARON LUCCHETTI

WASHINGTON — President George W. Bush announced Tuesday morning that the U.S. government is taking stakes in the nation’s top financial institutions as part of a new plan to restore confidence to the battered U.S. banking system, a far-reaching effort that puts the government’s guarantee behind the basic plumbing of financial markets.

FDIC Chairperson Sheila Bair speaks at a news conference as U.S. Treasury Secretary Henry Paulson (center) and Federal Reserve Chairman Ben Bernanke (right) look on.
“The efforts are designed to directly benefit the American people by stabilizing the financial system and helping the economy recover,” President Bush said.
Mr. Bush said the government will purchase equity shares in banks to help institutions unfreeze lending and spur economic growth. Funds for the purchases, which may amount to $250 billion, will come from the recently passed $700 billion bank rescue bill.

“This is an essential short-term measure to ensure the viability of America’s banking system,” Bush said. “And the program is carefully designed to encourage banks to buy these shares back from the government when the markets stabilize and they can raise capital from private investors.”

Mr. Bush also said the Federal Deposit Insurance Corp. will temporarily guarantee most new debt issued by insured banks. He said that will make it easier for banks to borrow money, which can then be lent to consumers. The FDIC also will “immediately and temporarily” expand its insurance to cover every dollar in all noninterest-bearing transaction accounts, which are widely used by small businesses to cover day-to-day operations.

Under the last step announced by Mr. Bush, the Federal Reserve will finalize a program to serve as a buyer of last resort for commercial paper, an important source of short-term financing for businesses banks.

Mr. Bernanke said the U.S. will not “stand down” until financial system and prosperity restored. Mr. Paulson, in his own remarks, said financial institutions in the new program will limit executive compensation. He said that “government owning a stake in any private U.S. company is objectionable to most Americans,” but said the alternative “of leaving businesses and consumers without access to financing is totally unacceptable.”

The government is set to buy preferred equity stakes in Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Bank of America Corp. — including the soon-to-be acquired Merrill Lynch — Citigroup Inc., Wells Fargo & Co., Bank of New York Mellon and State Street Corp., according to people familiar with the matter.
Getting a Grip on the Financial Crisis
• Real Time Economics: The Evolution of Henry Paulson
• Economists React: A Thumbs Up From Ivory Tower
• Treasury’s stock-purchase plan
• FDIC’s liquidity plan
• Paulson, Bernanke, Bair joint and individual remarks
• Bush remarks Tuesday morning
• Detail of commercial paper facility
• Commercial paper FAQs
• Treasury’s Executive Compensation Rules
Related Articles
• Wash Wire: Bush Embraces Multilateral Intervention
• Real Time Econ: The Evolution of Henry Paulson
• Europe’s Rescue Carries Huge Price Tag
• How the U.K. Rescue Plan Became a Banking Model
• Sumner Redstone Squeezed by Loan and Stock Price

Some of the big banks were unhappy about the government taking equity stakes, but acquiesced under pressure from Mr. Paulson in a meeting Monday. During the financial crisis, the government has steadily increased its involvement in financial markets, culminating with a move that rivals the breadth of the government’s response to the Great Depression. It intertwines the banking sector with the federal government for years to come and gives taxpayers a direct stake in the future of American finance, including any possible losses.

Formulated jointly by the Treasury, the Fed and the FDIC, these moves announced Tuesday are designed to keep money flowing through the financial system, ensuring that banks continue lending to companies, consumers and each other. A freeze in these markets rippled through the economy and helped cause stocks to crater last week.

Along with the government’s involvement come certain restrictions, such as caps on executive pay. For example, firms can’t write new employment contracts containing golden parachutes and their ability to use certain executive salaries as a tax deduction is capped. These restrictions are relatively weak compared with what congressional Democrats had wanted when they approved this spending, a potential flash point.

Some critics also say Treasury should have formulated a comprehensive plan earlier in the crisis. Even if this move helps mend credit markets, the economy is likely to suffer in the months ahead from the aftershocks of the recent turmoil.

A central plank of these new efforts is a plan for the Treasury to take about $250 billion in equity stakes in potentially thousands of banks, using funds approved by Congress through the recently approved $700 billion bailout plan.
Treasury will buy $25 billion in preferred stock in Bank of America — including Merrill Lynch — as well as J.P. Morgan and Citigroup; between $20 billion and $25 billion in Wells Fargo; $10 billion in Goldman and Morgan Stanley; $3 billion in Bank of New York Mellon; and about $2 billion in State Street.
The government will purchase preferred stock, an equity investment designed to avoid hurting existing shareholders and deterring new ones. Such shares typically don’t come with voting rights. They will carry a 5% annual dividend that rises to 9% after five years, according to a person familiar with the matter. By investing in several big firms at once, the government hopes to avoid placing a stigma on any one firm for getting government help.

The plan will be structured to encourage firms to bring in private capital. For instance, firms returning capital to the government by 2009 may get better terms for the government’s stake, a person familiar with the discussions said.

Among the other key components of the plan is the FDIC temporarily guarantee, for a fee, certain types of new debt called senior unsecured debt issued by banks and thrifts. This would apply to debt issued by June 30 with maturities up to three years. One problem plaguing credit markets has been a fear among financial institutions that it is unsafe to lend to each other even for periods of a few days. U.S. officials hope this guarantee removes that fear, which could bring down short-term lending rates, such as the London interbank offered rate, or Libor, a benchmark for consumer and business loans.

The FDIC is also temporarily offering banks unlimited deposit insurance for non-interest bearing bank accounts typically used by small businesses, through 2009. This would be voluntary for banks, and would extend the $250,000 per depositor limit lawmakers agreed on two weeks ago. To use these new powers, the FDIC is invoking a “systemic risk” clause in federal banking law that allows it to take extreme steps to prevent shocks to the economy.

The FDIC’s central role in the plan is consistent with its presence during past banking crises, the Great Depression and the savings and loan crisis. Each crisis sparked a major boost in the agency’s power.

The shift brings U.S. policy more in line with that of other countries. Monday, the U.K., Germany, France, Spain and Italy provided further details of measures to buy stakes in struggling banks and offer lending guarantees. The U.K., which first formulated such a plan, is planning to issue some £37 billion ($63.1 billion) in new government debt to pay for purchases of the common and preferred shares of three big banks.

“These are tough times for our economies. Yet we can be confident that we can work our way through these challenges.” President Bush in a joint statement with Prime Minister Berlusconi of Italy.

The U.S. plan to inject capital into banks is expected to be open to almost all such institutions, with a focus on getting the participation of the firms most important to the financial system, according to people familiar with the matter. Treasury’s main goal is to attract private capital. To make sure private investors aren’t scared away, it is expected to structure its investment on terms favorable to the banks and will inject capital in exchange for preferred shares or warrants, these people said.

The government’s new focus is raising questions about why it didn’t adopt such an approach sooner. Mr. Paulson actively opposed the idea of investing in banks because he worried about picking winners and losers, though Fed Chairman Ben Bernanke was an early advocate. Mr. Paulson was also concerned banks wouldn’t participate because of the perceived stigma and the potential for the government to meddle in their affairs, according to people familiar with the matter.

Senior executives and advisers to some of the nation’s leading banks pitched such a plan at various points earlier this summer but were rebuffed by officials at Treasury and the Fed, according to people familiar with the matter. Instead, Treasury initially marched ahead with a plan to buy distressed assets directly from banks.

House Democratic leaders, including Speaker Nancy Pelosi and House Financial Services Committee Chairman Barney Frank, held a closed-door session Monday with 11 economists and other advisers. The group threw its weight behind Treasury’s decision to inject capital into the banking system.

“The consensus was so strong towards direct equity injections that there was literally no dissension on the point,” said one of the invited economists, Jared Bernstein of the liberal Economic Policy Institute. “The only head-scratching is why did it take us so long to get here?”

Officials at the Treasury and Federal Reserve have been looking for a comprehensive approach to the credit crisis after a series of ad hoc interventions and say they didn’t have the authority to make such a comprehensive move until Congress passed the bailout bill. The government’s various moves, from saving mortgage giants Fannie Mae and Freddie Mac to letting Lehman Brothers Holdings Inc. fail, have confused investors and frozen many in place at a time when the banking system was desperate for fresh capital. That contributed to what in essence was a high-level run on Wall Street banks, with funding drying up overnight.

The government’s hope is that the new plan will more thoroughly address the problems of ailing financial institutions and persuade private investors that government involvement won’t come at their expense.

For troubled assets there is the Troubled Asset Relief Program, created by the $700 billion bailout bill, which gives the Treasury Department authority to acquire bad assets from banks and other financial institutions. TARP will also be used by Treasury when it puts new equity into banks.

The other steps, including the FDIC’s role in guaranteeing new funds raised by banks and thrifts, are designed to address the way banks fund themselves, freeing them to start lending again. The Fed is expected to announce Tuesday that a separate plan to lend directly to companies and banks through instruments called commercial paper will start in about two weeks.

William Poole, former president of the Federal Reserve Bank of St. Louis, was a fierce critic of Treasury’s initial plan to buy up distressed mortgage-backed securities. Such a scheme, he said, would lead banks to dump their worst assets on the taxpayers.

But Treasury’s new tack may well do the trick, said Mr. Poole, now a senior fellow at the free-market-oriented Cato Institute.

“Investors need to be confident that the banks they’re dealing with are unquestionably solvent, and it’s in the interest of banks to assure investors that that’s the case,” he said. “One way banks can provide that assurance is to raise additional capital, in some combination of private and government capital.”
Dean Baker, co-director of the left-of-center Center for Economic and Policy Research, argues the country may have turned a corner on the financial panic — the fear that has kept banks and investors from making even the most prudent loans. “I think we’re through the worst on that,” he said. “Maybe I’ll be proven wrong, but it really was at an extreme last week.”

Blanket guarantees, however, might inspire banks to take unnecessary risks, warned Frederic Mishkin, a Columbia University economist who stepped down as Fed governor in August. “You don’t want to give a guarantee to banks that are in trouble” that might try to gamble their way out of problems, he said. He says offering broad guarantees will require that U.S. officials more aggressively act to sort out good banks from bad banks.

One sticking point could come from Congress, which wrote into the original bailout bill requirements that Treasury tamp down executive pay. Rep. Frank said Monday he wants the government to set tough conditions for any company that receives a capital injection. If Mr. Paulson didn’t enforce such rules, Mr. Frank said the Treasury secretary could be “making a big mistake.”

—Michael M. Phillips, David Enrich, Daniel Fitzpatrick, Susanne Craig and Robin Sidel contributed to this article.
Write to Deborah Solomon at deborah.solomon@wsj.com, Damian Paletta at damian.paletta@wsj.com, Jon Hilsenrath at jon.hilsenrath@wsj.com and Aaron Lucchetti at aaron.lucchetti@wsj.com

Posted by: John Gilmore | September 16, 2006

Next Move in European Bailouts: Paying for Them

Here we go. It appears that the public is now being made aware of the ‘potential’ risk to government finances involved with these worldwide bank bailouts. This is like watching a slow-motion train wreck. With the world’s economy destined to collapse – you are watching some highly intelligent people setting up the world’s governments to collapse as well. This is not going to be pleasant.
Watching all of this develop is like standing on a beach watching a 1,000 ft tidal wave approaching. You yell for everyone to get off the beach and prepare for the inevitable – but few are listening.

jg – Oct 14, 2008
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OCTOBER 14, 2008

Next Move in European Bailouts: Paying for Them
Governments’ Bets on Banking Systems Begin to Lift Markets and Ease Lending, but Expose State Finances to Risk

Wall St. Journal

By MARCUS WALKER in Berlin, SARA SCHAEFER MUÑOZ in London and DAVID GAUTHIER-VILLARS in Paris

Now that governments across Europe have stepped in with bold plans to bail out their banking systems, they are facing a new challenge: How to pay for it all.
The U.K., Germany, France, Spain and Italy on Monday provided further details of measures that will see their governments spend tens of billions of pounds and euros on stakes in struggling banks and offer hundreds of billions more in guarantees aimed at helping banks borrow the money they need to do business. The U.S. followed suit late Monday, telling the nation’s top financial institutions in a meeting in Washington that it would buy preferred equity stakes in those banks, and lift the insurance limits for non-interest bearing bank deposit accounts, among other measures.

But even as markets rose sharply on news of the concerted efforts, economists were fretting about the potential effect on taxpayers and government finances.
In essence, governments are making massive bets on the futures of their banking systems. If the plans work and banks do well, taxpayers could profit as the value of the government stakes rises. But if banks suffer further losses, governments could see their national debts grow and credit ratings fall as they are forced to pay up on guarantees. That, in turn, could boost governments’ cost of borrowing, discourage private investment and put the brakes on economic growth.

“It’s incredibly risky,” said Simon Johnson, a professor at MIT and former chief economist of the International Monetary Fund. “You don’t really know the losses that these [banks] are going to have.”

Tom Bemis, a London-based MarketWatch editor, discusses the wave of capital injections that European governments are providing banks. Stocks are rebounding on the news, but it remains to be seen whether the action will unlock frozen credit markets.

So far, the U.K. and Germany have put forth the most ambitious bailout plans. The U.K. is planning to issue some £37 billion ($63.1 billion) in new government debt to pay for purchases of the common and preferred shares of three banks: Royal Bank of Scotland Group PLC and the soon-to-be-merged Lloyds TSB Group and HBOS PLC.
If private investors don’t take part in the banks’ share issues, the government will likely end up with a 60% stake in RBS for £20 billion and a 40% stake in the combined Lloyds-HBOS for £17 billion. The U.K. will also guarantee some £250 billion in bank debts with maturities of up to three years. The guarantees extend to the vast and frozen market for interbank lending, or short-term loans among banks, a Treasury spokeswoman said.

Germany plans to borrow as much as €80 billion ($107.3 billion) to buy stakes in banks and provide an additional €400 billion in debt guarantees. The government didn’t identify any targets for capital injections, but people familiar with the matter said officials have concerns about several of the country’s state-sector Landesbanken, or regional lenders. Several of these, such as Westdeutsche Landesbank and Bayerische Landesbank, have suffered heavy writedowns on U.S. subprime-related securities since mid-2007. A spokeswoman for BayernLB said the bank needs capital but would have to study the details of Germany’s plan. A spokesman for WestLB declined to comment.

The French government said it would inject as much as €40 billion into its banks and guarantee a total of €320 billion in bank debt. The government’s first move will be to inject €1 billion into Dexia SA, the municipal lender that the French and Belgian governments have agreed to bail out.

Meanwhile, the Spanish government approved plans to guarantee as much as €100 billion in bank debt in 2008 and set up a mechanism to inject fresh capital into Spanish banks, though it said none needed the facility at present. Italy also announced an unlimited plan to guarantee bank debt, but a finance ministry spokeswoman said the government doesn’t expect any banks to tap it in the near future.

Global investors issued a vote of confidence in the plans Monday, pushing European stocks sharply upward. The Dow Jones Stoxx 600 index, which tracks European shares, closed up 9.9%, before the U.S. Dow Jones Industrial Average closed up by more than 10%.

In one early sign that the measures might be working, short-term interest rates fell slightly as banks became a bit more comfortable about lending to one another. The three-month dollar London interbank offered rate, a benchmark that is meant to reflect banks’ borrowing costs, fell to 4.7525% Monday from 4.81875% Friday. The three-month Sterling rate fell to 5.60% from 5.8125% Friday.

But the cost of insuring against debt defaults rose for a number of European countries, reflecting rising concerns about how the plans will affect governments’ finances. The cost of insuring against a default on £10 million in U.K. government debt for five years, for example, rose Monday to £47,000 annually, from £41,000 Friday. The cost of five-year default insurance on €10 million in German debt jumped to €27,000 Monday from €23,000 Friday. A higher cost of default insurance translates into higher borrowing costs for governments, and more budget money spent on paying interest.

“You cannot issue this amount of debt in a short amount of time without having to” pay more for it, said Stuart Thomson, a fixed-income-fund manager and economist at Resolution Asset Management in Glasgow.

For the most part, Europe’s larger governments are in a position to absorb even extreme bank losses. In Germany, a theoretical loss of all of the €480 billion in capital injections and guarantees would raise the country’s net national debt to around 75% of gross domestic product, from around 56% now.

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Countries whose public debts already exceed 100% of GDP, such as Italy, might have bigger problems coping with such losses, Mr. Gros said. Smaller countries that are home to large banks could also face difficulties. Switzerland, for example, is home to one of Europe’s largest banks, UBS AG, which has already suffered some $42 billion in write-downs on bad investments.

Banks that participate in the plans won’t get a free ride. Governments intend to charge participating banks for the guarantees, and will also have a say in dividend policies and executive pay. Germany, for example, will charge a fee of at least 2% annually of the amount guaranteed. The U.K. will charge 0.50% plus the cost of default insurance on a bank’s debt.

Executive heads are also likely to roll. On Monday, RBS confirmed that Fred Goodwin, the bank’s chief executive for the past eight years, would be succeeded by Stephen Hester, most recently chief executive of real-estate trust British Land Company PLC. (See related article.)

—Neil Shah, Alistair MacDonald, Davide Berretta, Stacy Meichtry and Thomas Catan contributed to this article.

Posted by: John Gilmore | September 16, 2006

While the World Is Listening, Brown Touts Global Oversight

As the financial crisis continues to get worse – we are going to see more and more world leaders telling us that the world’s financial system needs a ‘global’ solution. Last week we heard the Prime Minister of Italy mention a ‘global’ solution – this week it’s the Prime Minister of England. Very soon – everyone will be singing the same song.

jg – Oct 15, 2008
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OCTOBER 15, 2008

While the World Is Listening, Brown Touts Global Oversight

By ALISTAIR MACDONALD
Wall St. Journal

LONDON — As the British bank-bailout plan becomes a model for Europe and the U.S., U.K. Prime Minister Gordon Brown is using his new platform as financial statesman to push what he sees as the next step: a global system of financial supervision.

Risk from financial markets has become global but the way to supervise financial institutions and their products hasn’t, and needs to be, Mr. Brown says. “You can’t deal with the problems of global financial markets within national systems of regulation,” he said at a news briefing.
Among other measures, Mr. Brown wants to empower international bodies including the International Monetary Fund to monitor global markets and act as early-warning systems.

Mr. Brown first proposed the idea after the Asian financial crisis in 1998, when he was Treasury chief under Prime Minister Tony Blair, and returned to it after the start of the credit crisis last year.

Mr. Brown said Tuesday that progress has been slow.

Though he may now have the attention of other leaders, getting them to act is more difficult. Moreover, warnings from central banks ahead of the credit crunch that there was too much leverage in the system were ignored. And the IMF’s current global financial stability reports get little traction.

But in the U.K., Mr. Brown’s handling of the credit crisis is lifting his popularity from its historic lows. He has a lot of ground to cover: his Labour Party trailed the rival Conservative Party by a wide margin in opinion polls before this week.

The U.K. leader’s bailout approach — injecting capital to bolster bank balance sheets as well as guaranteeing loans to unfreeze lending markets — got its strongest endorsement Tuesday when the U.S. took similar steps.

Mr. Brown and his team looked for other options to help the country’s banks after concluding that the massive amounts of liquidity that central banks had been pumping into the system weren’t addressing the central problem that banks didn’t trust each other so they weren’t lending, Mr. Brown said.

“We defined the problem as the strengthening of our banks with more capital so they could deal with any bad assets,” coupled with a need to guarantee some of their lending, he said. Taking stakes in banks also meant the government could dictate tough terms because taxpayers are footing the bill, he has said.

“I am very pleased that a large number of countries across the world, from Australia and New Zealand, to Sweden, to the euro area have moved towards the proposals that seem to me to be now the common ground for the way forward,” he said.

While Mr. Brown calls for greater global supervision, the U.K.’s markets regulator, the Financial Services Authority, was criticized for failing to spot and react to the risks associated with some of the country’s banks. Now, Mr. Brown’s increased credibility and the fresh urgency of the global crisis may move it along.

“We need an effective global early-warning system for the world economy to alert us to the risks ahead. We need globally accepted and supervised standards of regulation applied equally in all countries. We need stronger arrangements for cross-border supervision of global firms,” Mr. Brown said.

He talked with President George W. Bush on Tuesday about the crisis. Mr. Brown said he will push global regulation at the European Council meeting Wednesday, and he said he has talked to Chinese, Australian and other leaders this week about the idea.

An IMF spokesman didn’t return calls seeking comment.

Write to Alistair MacDonald at alistair.macdonald@wsj.com

Posted by: John Gilmore | September 16, 2006

Crisis Reverberates in Credit & Stock Markets

We’re now beginning to see all of these ‘unintended’ consequences of the recent bailouts. Here’s a question you should be asking yourself – what if they’re not ‘unintended’? What if the ‘problems’ (mentioned in the article below) developing daily are part of a plan? Let’s summarize some of these unintended consequences.

1. Investors are selling Fannie and Freddie bonds and buying bonds issued by large U.S. banks since the banks are now backed by the U.S. government. No one should be surprised that investors would take higher yields with implied government guarantees in this chaotic environment. So – we see investors flocking to big bank bonds and out of the bonds that are not backed by the government. No Surprise. What long term effects will this have on Fannie and Freddie? Will the government continue to back them and how will they back them? What happens to the housing market if it doesn’t?

2. The U.S. government will be forced to issue new debt (Treasuries) to pay for these bailouts. This will drive up interest rates – including mortgages. What will happen to the crippled housing market when you throw in much higher interest rates? Nothing good. As the article below mentions – we’re already starting to see this. Last week the 30 yr mortgage rate increased to 6.75% from 6.05%.

3. Last month the Federal Reserve moved to support short-term commercial paper since this market was frozen. What happened? Investors are not dumb. Not surprisingly, they invested in the commercial paper backed by the Fed and pulled away from short-term debt not backed by the Fed. Who is getting hurt by this? Corporations and European Banks.

4. The Fed’s efforts to unfreeze the short-term debt markets coupled with the FDIC’s efforts to stop bank withdrawals (increased insured amount to $250K from $100K) has led many money market fund managers to stay out of the short term debt markets – especially commercial paper. They are worried that Americans and corporations will favor simple bank accounts over their funds. Money market funds have historically contributed vast amounts of money to the commercial paper market – without them, the commercial paper market will remain largely frozen – where many companies and banks finance short-term obligations. Soon after these efforts, you’ll notice the Fed began offering money directly to corporations (they have not done this since the Great Depression).

So, if we again strip away all of the government/Federal Reserve rhetoric we see what is really happening. On the surface, it appears that our leaders are doing whatever they can to help the situation. If we take a close look at what is really happening, we see something else. We see these ‘bailouts’ increasing the U.S. debt by enormous amounts, we see interest rates rising significantly and we see normal short-term funding drying up. Do these efforts actually help or hurt the housing market? Higher interest rates will certainly hurt the housing market. Can the U.S. support trillions more debt? As you’ve seen me explain before – the answer is no. Sooner or later this is going to get very, very bad. Is it good for corporations and banks to borrow directly from the Fed? They are providing ‘solutions’ that are causing our government, corporations and banks to borrow even more from them. Do we really need to be even more indebted to a cartel of international bankers? As I’ve said before, we will not be able to get out of their grip until our monetary system changes.

The truth is that central banks the world over are negatively impacting the world’s economy. Their ‘solutions’ are simply accelerating the problems. As I’ve said before, I believe that a plan is at work here – and it certainly doesn’t benefit us.

jg – October 16, 2008

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October 16, 2008

Crisis Reverberates in Credit, Stock Markets

U.S. Efforts to Aid Debt Arena Cause Unintended Upshots
By LIZ RAPPAPORT and SERENA NG
Wall St. Journal

Government efforts to heal the credit markets are having unintended consequences that are roiling different sectors of the market and adding to anxiety among investors, who already are worried about the impact of a possible recession on U.S. companies.

Barely two days after the Treasury announced plans to buy stakes in U.S. banks and the Federal Deposit Insurance Corp. said it would provide guarantees on bank debt for three years, investors are making unexpected shifts.

Wednesday, bonds issued by mortgage providers Fannie Mae and Freddie Mac sold off sharply, even though these companies have government backing behind their debt. Traders said hedge funds were forced to sell as they deleverage, and investors were selling some Fannie and Freddie bonds — known as agency debt — and shifting money into bonds issued by large U.S. banks. These bank bonds boast higher yields and also would benefit from implied government guarantees, making them appear relatively safe in the eyes of risk-averse investors, for now.

The difference between yields on two-year Fannie Mae bonds and Treasury notes rose 0.25 percentage point Wednesday to 1.5 percentage points. That gap was less than a single percentage point when the government said in early September that it would place Fannie and Freddie under conservatorship.

The bonds issued by Citigroup Inc., Goldman Sachs Group Inc. and Bank of America Corp. gained over the last two days.

Investors have begun “to realize how potent the new FDIC-backed bank paper could be,” said Jim Vogel, an analyst at FTN Financial, who recently noted that there is some debate over how explicit the government’s guarantee of Fannie Mae- and Freddie Mac-backed debt is.

The agency debt’s selloff is the latest unexpected market response to Federal Reserve and Treasury attempts over the past few weeks to plug the financial system’s holes. The bailout plans may force the U.S. to issue new government debt that could drive up interest rates on mortgages, undermining efforts to rescue the housing market, the very problem that started it all.

Also, last month, the Fed moved to backstop short-term debt called asset-backed commercial paper, which led investors to pull away from the other half of the short-term debt market because it had no government guarantee. This debt was issued largely by corporations and European banks.

Not long after, the government’s move to provide more insurance for bank deposits caused some money managers to change the way they allocate their funds.
“Things are moving so fast, it’s hard for anyone to know what is going on,” said Jim Goulding, manager at Chicago trading firm GH Traders LLC.

While Treasurys remain popular now, because of a flight-to-quality trend that feeds off their safety, another unintended impact may be in the wings. The bailout plans will result in massive new issuance of U.S. Treasurys, sold to pay for it all. This likely would dilute the Treasury bond market, drive down prices, push up yields and cause mortgage rates to rise.

A miniature version of this happened this week. The average 30-year mortgage rate, which is based off of the 10-year Treasury rate, rose to 6.75% Wednesday from 6.05% Oct. 6, as the 10-year Treasury yield rose, according to HSH Associates.
“You have unintended consequences that spark government actions, that create other unintended consequences,” said David Kotok, chairman at money managers Cumberland Advisors.

The Fed’s efforts to unlock the short-term markets also have had meddlesome effects. The FDIC may have stopped the flood of withdrawals from banks when it agreed to insure deposits in accounts up to $250,000, up from $100,000, but this has led many money-market fund managers to stay out of the short-term debt markets, particularly for commercial paper. They worry that cash-strapped Americans and corporate treasurers will favor simple bank accounts over their funds even though they pay slightly higher returns.

Money-market fund managers are traditionally large participants in the commercial-paper market, where companies and banks finance near-term obligations.
The managers remain uncomfortable investing in debt that matures in more than a day. They still are holding on to large cash positions in case they are hit with redemption requests from investors.

The government’s plan isn’t a “panacea for money markets,” said Alex Roever, fixed-income strategist at J.P. Morgan Chase & Co.
In mid-September, when the Fed agreed to lend to U.S. banks with asset-backed commercial paper as collateral, the move was intended to unlock the market and help mutual funds sell the debt to banks in order to meet investor redemptions.
In the weeks following the Fed move, some commercial-paper brokers lamented that the Fed’s implied backstop for the asset-backed commercial-paper market caused investors to favor the higher yielding asset-backed debt over unsecured commercial paper issued by many corporations and European banks.

The imbalance squeezed European banks already having trouble funding themselves, and the Fed ultimately had to step in again to offer short-term loans directly to companies and banks.

Write to Liz Rappaport at liz.rappaport@wsj.com and Serena Ng at serena.ng@wsj.com

Posted by: John Gilmore | September 16, 2006

Volcker Makes a Comeback as Part of Obama Brain Trust

Do you ever wonder why the same people always seem to be recycled into new positions of power? We now have a Presidential candidate who is seeking economic guidance from someone who led the institution that is systematically destroying our economy. Does anyone see a problem here?

jg – Oct 21, 2008
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OCTOBER 21, 2008

Volcker Makes a Comeback as Part of Obama Brain Trust
By MONICA LANGLEY

NEW YORK — At 81 years old, former Federal Reserve chairman Paul Volcker is getting a second chance to shape his legacy with a presidential hopeful more than 30 years his junior.
Mr. Volcker has emerged as a top economic adviser to Sen. Barack Obama during a presidential campaign dominated by a global financial crisis. Their growing bond is paying dividends for each man.

Mr. Volcker delivers gravitas and credibility to Sen. Obama, people in the Obama camp say, as well as ideas and approaches to the economic crisis. “Volcker whispering in Obama’s ear will make even Republicans comfortable, because he’s a hero of the right and a supporter of a strong dollar,” says John Tamny, a supply-side economist and Republican.

On Tuesday, Mr. Volcker is scheduled to appear on the campaign trail with Sen. Obama for the first time. At a round-table discussion with voters in Lake Worth, Fla., he’ll “give his view on the state of the economy and the credit markets, and what needs to be done to fix them,” says one campaign adviser. Longtime Fed watchers are amused that Mr. Volcker, known for his muttered statements during Fed meetings in the 1980s, will be in a political role on the stump.

For Mr. Volcker, a connection with Sen. Obama could help burnish his record as Fed chairman. The cigar-chomping central banker from 1979 to 1987, he received blame for driving up interest rates and tipping the U.S. into the deepest recession since the Great Depression. But Mr. Volcker is just as well known for taming the runaway inflation of that era. His stock has risen in recent months as his gruff warnings about the risks of deregulating the financial sector have come to look prescient. His successor’s reputation, meanwhile, has come under a cloud. Alan Greenspan is under criticism that the low interest rates and deregulatory ideology of his tenure contributed to today’s crisis.

With nearly every day presenting a fresh financial emergency, Sen. Obama has persuaded Mr. Volcker, who travels the globe for economic meetings and occasionally disappears on fly-fishing trips, to be at the ready; Mr. Volcker now keeps a cellphone on him at all times. And though he still doesn’t own a computer (his assistant prints out emails for him), he’s gotten used to Sen. Obama’s rapid-fire messages sent from a BlackBerry device.

The Obama-Volcker relationship continues to evolve, campaign advisers say. At the start, Sen. Obama sought advice from Mr. Volcker and other outside voices through his economic adviser, Austan Goolsbee, a 39-year-old University of Chicago professor. But starting with the demise of Bear Stearns Cos. in March and continuing today, Sen. Obama speaks directly and often with Mr. Volcker about the intricacies of the financial crisis and possible solutions. They’ve become “collaborators,” as one aide puts it.

For example, when the U.S. Treasury put forth a plan to set up a $700 billion rescue fund to buy up toxic assets, Sen. Obama quickly backed it on the advice of Mr. Volcker. Like other prominent economists, Mr. Volcker also advocated early on for the recapitalization of banks. On this advice, Sen. Obama proposed direct equity infusions in banks in his frequent conference calls with Treasury Secretary Henry Paulson. The idea, initially rejected by Mr. Paulson, was finally proposed last week by the administration, in an effort to get banks lending again to businesses and each other.

Sen. Obama’s team of economic advisers includes two former Treasury secretaries, Robert Rubin and Lawrence Summers, and in some decisions, Mr. Volcker doesn’t reign supreme. The candidate’s latest proposal, for example, a $60 billion stimulus package, was initially fought by the former Fed chief on the grounds that Americans were already overspending. Moreover, he is unlikely to take a long-term role in any Obama administration.

Paul Volcker, delivering a lecture last week in Singapore, where he warned that the U.S. and Europe are facing recession from the financial crisis.

But for now, and going into the campaign’s final weeks, aides say Sen. Obama is increasingly relying on Mr. Volcker. His staff now routinely reviews policy proposals and speeches with Mr. Volcker. Conference calls and face-to-face meetings of the Obama economic team are often reorganized to accommodate his schedule. When the team discusses the financial crisis, “The most important question to Obama: What does Paul Volcker think?” says Jason Furman, the campaign’s economic-policy director.

The two men have developed an ease with each other, say aides, even as their styles appear to differ: Sen. Obama, who tends to use the Socratic method from his law-school training, examines all points of view and debates them. With a more formal and direct demeanor, Mr. Volcker likes to go straight to solutions.

In last week’s final presidential debate, after Republican John McCain raised questions about his rival’s ties, Sen. Obama said, “Let me tell you who I associate with. On economic policy, I associate with Warren Buffett and former Fed Chairman Paul Volcker…who have shaped my ideas and who will be surrounding me in the White House.”

Some Democrats have speculated that, if elected, Sen. Obama could name Mr. Volcker to a post, possibly even as Treasury secretary, for a limited time. Banking and Wall Street executives are pushing the two campaigns to name a new secretary shortly after the election to reassure markets during the transition. The Obama campaign wouldn’t comment on possible appointments.

“I just want to be helpful, because I believe Sen. Obama — in his person, in his ideas and in his ability to understand and articulate both our needs and our hopes — brings the strong and fresh leadership we need,” Mr. Volcker said in an interview in New York. Mr. Volcker wouldn’t provide details of his policy suggestions or his personal relationship with Sen. Obama.
After leaving the Fed 20 years ago, Mr. Volcker stopped smoking cigars, became a professor at Princeton University and spent more time fly-fishing. His corner office overlooking Fifth Avenue is filled with photographs and statues of fish, as well as a pillow inscribed: “Work is for people who don’t know how to fish.”

Following a stint as chairman of a boutique investment-banking firm, Mr. Volcker largely steered clear of joining any Wall Street companies. He set up his own office in Rockefeller Center, where he consults for companies and governments. He has served on a few corporate boards, such as UAL Corp., Prudential Insurance Co. of America and Nestlé SA. He also participated on commissions including the United Nations committee to investigate corruption in its oil-for-food program, and an inquiry launched by Swiss banks to determine which accounts belonged to Holocaust victims.

The bond between Messrs. Obama and Volcker started with a dinner invitation. In June 2007, Mark Gallogly, co-founder of Centerbridge Partners, a New York private-investment firm, and an early supporter of Sen. Obama, invited a dozen financial executives to meet the senator, including Goldman Sachs Group Inc. President Gary Cohn, Merrill Lynch & Co. President Greg Fleming and Mr. Volcker.

Along with the invitation, Mr. Volcker received from Mr. Gallogly a “briefing package” containing some speeches by Sen. Obama and news articles about him. Mr. Volcker also read the two books written by the senator.

In the private dining room at a Capitol Hill restaurant, Mr. Gallogly seated Mr. Volcker directly across from Sen. Obama, who at the time was considered a long shot to win the Democratic nomination over Sen. Hillary Clinton. Returning late that night on a flight to New York, Mr. Volcker told the group he was “genuinely impressed” with the Illinois senator.

That message was eventually passed along to Sen. Obama’s advisers in New York, Michael Froman, a friend from Harvard Law School and a Citigroup Inc. executive, and Jenny Yeager, a fund-raiser. Ms. Yeager told Obama headquarters in Chicago that Mr. Volcker seemed “interested” in the candidate, but in two months no one had followed up with the ex-central banker for fund raising or anything else.

When Sen. Obama’s economics adviser, Mr. Goolsbee, heard about Mr. Volcker’s interest, he immediately got excited. “Paul Volcker is a legend! We don’t want to use his contacts for money, we want to pick his brain,” he recalls saying to a campaign operative.

Starting in late summer 2007, Mr. Goolsbee had regular discussions with Mr. Volcker. He incorporated Mr. Volcker’s ideas, including his early concern that the housing downturn would snowball into a larger financial crisis, into Sen. Obama’s policy positions. In a September 2007 speech at Nasdaq, Sen. Obama predicted that because of oversight lapses and abusive practices that cause the public to doubt financial results, “the markets will be ravaged by a crisis in confidence.”

In early January 2008, when Sen. Clinton was pounding her rival over his lack of experience and stature, Sen. Obama phoned Mr. Volcker to ask for his endorsement. (At that time, billionaire investor Warren Buffett had refused to take sides between the Democratic contenders, saying he would support whoever got the nomination.) Mr. Volcker, a long-time Democrat who had mostly stayed out of partisan politics, agreed, and wrote out his statement in longhand.

The presidential candidate’s first big economic address took place in March at Cooper Union in New York. Mr. Volcker’s fingerprints were evident in the speech. The onetime central banker had long been vigilant about strong regulatory oversight; as Fed chairman he rejected big banks’ attempts to repeal Depression-era laws to engage in more risky practices like investment banking. New financial institutions and instruments have since led to the repeal or relaxation of those laws, and Mr. Volcker told Sen. Obama that the U.S. regulatory structure must be strengthened and updated for the 21st century.

With Mr. Volcker sitting in the front row, Sen. Obama told the audience at Cooper Union that the current financial-regulatory framework must be “revamped.” He faulted deregulation for the growing economic crisis. “Our free market was never meant to be a free license to take whatever you can get, however you can get it.”

Once Sen. Obama became the expected Democratic nominee in June, and the economy became the central campaign issue, his chats with Mr. Volcker picked up. Mr. Goolsbee would get emails from Sen. Obama’s traveling aide Reggie Love or his senior strategist David Axelrod with the message: “BO wants to call Volcker. What’s his number again?”

In the past two months, financial crises have come one after another, picking up speed with the federal government’s July effort to bolster big mortgage insurers Fannie Mae and Freddie Mac. As the contagion from the subprime mortgages and risky mortgage credit swaps threatened to topple other institutions, Sen. Obama asked for “emergency meetings” with his economic team, about a dozen advisers including Mr. Volcker and Mr. Buffett.

At the first group meeting in Washington in late July, Sen. Obama said he wanted to hear from each adviser on the worsening economic downturn and asked Mr. Volcker to go first. “The very health of the credit markets is at stake,” Mr. Volcker said, according to one attendee. He urged strong action to restore confidence, particularly in the U.S. banking system.

When Sen. Obama raised the prospect of a package of spending and tax measures to “stimulate” the economy, Mr. Volcker disapproved. “Americans are spending beyond their means,” he told the group. A stimulus package would delay the belt-tightening and savings needed, he added, proposing instead better regulation and assistance to banks.

Laura Tyson, economics adviser for President Bill Clinton and a professor at University of California, Berkeley, disagreed. “Americans can’t help but spend beyond their means because they’ve had no income growth while their costs on gas and food have skyrocketed.” She suggested spending money to rebuild infrastructure and create jobs. Even as some others agreed with Ms. Tyson, Mr. Volcker didn’t budge. Sen. Obama delayed putting out a new stimulus package, but stressed that he wanted to find the “right balance” of possible assistance.

When the bailout bill became a political football and the markets seized up, Sen. Obama called the second in-person meeting of his financial team on Sept. 26 in Miami. Mr. Volcker initially said he would have to call in because he was leaving for Europe that day. Sen. Obama, according to campaign aides, called him with a personal plea.

The next morning, the senator seated Mr. Volcker beside him, an arrangement that was photographed by the media entourage covering the campaign. Mr. Volcker told the group he had changed his mind about an economic-stimulus package due to the global recession, but he couldn’t stay to hear the discussion about the approach because he had to catch a plane to Europe.

In the past two weeks, with the stock market’s drastic volatility and weak economic indicators, Sen. Obama presented his $60 billion package, which contains tax cuts and spending to provide public-works jobs to struggling Americans.

On Monday, Fed Chairman Ben Bernanke endorsed the idea of another stimulus package, giving a boost to Democratic lawmakers who are considering one. But congressional Republicans have so far shown little interest in a second spending bill.

Write to Monica Langley at monica.langley@wsj.com
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February 10, 2009

Here’s another article that relates to the article above. This is an article from the Loose Change website. I encourage you to research these things on your own.

jg

Obama’s Trilateral Commission Connections, Council on Foreign Relations Sellouts and Wartime Military/National Guard Draft Re-Instatement Issues that the Republicans Don’t Even Talk About

By Patrick Wood, EditorThe August Review, Global elite research center
January 30, 2009

[Ed. note: For clarity, members of the Trilateral Commission appear in bold type.]
As previously noted in Pawns of the Global Elite, Barack Obama was groomed for the presidency by key members of the Trilateral Commission. Most notably, it was Zbigniew Brzezinski, co-founder of the Trilateral Commission with David Rockefeller in 1973, who was Obama’s principal foreign policy adviser.

The pre-election attention is reminiscent of Brzezinski’s tutoring of Jimmy Carter prior to Carter’s landslide election in 1976.

For anyone who doubts the Commission’s continuing influence on Obama, consider that he has already appointed no less than eleven members of the Commission to top-level and key positions in his Administration.

According to official Trilateral Commission membership lists, there are only 87 members from the United States (the other 337 members are from other regions). Thus, in less than two weeks since his inauguration, Obama’s appointments encompass more than 12% of Commission’s entire U.S. membership.

Is this a mere coincidence or is it a continuation of dominance over the Executive Branch since 1976? (For important background, read The Trilateral Commission: Usurping Sovereignty.)

Secretary of Treasury, Tim Geithner
Ambassador to the United Nations, Susan Rice
National Security Advisor, Gen. James L. Jones
Deputy National Security Advisor, Thomas Donilon
Chairman, Economic Recovery Committee, Paul Volker
Director of National Intelligence, Admiral Dennis C. Blair
Assistant Secretary of State, Asia & Pacific, Kurt M. Campbell
Deputy Secretary of State, James Steinberg
State Department, Special Envoy, Richard Haass
State Department, Special Envoy, Dennis Ross
State Department, Special Envoy, Richard Holbrooke

There are many other incidental links to the Trilateral Commission, for instance,
Secretary of State Hillary Clinton is married to Commission member William Jefferson Clinton.
Geithner’s informal group of advisors include E. Gerald Corrigan, Paul Volker, Alan Greenspan and Peter G. Peterson, among others. His first job after college was with Henry Kissinger at Kissinger Associates.

Brent Scowcroft has been an unofficial advisor to Obama and was mentor to Defense Secretary Robert Gates.

Robert Zoelick is currently president of the World Bank. The World Bank Group is comprised of five agencies that make loans or guarantee credit to 177 member countries. Its stated aim is to help countries reduce poverty by making long-term loans to governments for large-scale projects such as dams or pipelines, or to back economic reform programs. However, World Bank loans have often had very negative effects on countries putting them in situations of precarious debt and setting conditions on which countries can receive loans, conditions which often have a devastating impact on the lives of citizensLaurence Summers, White House Economic Advisor, was mentored by former Treasury Secretary Robert Rubin during the Clinton administration.
There are many other such links, but these are enough for you to get the idea of what’s going on here.

Analyze the positions

Notice that five of the Trilateral appointees involve the State Department, where foreign policy is created and implemented. Hillary Clinton is certainly in line with these policies because her husband, Bill Clinton, is also a member.What is more important than economic recovery? Paul Volker is the answer.What is more important than national intelligence? Gen. James Jones, Thomas Donilon and Adm. Dennis Blair hold the top three positions.

What is more important than the Treasury and the saving of our financial system? Timothy Geithner says he has the answers.

The State Department is virtually dominated by Trilaterals: Kurt Campbell, James Steinberg, Richard Haass, Dennis Ross and Richard Holbrooke.

This leaves Susan Rice, Ambassador to the United Nations. The U.N. is the chosen instrument for ultimate global governance. Rice will help to subvert the U.S. into the U.N. umbrella of vassal states.

Conflict of interest

Since 1973, the Commission has met regularly in plenary sessions to discuss policy position papers developed by its members. Policies are debated in order to achieve consensuses. Respective members return to their own countries to implement policies consistent with those consensuses.

The original stated purpose of the Trilateral Commission was to create a “New International Economic Order.” Its current statement has morphed into fostering a “closer cooperation among these core democratic industrialized areas of the world with shared leadership responsibilities in the wider international system.” (See The Trilateral Commission web site)

U.S. Trilateral members implement policies determined by a majority of non-Americans that most often work against the best interests of the country.

“How,” you say?

Since the administration of Jimmy Carter, Trilaterals held these massively influential positions:

Six out of eight World Bank presidents, including the current appointee, Robert Zoelick
Eight out of ten U.S. Trade Representatives
President and/or Vice-President of every elected administration (except for Obama/Biden)
Seven out of twelve Secretaries of State
Nine out of twelve Secretaries of Defense

Is this sinking in? Are you grasping the enormity of it?

Endgame is at hand

For the Trilateral crowd, the game is about over. The recent reemergence of original members Henry Kissinger, Zbigniew Brzezinski, Brent Scowcroft and Paul Volker serves to reinforce the conclusion that the New International Economic Order is near.

The Trilateral Commission and its members have engineered the global economic, trade and financial system that is currently in a state of total chaos.

Does that mean that they have lost? Hardly.

In the article Chorus call for New World Order, they are using the crisis to destroy what remains of national Sovereignty, so that a New World Order can finally and permanently be put into place. Sovereignty is the principle that the state exercises absolute power over its territory, system of government, and population. Accordingly, the internal authority of the state supersedes that of all other bodies.

Conclusion on Obama’s Trilateral Commission Connections

The Obama presidency is a disingenuous fraud. He was elected by promising to bring change, yet from the start change was never envisioned. He was carefully groomed and financed by the Trilateral Commission and their friends.In short, Obama is merely the continuation of disastrous, non-American policies that have brought economic ruin upon us and the rest of the world. The Obama experience rivals that of Jimmy Carter, whose campaign slogan was “I will never lie to you.”

When the Democrat base finally realizes that it has been conned again (Bill Clinton and Al Gore were members), perhaps it will unleash a real political revolution that will oust Trilateral politicians, operatives and policies from the shores of our country.

If the reader is a Democrat, be aware that many Republicans and conservatives are still licking their wounds after finally realizing that George Bush and Dick Cheney worked the same con on them for a disastrous eight years of the same policies!

A who’s who guide to the people poised to shape Obama’s foreign policy.

U.S. policy is not about one individual, and no matter how much faith people place in President-elect Barack Obama, the policies he enacts will be fruit of a tree with many roots. Among them: his personal politics and views, the disastrous realities his administration will inherit, and, of course, unpredictable future crises. But the best immediate indicator of what an Obama administration might look like can be found in the people he surrounds himself with and who he appoints to his Cabinet. And, frankly, when it comes to foreign policy, it is not looking good.
Obama has a momentous opportunity to do what he repeatedly promised over the course of his campaign: bring actual change. But the more we learn about who Obama is considering for top positions in his administration, the more his inner circle resembles a staff reunion of President Bill Clinton’s White House. Although Obama brought some progressives on board early in his campaign, his foreign policy team is now dominated by the hawkish, old-guard Democrats of the 1990s. This has been particularly true since Hillary Clinton conceded defeat in the Democratic primary, freeing many of her top advisers to join Obama’s team.

“What happened to all this talk about change?” a member of the Clinton foreign policy team recently asked the Washington Post. “This isn’t lightly flavored with Clintons. This is all Clintons, all the time.”

Amid the euphoria over Obama’s election and the end of the Bush era, it is critical to recall what 1990s U.S. foreign policy actually looked like. Bill Clinton’s boiled down to a one-two punch from the hidden hand of the free market, backed up by the iron fist of U.S. militarism. Clinton took office and almost immediately bombed Iraq (ostensibly in retaliation for an alleged plot by Saddam Hussein to assassinate former President George H.W. Bush). He presided over a ruthless regime of economic sanctions that killed hundreds of thousands of Iraqis, and under the guise of the so-called No-Fly Zones in northern and southern Iraq, authorized the longest sustained U.S. bombing campaign since Vietnam.

Under Clinton, Yugoslavia was bombed and dismantled as part of what Noam Chomsky described as the “New Military Humanism.” Sudan and Afghanistan were attacked, Haiti was destabilized and “free trade” deals like the North America Free Trade Agreement and the General Agreement on Tariffs and Trade radically escalated the spread of corporate-dominated globalization that hurt U.S. workers and devastated developing countries. Clinton accelerated the militarization of the so-called War on Drugs in Central and Latin America and supported privatization of U.S. military operations, giving lucrative contracts to Halliburton and other war contractors. Meanwhile, U.S. weapons sales to countries like Turkey and Indonesia aided genocidal campaigns against the Kurds and the East Timorese.

The prospect of Obama’s foreign policy being, at least in part, an extension of the Clinton Doctrine is real. Even more disturbing, several of the individuals at the center of Obama’s transition and emerging foreign policy teams were top players in creating and implementing foreign policies that would pave the way for projects eventually carried out under the Bush/Cheney administration. With their assistance, Obama has already charted out several hawkish stances. Among them:

– His plan to escalate the war in Afghanistan;
– An Iraq plan that could turn into a downsized and rebranded occupation that keeps U.S. forces in Iraq for the foreseeable future;
– His labeling of Iran’s Revolutionary Guard as a “terrorist organization;”
– His pledge to use unilateral force inside of Pakistan to defend U.S. interests;
– His position, presented before the American Israel Public Affairs Committee (AIPAC), that Jerusalem “must remain undivided” — a remark that infuriated Palestinian officials and which he later attempted to reframe;
– His plan to continue the War on Drugs, a backdoor U.S. counterinsurgency campaign in Central and Latin America;
– His refusal to “rule out” using Blackwater and other armed private forces in U.S. war zones, despite previously introducing legislation to regulate these companies and bring them under U.S. law.

Obama did not arrive at these positions in a vacuum. They were carefully crafted in consultation with his foreign policy team. While the verdict is still out on a few people, many members of his inner foreign policy circle — including some who have received or are bound to receive Cabinet posts — supported the invasion and occupation of Iraq. Some promoted the myth that Saddam had weapons of mass destruction. A few have worked with the neoconservative Project for the New American Century, whose radical agenda was adopted by the Bush/Cheney administration. And most have proven track records of supporting or implementing militaristic, offensive U.S. foreign policy. “After a masterful campaign, Barack Obama seems headed toward some fateful mistakes as he assembles his administration by heeding the advice of Washington’s Democratic insider community, a collective group that represents little ‘change you can believe in,’” notes veteran journalist Robert Parry, the former Associated Press and Newsweek reporter who broke many of the stories in the Iran-Contra scandal in the 1980s.

Posted by: John Gilmore | September 16, 2006

Poll: Americans Angry, Worried Over State of Nation

Even though many Americans do not know God or understand His ways, the vast majority of us do know that something is seriously wrong with our nation. It’s now getting to the point that we can see everything going against us – our finances, our security, the wars in the Middle East, the weather (floods, hurricanes, wildfires, drought) – it appears to most Americans that things are no longer going our way. You don’t need to be a Christian to see this process happening – but you do need to be a true Christian to understand why it’s happening. As I’ve said before, to truly understand what is happening in the world, you need to understand God’s ways and His character. The reason that all of these things are happening is because we are no longer blessed by Him as a nation – we are cursed.

The Old Testament is full of stories of empires that fell. Why did they fall? Was it because they didn’t plan for the future? Was it because an enemy destroyed them? Was it because they didn’t manage money/finances well? What does the Bible say about this? The Bible tells us that the world’s many empires fell because they walked away from God and His laws – their fall was not due to worldly problems. They stopped following God and embraced the world and its evil. When this happens, God warns first. A nation will begin to see problems develop with regards to weather, finances, enemies, etc. In Israel’s case – since they were God’s covenant people – the Lord sent His prophets to warn in an attempt to turn them around. When a prophet is sent to warn – you’ve reached the end of the line. What happened to Israel when they rejected the final message of repentance from Jesus? Rome invaded Jerusalem and the 2nd Jewish Temple was destroyed. Finality. It does not matter who you think you are – your position, your wealth, your worldly power, your lineage – if you walk away from God, you have no protection in this world. From a spiritual standpoint, a nation should recognize the seriousness of the situation when things begin to turn against them – history records that most nations have refused to acknowledge God and His warnings – to their ruin.

What do we see in America today? We see widespread destruction due to weather. We see our nation’s finances in disarray. We see powerful enemies rising up at a time when we are declining. We see an evil entity (the Bible refers to it as a ‘beast’) infiltrating our government, our financial system and our corporations. We even see our enemy infiltrating and corrupting Christianity itself – and very few are left in the world who can even identify what is happening. Evil is taking over because this is what we have chosen. We are all wrapped up in the world – and are on a path that will eventually lead to our ruin – just like every other world empire before us. You would think that we would have learned the lesson that God has taught us throughout human history. How soon we forget. When all of our worldly possessions are stripped away – we’ll see ourselves as we truly are – poor, blind and naked.

All of the bailouts, stocks, bonds, financial derivatives, cash, etc. in the world cannot save us from financial ruin. All of the military hardware in the world will not protect us from our enemies. All of our intelligence will not allow us to see our enemy infiltrating the world’s political, financial and religious systems. Worldly wealth, power and intelligence won’t get us where we need to be. All worldly roads eventually lead to one place – destruction. If you pray for forgiveness and ask God what is really happening in America – you will begin to see as I do – you will see our enemy systematically destroying this nation. Don’t deceive yourself and let your pride blind you into thinking that God would never let this happen. He’s letting it happen because of what we’ve become.

My personal belief is that our wealth will be taken from us – this is a certainty. We have worshipped wealth – and so we have a very hard lesson to learn. Once our stock market falls and our economy collapses – where do we go? What will we do? There are two roads from here. We can curse God and continue to ignore Him and His ways – or we can sincerely ask for forgiveness and turn this ship around. We need to ask Him to forgive and help us get out of the abyss. If we are truly sincere – He will draw near to us and heal us – but His help is conditional. We cannot continue to do evil and then ask our Holy God for help without making major changes within our hearts.

Will the United States of America return to God or will we choose to become just another part of world government? Will we stand for God in the face of overwhelming odds or will we choose the way of the world – and eternal punishment? Will we ask for the faith and courage necessary to stand up against evil or will we give in when the going gets tough? This starts with the heart of everyone reading this. You can’t look at your neighbor or your relatives or your friends – you must take a hard look at your own heart and see where you are and where you need to go spiritually. Are you afraid of what is happening? This is the first indication that you have some spiritual work to do. For the true believer – there is nothing to fear in this world with the Lord standing with you.

I receive a daily devotion email on God’s promises. I received the following yesterday:

This week’s promise: God blesses humble people
God as house-builder
“Unless the Lord builds a house, the work of the builders is useless. Unless the Lord protects a city, guarding it with sentries will do no good.
Psalm 127:1 NLT

“Benjamin Franklin is best known for his inventions (lightning rod) and his aphorisms (“early to bed and early to rise makes a man healthy, wealthy, and wise”). But he was also a key figure when the thirteen colonies were giving birth to a new nation.

At the age of 81, Franklin was the oldest representative at the 1787 Constitutional Convention in Philadelphia. Weeks after the convention began, representatives were still haggling about the relative voting power of large states and small states. Then Franklin stood up and said,

“In the beginning of the contest with Britain, when we were sensible of danger, we had daily prayers in this room for the divine protection. Our prayers, sir, were heard and they were graciously answered.…Have we now forgotten this powerful Friend? Do we imagine that we no longer need his assistance? I have lived a long time, and the longer I live the more convincing proof I see of this truth, that God governs in the affairs of men.…We have been assured, sir, that ‘except the Lord builds the house, they labor in vain that build it,’ and without His concurring aid, we shall succeed in this political building no better than the builders of Babel.”

The verse from Psalm 127 had its effect. A compromise was soon worked out, and a Constitution ratified by the states the following year.

jg – Oct 21, 2008
_________________
Poll: Americans angry, worried over state of nation
STORY HIGHLIGHTS:

CNN/Opinion Research Corp. poll finds widespread dissatisfaction
Poll reports 75 percent say things are going badly in United States
Similar numbers say they are angry and stressed out; two-thirds scared
More than 70 percent dissatisfied with President Bush’s performance

From Paul Steinhauser

WASHINGTON (CNN) — A new national poll suggests that only a quarter of Americans think things are going well in the country today, while the rest of those questioned are angry, scared and stressed out.

Two-thirds of those questioned say they’re scared about the way things are going in the U.S.

Seventy-five percent of those surveyed in a CNN/Opinion Research Corp. poll released Tuesday said things are going badly in the United States.

An equal portion of those polled said they are angry about the way things are going. Two-thirds of those questioned said they’re scared about the way things are going and three in four said the current conditions in the country are stressing them out.
“It’s scary how many Americans admit they are scared,” said Keating Holland, CNN’s polling director. “Americans tend to downplay the amount of fear they have when facing tough times. The fact that more than six in 10 say that they are scared shows how bad things are getting.”

The 25 percent who said things are going well in the country is another indicator of the negative mood among Americans.

“Prior to 2008, we have seen that level of dissatisfaction only three times in the past four decades — during Watergate, the Iranian hostage crisis and the recession of 1992,” Holland added.

The survey also suggests that most Americans are not happy with President Bush. Seventy-two percent of those questioned disapprove of the president’s handling of his job.

The war in Iraq also continues to be unpopular with Americans, with 32 percent of those questioned favoring the war.

The CNN/Opinion Research Corp. poll was conducted Friday through Sunday, with 1,058 adult Americans questioned by telephone. The survey’s sampling error is plus or minus 3 percentage points.

Posted by: John Gilmore | September 16, 2006

Greenspan Admits Errors to Hostile House Panel

I am amazed at how easily our leaders lie to cover up what is happening to our economy. It is ridiculous for Alan Greenspan to say he is ‘shocked’ by the current credit/financial crisis. There is absolutely no doubt that the Federal Reserve setup the world system for a final, systemic failure during Greenspan’s watch. Let’s take a look at a couple of his comments and compare them to reality.

“no one could have predicted the collapse of the housing boom and the financial disaster that followed” – Alan Greenspan

Really? Let’s take a look at housing data and U.S. income from the 1970’s until now.


We can see that housing prices began to diverge from income in the mid-1990’s. By the year 2000, it was clear to anyone paying attention that a housing bubble was forming – housing prices cannot outpace income forever – people must be able to pay their mortgages. This was certainly known by the Federal Reserve – it’s easy to see there was a problem. Again, it’s doesn’t take a legion of Economists to understand this. So, you can see that it’s ridiculous for Greenspan to say that no one could have predicted the housing market collapse. There’s only one explanation for his comments – he’s lying. Not only did the Federal Reserve know about this housing bubble – they contributed to the magnitude of the bubble!

In order to sustain this bubble for a longer period than the previous two recent housing bubbles (late 70’s and mid 80’s), something different had to happen. What happened? If you remember, we began to see a massive amount of liquidity flowing throughout the world. Where did this liquidity come from? Central Banks throughout the world were creating massive amounts of money through our monetary system (once again – exponential money growth) and reducing interest rates to almost nothing. As a result, there was massive amounts of capital available for banks to lend – at low interest rates. This fueled all types of ‘exotic’ mortgages – subprime, interest only, no down payments, option-ARMs, etc. Banks had money to lend and created all kinds of ways to make loans. Wall Street began providing massive amounts of funding – contributing to the problem. Greenspan even told us that ARMs and variable interest rate loans were good options for mortgages. This environment allowed the housing market to continue on its unsustainable ride – a ride that would end with a massive collapse. This was not a surprise to Greenspan, Bernanke, Paulson, Bush or anyone else at the top echelons of power in our country. If only Hollywood had actors as good as our leaders. This would be entertaining if it was a fictional movie and they weren’t destroying the financial stability of our nation.

Let’s continue with a few more comments by Greenspan.

“Those of us who have looked to the self-interest of lending institutions to protect shareholder’s equity (myself especially) are in a state of shocked disbelief.”

“Former Fed Chairman Alan Greenspan said he was “shocked” by the breakdown in the credit system and told Congress the crisis was once in a century.”

Is this a once in a century crisis? Currencies, commodities, stocks and banks the world over are collapsing. I don’t think the world has seen what we’re experiencing.
Lawmakers read back quotations from recent years in which Mr. Greenspan said there’s “no evidence” home prices would collapse and “the worst may well be over.”
More lies. As we’ve seen – it was obvious that housing prices would collapse. He knew very well that the worst was not over.

“Amid the barrage of questions, Mr. Greenspan dodged and weaved. He would begin meandering responses in the elaborate phraseology that once served him so well, only to be cut off as lawmakers sought to use their brief question time for sharper attacks.”

I can only imagine what it must be like to continue lying in this environment. This is a grand show – and everyone’s watching.

“Mr. Greenspan’s confidence in the resilience of home prices — shared by most in the industry at the time — became a critical forecasting error. The belief spurred more mortgage underwriting because lenders assumed that borrowers living on the edge could always refinance or sell their homes for a profit if they ran into trouble. Instead, with home prices now falling, hundreds of thousands of homeowners are facing foreclosure.”

I know that millions of people expected to be able to refinance before interest rates increased or balloon payments came due. Guess who slammed the door shut before people could escape from this nightmare? I’ve said it before – we are dealing with some very evil people here.

“In an echo of the Watergate hearings 35 years ago, Mr. Greenspan was asked when he knew there was a housing bubble and when he told the public about it. He answered that he never anticipated home prices could fall so much. “I did not forecast a significant decline because we had never had a significant decline in prices,” he said.”

We never had a massive decline in housing prices because we’ve never experienced a housing bubble as large as this one. Factor in the effects of our monetary system (massive debt growing exponentially) and you’ve got a perfect financial storm. It’s hard to even listen to the lies anymore. Will anyone ever tell us the truth?

I’m going to stop here – you get the point. Think about where this is leading – bank failures, market crashes, currency crashes, government debt exploding, more regulation, governments taking control of private institutions – all planned by the global elite so they can implement a global ‘solution’. Lies upon lies – deception rules the day. Our enemy is making a final push to gain control of the world.

We’re watching it happen.
___________________________________________
OCTOBER 24, 2008
Greenspan Admits Errors to Hostile House Panel
By KARA SCANNELL and SUDEEP REDDY

Alan Greenspan, lauded in Congress while the economy boomed, conceded under harsh questioning from lawmakers that he had made mistakes during his long tenure as Federal Reserve chairman that may have worsened the current slump.

In a four-hour appearance before the House Oversight Committee Thursday, Mr. Greenspan encountered legislators who interrupted his answers, caustically read back his own words from years ago, and forced him to admit that, at least in some ways, his predictions and policies had been wrong.

Former Fed Chairman Alan Greenspan said he was “shocked” by the breakdown in the credit system and told Congress the crisis was once in a century. Video courtesy of Reuters. (Oct. 23)

Former Federal Reserve Chairman Alan Greenspan testifies during a House Oversight and Government Reform Committee hearing on Capitol Hill Thursday.

Returning to Capitol Hill amid a financial crisis rooted in mortgage lending, Mr. Greenspan said he had been wrong to think banks’ ability to assess risk and their self-interest would protect them from excesses. But the former Fed chairman, who kept short-term interest rates at 1% for a year earlier this decade, said no one could have predicted the collapse of the housing boom and the financial disaster that followed.

Lawmakers weren’t buying his explanations. “You had the authority to prevent irresponsible lending practices that led to the subprime-mortgage crisis. You were advised to do so by many others. And now our whole economy is paying its price,” said Rep. Henry Waxman (D., Calif.), chairman of the House committee.

Lawmakers read back quotations from recent years in which Mr. Greenspan said there’s “no evidence” home prices would collapse and “the worst may well be over.”
The 82-year-old Mr. Greenspan said he made “a mistake” in his hands-off regulatory philosophy, which many now blame in part for sparking the global economic troubles. He quoted something he had written in March: “Those of us who have looked to the self-interest of lending institutions to protect shareholder’s equity (myself especially) are in a state of shocked disbelief.”

He conceded that he has “found a flaw” in his ideology and said he was “distressed by that.” Yet Mr. Greenspan maintained that no regulator was smart enough to foresee the “once-in-a-century credit tsunami.”

The hearing made clear how far the 18-year central banker’s reputation had fallen from the days when he was hailed for his stewardship in keeping inflation low, holding growth up and helping pull the world through financial crises, including the Asian crisis and other turmoil a decade ago.

When Alan Greenspan retired in 2006 after 18½ years as chairman of the Federal Reserve, his economic legacy seemed secure: Inflation and unemployment were lower than when he took office, and during his tenure, the U.S. experienced just two mild recessions and its longest expansion on record. But today, that legacy is under fire amid the housing slump and financial crisis. Here is a look back at Greenspan as covered in the Journal:

Two and a half years after Mr. Greenspan left office, Congress is drawing plans to remake global financial regulation with the kind of tight government hand that he long opposed. At the same House hearing, Securities and Exchange Commission Chairman Christopher Cox, himself a longtime free-market Republican, said he supported merging his agency with the Commodity Futures Trading Commission, creating a beefed-up supercop to police certain previously unregulated financial products.

Amid the barrage of questions, Mr. Greenspan dodged and weaved. He would begin meandering responses in the elaborate phraseology that once served him so well, only to be cut off as lawmakers sought to use their brief question time for sharper attacks.

In an echo of the Watergate hearings 35 years ago, Mr. Greenspan was asked when he knew there was a housing bubble and when he told the public about it. He answered that he never anticipated home prices could fall so much. “I did not forecast a significant decline because we had never had a significant decline in prices,” he said.

Mr. Greenspan’s confidence in the resilience of home prices — shared by most in the industry at the time — became a critical forecasting error. The belief spurred more mortgage underwriting because lenders assumed that borrowers living on the edge could always refinance or sell their homes for a profit if they ran into trouble. Instead, with home prices now falling, hundreds of thousands of homeowners are facing foreclosure. Prices nationwide have fallen nearly 20% since their 2006 peak, and many economists foresee a further decline of 10% or more in the next year.
The difficulties of forecasting served as a key defense for Mr. Greenspan. The Federal Reserve, with its legions of Ph.D. economists, has a better forecasting record than the private sector, he said, but that’s still not enough to prevent every problem. “We were wrong quite a good deal of the time,” he said.
Forecasting “never gets to the point where it’s 100% accurate.”

Subprime mortgages led to a global economic crisis in considerable part because of securitization, in which the home loans were sliced up, packaged into securities and sold off to investors all around the world. Anticipating such a crisis is “more than anybody is capable of judging,” Mr. Greenspan said.

If the best experts were not able to foresee the development, “I think we have to ask ourselves, ‘Why is that?'” Mr. Greenspan said. “And the answer is that we’re not smart enough as people. We just cannot see events that far in advance.”
He continued, “There are always a lot of people raising issues, and half the time they’re wrong. The question is what do you do?”

Lawmakers, stung by having to put $700 billion of taxpayer money on the line to rescue the financial system, were unmoved throughout the hearing, and eager to make their own points about the situation.

Rep. John Yarmuth, Democrat of Kentucky, hit Greenspan close to home, calling the avid baseball fan one of “three Bill Buckners.” That was a reference to the Boston Red Sox first baseman whose flubbed handling of a routine grounder cost his team the 1986 World Series. Former Treasury Secretary John Snow and Mr. Cox, who sat alongside Mr. Greenspan, also got tagged with that comparison.

Lawmakers homed in on a warning the late Fed governor Edward Gramlich gave Mr. Greenspan in 2000 about potential problems in lending practices. Mr. Greenspan said he agreed but added that if the matter was of such high concern, a Federal Reserve subcommittee would have presented it to the full board. He said that never occurred.
The former Fed chief also said he was often following the “will of Congress” during his long tenure and did “what I am supposed to do, not what I’d like to do.”

Mr. Greenspan has spent much of this year defending his record at the Fed, trying to take apart arguments to show how his decisions were far less significant than outside forces in causing the crisis.

The central bank is blamed for too vigorously spurring home buying through its low short-term interest-rate targets, which were initially set to fight the economic slump after the dot-com bubble burst in 2000-01. Mr. Greenspan maintains that the development of China and other factors fostered low rates — around the globe and not just in the U.S. — contributing to a housing boom that was world-wide.

Lawmakers took Mr. Greenspan to task for his advocacy of credit-default swaps, an unregulated kind of insurance contract that can help investors protect themselves against another party’s bankruptcy. Credit-default swaps were also used as a way of taking risks and are widely blamed for adding to financial-market instability. Rep. Waxman asked pointedly, “Were you wrong?”

Mr. Greenspan said, “Partially.” While he cautioned the lawmakers against excessive regulation, he said credit-default swaps “have serious problems” and, after some pointed questions, agreed they should be subject to oversight.

The treatment was a striking contrast with one of Mr. Greenspan’s last appearances before Congress as Fed chairman, on Nov. 3, 2005. “You have guided monetary policy through stock-market crashes, wars, terrorist attacks and natural disasters,” Rep. Jim Saxton (R., N.J.) told him then. “You have made a great contribution to the prosperity of the U.S. and the nation is in your debt.”

—Brian Blackstone contributed to this article.
Write to Kara Scannell at kara.scannell@wsj.com and Sudeep Reddy at sudeep.reddy@wsj.com

Posted by: John Gilmore | September 16, 2006

Financial Crisis is Accelerating

October 24, 2008

There is so much bad news right now it’s impossible to keep track of it all. If you are still debating whether this is a crisis and whether the stock market can go any lower – I assure you – it is a crisis and world markets will go lower. We haven’t yet seen the stampede – but there are many, many people around the world who are inching closer to the door. The same problems exist throughout the world. We are watching a slow motion train wreck – that is rapidly picking up speed.

The following excerpts were taken from Articles in the Wall St. Journal over the past 2 days:

“A new wave of fear seized investors and trading floors around the world Friday, resulting in an across-the-board drop in stocks. The Dow Jones Industrial Average was recently down 352.26 points, or 4.1%, at 8338.89, hurt by declines in all 30 of its blue-chip components. The S&P 500 tumbled 4% to 871.64. All its sectors traded lower, led by energy, off 6.3%, and technology, off 7%. Health care, a traditional investor haven, saw more modest losses and was down 2.1%. The selling was prompted in part by signs that economies around the world are beginning to crack.”

“Disappointing corporate earnings and intensifying recession worries slammed Asian stock markets Friday, leading to drops of 10.6% in South Korea and 9.6% in Japan and capping a tough week for the region’s investors. Asian markets slumped across the board, with Mumbai down 9.4% intraday and Hong Kong ending 8.3% lower. Singapore was down 8.7% near the end of the trading day.”

“European shares tumbled Friday as fears of a long and deep recession grew, with the auto sector slumping after profit warnings from Renault and Peugeot-Citroen as well as weak results from Swedish truck maker Volvo. The pan-European Dow Jones Stoxx 600 Index dropped below 200 for the first time since mid-2003, falling 8.4% to 191.21. Among regional markets, the U.K. FTSE 100 Index dove 8.4% to 3746 and the German DAX Xetra Index dropped 9.1% to 4109.48. The French CAC 40 index was down 8.8% at 3021.26.”

“Tempting as it is to ascribe the heavy sell-off in blue-chip European stocks Friday to fear and panic, there is one good fundamental reason why the stock market rout continues. Recent robust revenue growth for Europe’s biggest companies has come largely from emerging markets, after years of heavy investment in new capacity and purchases of local rivals. Macroeconomic data tell the story of corporate Europe’s emerging-market push. EU exports to China, India and Southeast Asia rose 56% to 228 billion euros between 2000 and 2007, with China and India accounting for 44% of that total. But now emerging-market bets are off. The credit crunch has caught up with developing economies with big current deficits and open financial markets with sickening speed. It’s created a widespread crisis, from Argentina and Hungary to the Persian Gulf and South Korea. Suddenly, the engine of double-digit topline growth for many European companies seems to be about to stall. That’s why investors Friday wiped out nearly a fifth of the value of banks such as HSBC, Barclays, Societe Generale and UniCredit, all of whose emerging-market business has helped them do relatively well through the credit crunch. That business now looks like an extra liability.”

“Russia’s currency fell to a new two-year low despite billions being spent by Moscow to prop it up, and the country’s fast-shrinking mountains of reserves and oil revenues threatened to reduce its credit rating, a key marker of its recent resurgence. The new wave of problems — coming on top of a stock market fall of 70% from its May peak — highlights how quickly the global financial crisis has reversed Russia’s fortunes. Worried about the turmoil, Russians have hurriedly taken to converting their ruble savings into dollars and euros, driving street exchange rates even lower than the official one.”

“Underscoring the growing impact of the global financial crisis on Latin America, central banks in Mexico and Brazil deployed billions of dollars of reserves on Thursday to stem steep currency declines that are testing the region’s hard-won economic stability. The simultaneous moves provided a snapshot of a region caught off-guard by the swiftness and depth of currency plunges prompted by the U.S. financial crisis. Now, policy makers are scrambling to reduce the potential for economic wreckage, seeking to reduce volatility as their currencies lurch toward new postcrisis levels. “These are exceptional times, and they call for exceptional measures,” says Paulo Leme, a senior Goldman Sachs economist who follows Latin America.”

“South Korea’s stock market and currency took another beating Friday amid mounting global fears at the toll that recession will take even in countries like this one, which is unlikely to tumble into negative growth. The benchmark Kospi Index fell 10.6% to below 938.75, its lowest level since July 2005. The close also marked the Kospi’s first dip below 1,000 since then and its worst week on record, in which it finished down 20.5% for the week and is off 35.2% so far this month. Meanwhile, the South Korean won plunged to 1,424 per U.S. dollar, its lowest level since June 1998 and down 33.8% against the dollar this year. And the Bank of Korea reported that South Korea’s third-quarter gross domestic product expanded at a seasonally adjusted 0.6%, the weakest level in four years.”

“On Wednesday, it was Hungary’s turn to take desperate measures. As the financial shock that began in the U.S. reached deeper into emerging markets, Hungary’s central bank took the dramatic step of raising interest rates by a steep three percentage points in order to prevent a run on its currency. Its move came as Belarus and Pakistan said Wednesday they are seeking large infusions of aid from the International Monetary Fund, while Ukraine suggested it is close to getting one. The Brazilian and Argentine stock markets each fell about 10% Wednesday, outpacing a steep drop in U.S. stocks. The growing rout in emerging markets is dashing hopes that developing nations would prop up world economic growth at a time when the U.S. and Western Europe are experiencing the worst financial instability in decades. Instead, many emerging markets are the world economy’s new problem children.”

“German banks have bled billions of euros in the U.S. subprime-mortgage debacle. Now they face another potentially big bill from a costly misadventure in Iceland. The Icelandic bet is the latest illustration of how German banks — including once-sleepy regional lenders — ranged far and wide in recent years in search of yield to escape stiff competition and low profit margins on their home soil. By June of this year, before Iceland’s spectacular financial meltdown, German financial institutions had lent $21.3 billion to Icelandic borrowers, according to the Bank for International Settlements. That was well over a quarter of all foreign lending in Iceland, and roughly five times as much as Britain, the next-largest creditor country. Iceland’s three largest banks — and the country’s main debtors — collapsed this month, plunging the country into crisis. Kaupthing Bank, Iceland’s biggest, missed a coupon payment this week on 50 billion yen ($512 million) of bonds in Japan, heightening default concerns.”

“The Icelandic government is likely to ask the International Monetary Fund for financial help over the weekend, as the country’s foreign-exchange market remains dysfunctional and questions mount over Iceland’s near-term debt obligations, a key government official told Dow Jones Newswires Friday. Financial markets worry about the government’s ability to meet debt obligations as Iceland drastically shakes up its financial system. The Icelandic Financial Supervisory Authority, or FME, confirmed that the principal of a $750 million corporate bond from nationalized Glitnir Banki Hf. that matured Wednesday went completely unpaid. FME spokeswoman Kate Hill said the FME, the government and advisers are in the process of sorting out Icelandic bank assets and liabilities.”

“China’s government is racing to make sure one of the world’s biggest housing booms doesn’t turn into a bust. How the swoon in housing plays out in coming months may largely determine how severe the nation’s economic slowdown during the global financial crisis will be — and how acute the world-wide repercussions of the slump will be, as China’s demand for construction materials declines. While housing bubbles around the world have burst, China’s market has been seen as different because its surge in home building has been driven less by financial leverage than by real demand from a rapidly urbanizing population. Anywhere from 15 million to 20 million people move to Chinese cities each year. But sales of new housing in China have plummeted in recent months as buyers have been spooked by a deteriorating economy and weakening prices.”

“The U.K. economy slumped in the third quarter amid the global financial crisis, becoming the latest developed nation to experience an economic contraction. The Office for National Statistics said Friday that the economy contracted a far-bigger-than-expected 0.5% in the third quarter, compared with zero growth in the second quarter. It is the first time the economy has contracted since the second quarter of 1992 and the biggest drop since the fourth quarter of 1990.”

“Transportation companies are reporting sharply lower freight volumes, a sign that the pipelines of global commerce have begun to slow. Goods shipped by truck, train and ship have all fallen off in volume, and freight companies are now forecasting a slump as the credit crisis slows manufacturing and puts the brakes on consumer spending. Shipping companies are considered a barometer of economic health, which makes the current downturn particularly worrisome.”

“At the same time, the median U.S. home price was $191,600 in September, down 9.0% from $210,500 one year ago. That $191,600 median price is the lowest since April 2004. The median price in August this year was $203,100.”

“Employers grappling with the financial crisis and a slowing economy are accelerating and broadening job cuts in multiple industries, potentially deepening the economic downturn. Xerox Corp., General Motors Corp. and bottler Coca-Cola Enterprises Inc. disclosed new job cuts Thursday, following layoff announcements earlier in the week by Chrysler LLC, Merck & Co. and Yahoo Inc., among others. The economic slowdown, previously concentrated among housing- and finance-related employers, is spreading to once-sheltered sectors like health care and technology.”

“Chrysler LLC told employees Friday it will cut 25% of its white-collar jobs next month. In a letter to employees, Chief Executive Robert Nardelli said the cuts are necessary because of the deep downturn in the economy and the tightening credit situation, which are choking off auto sales. Mr. Nardelli said the company is facing the “most difficult economic period any of us can remember.”

“Despite the darkening outlook for the U.S. economy, few banks have taken extra precautions to protect against sharply higher bad-loan losses…. Additions to loan-loss reserves are an expense on the income statement. As a result, moves to beef them up could crush banks’ earnings power.”

“Denmark’s central bank Friday raised its key policy rate for the second time this month to prop up the country’s struggling currency as the global financial crisis continues to wreak havoc. Danmarks Nationalbank said it increased its key lending rate and the interest rate for certificates and deposits to 5.5% from 5% “as a result of continued intervention to support the Danish krone.”

“In a matter of weeks, the tempest in global markets has undone years of hard-won gains by emerging economies. Over the past month, borrowing costs for governments in emerging markets have ballooned to levels that haven’t been seen in six years, and they continued to rise Thursday. Investors are especially frightened of countries with financing needs and weakening economic fundamentals that could tip into a deeper crisis, like some in Eastern Europe. But even countries with comparatively solid balance sheets are seeing their outlook darken as access to credit tightens and global economic growth slows sharply.”

“European central bankers signaled interest rates are likely to head lower as the financial crisis nudges Western Europe closer to recession.”

“Eager to rein in a dramatic slide in oil prices, OPEC decided Friday to make a deep cut in oil production, taking 1.5 million barrels a day off global markets as it embarks on the challenging task of managing prices amid a potential global recession.”

“Driven by once insatiable demand from China and other developing countries, service center owners and metal dealers built vast stockpiles of scrap steel, aluminum, copper and nickel, expecting prices to continue rising. But in the last six weeks, scrap steel prices have fallen nearly 60% to about $400 a ton. Prices for aluminum scrap has dropped 33%, copper 25% and nickel about 15%. Peter Marcus, metals analyst for World Steel Dynamics, says, “We aren’t near the bottom yet.”

“Liz Claiborne Inc. slashed its 2008 earnings view and said it is curtailing capital spending amid slumping sales. The apparel retailer also said it will post a third-quarter loss due to restructuring charges. Liz Claiborne, like other retailers, is struggling as consumers cut back on discretionary spending due to the weakening economy. The company warned that it may cut its outlook further if the deterioration in demand continues.”

“Samsung Electronics Co. said its third-quarter net profit fell 44% as its major divisions recorded smaller operating profits simultaneously for the first time since mid-2005. Samsung’s semiconductor business, for years its biggest profit contributor, experienced the sharpest decline and was barely profitable because of a prolonged cycle of tight pricing for memory chips used in computers and other gadgets. Profits in its cellphone and flat-panel-display units also tightened. Samsung expects the fourth quarter, usually the best for electronics makers, to be “an even more challenging period,” said Chu Woo-sik, the company’s investor-relations chief. He cited rising component costs and the effect that the global economic slowdown would have on consumer purchases of electronics.”

“Microsoft Corp. reported a 2% increase in fiscal first-quarter net income on a 9% rise in revenue, and lowered its financial forecasts for the rest of the year because of the gloomy economy.”

“Citing the global economic turmoil and a strengthening yen, Sony Corp. sharply lowered its outlook for its fiscal year ending March 2009, a blow to the company whose nascent recovery was already looking fragile. The Tokyo-based electronics giant warned that the deteriorating business climate could force the company to scale back capital spending, close plants and cut jobs to shore up profit.”

“Amazon.com Inc. reported a 48% increase in profit and a 31% revenue jump for the third quarter, but issued a cautious projection ahead of the key holiday season. The revised sales outlook comes just three months after the Seattle-based Internet retailer had raised its revenue forecast for the year, showing how quickly the consumer spending environment has declined. Amazon shares fell more than 13% after hours on the news.”

“Gannett Co.’s third-quarter net income slid 32% as the media company grappled with slumping advertising sales and higher newsprint prices. Gannett, which publishes 85 daily newspapers and operates 23 television stations, posted net income of $158 million, or 69 cents a share, down from $234 million, or $1.01 a share, a year earlier.”

“Credit Suisse Group, one of the few banks to skirt massive credit losses, said in-house bets contributed to a third-quarter loss, signaling the challenges banks face in navigating volatile markets. The bank said 2.43 billion Swiss francs ($2.09 billion) in write-downs on mortgage securities and unsold buyout loans, as well as a 1.7 billion franc trading loss, left it with a 1.3 billion franc net loss for the quarter. The results sting CEO Brady Dougan, who has been steering pretty successfully through the credit crunch. Mr. Dougan called the results “clearly disappointing.”

“The shift is being echoed across Silicon Valley, where executives at startups—which form the foundation of the tech economy—are now deferring expansion projects, taking voluntary pay cuts, delaying hiring plans and slashing expenses. The shift is a turnabout for the region’s young companies, which have traditionally focused on go-go growth by grabbing customers early and being first to market with new technologies. The change is being spurred by the souring economy and market gyrations, which have hit startups’ main source of funding: venture capital.”

“College seniors may have more trouble landing a job next spring than recent graduates, as employers trim their hiring outlooks in response to the slowing economy and financial-sector turmoil. Employers plan to hire just 1.3% more graduates in 2009 than they hired this year, according to a survey by the National Association of Colleges and Employers. That’s the weakest outlook in six years and reflects a sharp recent downturn. Just two months ago, a survey by the same group projected a 6.1% increase in hiring.”

jg

Posted by: John Gilmore | September 16, 2006

A 21st Century Bretton Woods

As I mentioned in a post a few weeks ago – we are going to see more and more articles like this that tell us the world needs to make a global change to the current financial system – that is failing. I expect that out of these ‘summits’ – we’ll see suggestions for consolidating currencies, much more structured regulatory agencies and overall financial control consolidated into some type of world financial ‘authority’. We are watching the beginning of the end of free markets and free enterprise.

jg

OCTOBER 25, 2008

A 21st-Century Bretton Woods

Success at global finance summit hinges on China’s willingness to play role once taken by U.S.

By SEBASTIAN MALLABY
Wall St. Journal

There wasn’t much to see in Bretton Woods in July 1944, when delegates from 44 countries checked into the sprawling Mount Washington Hotel for the United Nations Monetary and Financial Conference. Almost a million acres of New Hampshire forest surrounded the site; there were free Coca-Cola dispensers, but few other distractions.

In this scene of rustic isolation, 168 statesmen (and one lone stateswoman, Mabel Newcomer of Vassar College) joined in history’s most celebrated episode of economic statecraft, remaking the world’s monetary order to fend off another Great Depression and creating an unprecedented multinational bank, to be focused on postwar reconstruction and development.

At the Final Plenary, a sea of black-tied delegates gave a standing ovation to British economist John Maynard Keynes, whose intellect had permeated the three weeks of talks. Lord Keynes paid tribute to his far-seeing colleagues, who had performed a task appropriate “to the prophet and to the soothsayer.”

The Bretton Woods conference has acquired mythical status. To economic-history buffs, it’s akin to the gathering of the founding fathers at the constitutional convention. To politicians anxious to make their marks upon the world, it’s a moment to be richly envied. The recent calls from British Prime Minister Gordon Brown and French President Nicolas Sarkozy for a new Bretton Woods conference, to which the Bush administration has acceded, have caused TV crews to descend upon the old hotel, which has undergone a $50 million facelift. But Bretton Woods revivalism is nothing new. Indeed, it’s a long tradition.

After the onset of the Latin debt crisis in 1982, U.S. Treasury Secretary Donald Regan floated the idea of a new Bretton Woods to steady the hemisphere’s currencies. The following year, reeling from three devaluations of the franc, French President Francois Mitterrand declared, “The time has really come to think in terms of a new Bretton Woods. Outside this proposition, there will be no salvation.” Mitterrand persisted in this grandiloquence over the next two years. He finally quieted down in 1985, when Margaret Thatcher dismissed his proposal as “generalized jabberwocky.”
In the wake of the emerging-market crises of 1997-98, Bretton Woods nostalgia broke out again — this time in post-Thatcher Britain. “We should not be afraid to think radically and fundamentally,” Tony Blair opined. “We need to commit ourselves today to build a new Bretton Woods for the next millennium.” The precise content of Mr. Blair’s millennial ambition was, shall we say, vague. But no fellow leader was rude enough to say so.

Among acts of international economic statesmanship, perhaps only the Marshall Plan has been invoked more frequently. There have been calls for a Marshall Plan for postcommunist eastern Europe, a Marshall Plan for Africa, a Marshall Plan for the inner cities. Indeed, anybody wanting Washington to splurge finds Marshall exceedingly convenient.

But Bretton Woods has a richer and more rarefied cachet. It was about reordering the international system, not just mobilizing money for an enlightened cause. And whereas the Marshall Plan was an example of the unilateralism for which the U.S. is known, the Bretton Woods conference was a triumph of multilateral coordination. It featured countries as diverse as Honduras, Liberia and the Philippines (Keynes spoke disdainfully of a “most monstrous monkey-house”), though it did not include South Korea or Japan, important voices in today’s economic summitry.

Both sides of the Bretton Woods achievement seem alluring today, yet both may be chimerical. The conference rebuilt the economic order by creating a system of fixed exchange rates. The aim was to prevent a return to the competitive devaluations best illustrated by the “butter wars.” In 1930 New Zealand secured a cost advantage for its butter exports by devaluing its money; Denmark, its main butter rival, responded with its own devaluation in 1931; the two nations proceeded to chase each other down with progressively more drastic devaluations.

This beggar-thy-neighbor behavior added to the protectionism that brought the world to ruin, and the Bretton Woods answer was simple. In the postwar era, the dollar would be anchored to gold, and other currencies would be anchored to the dollar: No more fluctuating money, ergo no competitive devaluation. To undergird this system, the Bretton Woods architects created the International Monetary Fund, which was far more central to their ambitions than their other legacy, the World Bank. If a country’s fixed exchange rate led it into a balance of payments crisis, the IMF would bail it out and so avert devaluation.

Today the idea of another monetary rebirth has much to recommend it. The credit bubble that has wreaked havoc on the world’s financial markets has its origins in a two-headed monetary order: Some countries allow their currencies to float, while others peg loosely to the dollar. Over the past five years or so, this mixture created a variation on the 1930s: China, the largest dollar pegger, kept its currency cheap, driving rival exporters in Asia to hold their exchange rates down also. Thanks to this new version of competitive currency manipulation, the dollar-peggers racked up gargantuan trade surpluses. Their earnings were pumped back into the international financial system, inflating a credit bubble that now has popped disastrously.

Persuading China to change its currency policy would be a worthy goal for a new Bretton Woods conference. But currency reform is low on the agenda of the summit that the Bush administration plans to host on Nov. 15. (The administration styles this gathering a “G-20 meeting,” ignoring the European talk of a Bretton Woods II.) The British and French leaders who pushed for the meeting want instead to talk about financial regulation — how to fix rating agencies, how to boost transparency at banks and so on. But many of these tasks require minimal multilateral coordination.
If the Europeans shrink from demanding that China cease pegging to the dollar, it’s perhaps because they anticipate the concession that would be asked of them. China isn’t going to give up its export-led growth strategy for the sake of the international system unless it gets a bigger stake in that system — meaning a much bigger voice within the International Monetary Fund and a corresponding reduction in Europe’s exaggerated influence. When you strip out the blather about bank transparency and such, this is the core bargain that needs to be struck. Naturally, the Europeans aren’t proposing it.

It will be up to the two great powers — the U.S. and China — to fashion the deal that brings China into the heart of the multilateral system. Here, too, is an echo of the first Bretton Woods, for underneath the camouflage of a multilateral process there was a bargain between two nations. Britain, the proud but indebted imperial power, needed American savings to underpin monetary stability in the postwar era; the quid pro quo was that the U.S. had the final say on the IMF’s design and structure. Today the U.S. must play Britain’s role, and China must play the American one.

There’s a final twist, however. In the 1940s the declining power practiced imperial trade preferences; the rising power championed an open world economy. When Franklin Roosevelt told Winston Churchill that free trade would be the price of postwar assistance, he was demanding an end to the colonial order and the creation of a level playing field for commerce. “Mr. President, I think you want to abolish the British empire,” Churchill protested. “But in spite of that, we know you are our only hope.”

Today it is the rising power that pursues mercantilist policies via its exchange rate. China’s leadership, which sits atop an astonishing $2 trillion in foreign-currency savings, could trade a promise to help recapitalize Western finance for an expanded role within the IMF. But China may simply not be interested. The future of the global monetary system depends on whether China aspires to play the role of Roosevelt — or whether it prefers to be a modern Churchill.

Sebastian Mallaby directs the Center for Geoeconomic Studies at the Council on Foreign Relations. He is writing a history of hedge funds.

Posted by: John Gilmore | September 16, 2006

China Backs Europe’s Push for Oversight

Another country lining up to support additional oversight of financial markets. We’ve seen the U.S., Latin America, Europe (Italy, Britain, France, Germany) and now China support a move for more regulation – all within the past 2 weeks. We’re going to see more and more articles like this in the coming months as the global elite continue to push their agenda forward.

jg

OCTOBER 27, 2008

China Backs Europe’s Push for Oversight

By IAN JOHNSON
Wall St. Journal

BEIJING — After several days of talks between European and Asian leaders, China apparently has allied itself with Europe in calling for a vigorous system of international regulation.

In closed-door talks with European leaders Friday and Saturday, senior Chinese officials said they would back Europe’s effort to overhaul international regulatory systems, European diplomats present at the meetings said. China most strongly stated its position Friday in a talk between Chinese President Hu Jintao and José Manuel Barroso, president of the European Commission.

Mr. Hu, according to diplomats at the meeting, said China would “actively cooperate” with the EU, which has been pushing an ambitious new system of global oversight. Formal talks on the new overhauls would begin in mid-November in Washington.
“The Chinese said they’d back more vigorous reforms,” a senior European diplomat said in an interview. “They rely on the global economy and are afraid it’s become very unstable.”

Chinese officials had no comment on the closed-door meeting. In public statements, Chinese leaders issued milder endorsements of reforms. At the close of the seventh Asia-Europe Meeting on Saturday, for example, Chinese leaders backed the 45 nations’ statement, which expressed “the need to improve the supervision and regulation of all financial actors, particularly their accountability.”

Foreign diplomats have been keen to see how China would come down on the issue of regulation. On one hand, China values stability and thus would seem naturally to support regulation. On the other, it likely doesn’t want international institutions that curb its sovereignty or constrain its financial flows.

In Brussels, EU officials said they weren’t surprised China agreed to side with the EU in pushing for new rules for financial markets. “They want a seat at the table in whatever is going to happen,” said an EU official who attended an Oct. 15-16 summit that drafted the EU’s plan.

U.S. officials said that the Beijing meetings underscore the importance of President Bush’s global economic summit, scheduled for Nov. 15 in Washington after the presidential election. The White House hopes to use the summit to discuss the crisis’s underlying causes, analyze responses and develop principles to reform the global financial architecture.

Bush administration officials acknowledged their concerns that some countries could seek to use the financial crisis to move against free trade and promote more centralized economic models. “Whatever else we do, the summit needs to enhance our commitment to free markets and free trade — the fundamental policies that have increased standards of living,” said a U.S. Treasury Department official.

—John W. Miller in Brussels and Jay Solomon in Washington contributed to this article.

Write to Ian Johnson at ian.johnson@wsj.com

Posted by: John Gilmore | September 16, 2006

Treasury Considers Stakes in Insurance Companies

Now we see that the Treasury is going to buy equity stakes in insurance companies with the bailout money. To date, not one ‘toxic’ security has been purchased. The treasury has been given a blank check – and instead of helping homeowners or actually buying distressed securities – they are buying stakes in all types of financial/banking companies. Why? I believe they are doing this to gain more control. The question is – what happens when things begin to get even worse?

jg

OCTOBER 24, 2008, 2:32 P.M. ET

Treasury Considers Stakes in Insurance Companies
By DEBORAH SOLOMON

WASHINGTON — The Treasury Department is considering taking equity stakes in insurance companies, a sign of how the government’s $700 billion program has become a potential piggybank for a range of troubled industries.

The availability of government cash is drawing requests from all corners, with insurance firms, automakers, state governments and transit agencies lobbying for a piece of Treasury’s pie. While Treasury intended for the program to apply broadly, the growing requests could rapidly deplete the $700 billion, an amount that initially stunned many as being quite large.

Among those expected to benefit from Treasury’s program are insurance firms. Most insurance companies are financially sound but have seen their long-term investments and stock prices hurt by the recent market turmoil.

Treasury wants insurance companies to participate in its program, dubbed TARP, and is considering taking equity stakes in certain firms, according to people familiar with the matter.

For now, however, only certain insurance firms would be eligible for a capital infusion. Under the terms of Treasury’s program, insurers would have to have a financial institution holding company that was regulated at the federal level.
Insurers would also be able to sell its bad assets to the government under a separate element of the program.

Write to Deborah Solomon at deborah.solomon@wsj.com

Posted by: John Gilmore | September 16, 2006

Mergers, Acquisitions and the Bailout

As I’ve mentioned in previous posts, we haven’t seen any of the $700 billion bailout used to buy distressed securities. What we have seen is the U.S. Treasury buying equity stakes in banks and the possibility that this buyout will extend to insurance companies. As you will read in the articles below – one of the consequences of these actions is that banks are taking these funds and are planning to acquire other banks. It appears that the same scenario will play out with insurance companies. Those banks and insurance companies lucky enough to be ‘chosen’ will have a significant advantage over those without access to these funds. How would you like to be one of the banks/companies without government funding trying to fight off a takeover in this current business environment? If it doesn’t sound fair – that’s because it isn’t. Don’t think for a minute that this wasn’t planned. You are seeing a forced consolidation of banks and companies across the board.

In order to see what is really happening, you must look past all of the rhetoric. We were told that this bailout was absolutely necessary or we faced an economic meltdown. It was absolutely necessary to buy billions of dollars of ‘toxic’ securities or face the consequences. Well, no securities have been purchased and the economy hasn’t melted down yet. What has happened is that the Federal Reserve and the U.S. Treasury are gaining ever more control over our banks and corporations by buying equity in these companies. Today, the Federal Reserve began lending directly to corporations (see article below). So, what we actually see is our government and an international banking cartel gaining more control over us as industries are forced to consolidate and the government continues to buy equity stakes.

There are very few people that recognize that all of these problems (mortgage foreclosures, bankruptcies, reduced lending, stock market volatility, banking instability, etc.) are merely symptoms of the underlying disease – our monetary system. Central Banks and governments have the world focused on the symptoms – while the disease destroys the world’s economy. You can’t simply treat the symptoms and expect a cure. If you want to be cured – you must cure the disease. To truly get free of this mess – the Federal Reserve must be removed and the U.S. must begin to manage its own money supply.

Remember – based on what we’ve learned – our economy is destined to collapse. This is not a mystery to the leaders of the Fed and it’s not a mystery to the highest echelon of power within our government. So, when they tell us that we must submit to their demands to ‘save’ our economy, what is really happening? They are simply forcing us to go along with their plans – knowing that we are destined for collapse. They are now consolidating power (bank/corporation consolidation & government equity stakes) for the time when our economy does collapse. This will usher in a new round of regulation and control as we move closer to world government and a world financial system. As I’ve said many times before – very ingenious. Evil – but ingenious. This ‘beast’ continues to deceive the world – just as the Bible tells us it would do.

The last comment I’ll make in this post is this – do we really want our government managing banks and corporations? Think about this for a minute. This is the same group of people (the Federal Reserve, Congress, Senate, Presidential administrations, U.S. Treasury, etc) that have led our nation to the brink of economic ruin – which could eventually lead to the collapse of the United States. This is a group of people (the term ‘leaders’ definitely does not apply here – leaders are worthy of our respect) that is extremely corrupt and focused on worldly wealth and glory for themselves. Do we really want this same group of people to gain even more control over us? Would you really want George W. Bush, Nancy Pelosi, Barney Frank or Ben Bernanke running your company? The thought of this keeps me up at night.

I’m sure there will be much more to discuss in coming days. Things are moving so fast that it’s difficult to keep up with the changes.

jg – Oct 28, 2008
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October 28, 2008

Plan Could Push Insurers Into Mergers

More Corporate Lending Also Could Be Sparked Under the Government’s Rescue Program
By LESLIE SCISM

If the Treasury Department’s capital-infusion program for the banking sector expands to insurers, industry consolidation may follow.

Some of the life insurers whose names have emerged as supportive of a widening of the Treasury’s $700 billion rescue program, the possibility of which emerged Friday, are considered by ratings firms to be financially healthy and capable of acquisitions. One is New York-based MetLife Inc. Industry analysts say it could be a contender to acquire at least some of the U.S. life-insurance operations of American International Group Inc.

The financial-services conglomerate has said it is trying to sell business units, including these and part of its foreign life-insurance operations, to pay back an $85 billion rescue loan it received last month from the federal government in exchange an 80% equity stake. That rescue, by the Federal Reserve, is separate from the $700 billion Treasury program.

Raising large sums of money for acquisitions is a tough challenge for any financial company right now, with credit markets still tight and stocks beaten down. Analysts say the infusion of low-cost government capital into a potential acquirer could prove crucial for AIG’s efforts to strike deals in the months ahead.

A MetLife spokesman said the company wouldn’t comment on any potential acquisition plans. An AIG spokesman said: “AIG is moving forward aggressively with its plan to permanently resolve its liquidity problems, sell a number of our world-class businesses and repay the Fed loan. We also continue to evaluate other possible options to restore AIG as a healthy competitor.” He declined to elaborate.
Banking-industry analysts interpreted Friday’s announcement that PNC Financial Services Group Inc. has agreed to acquire National City Corp. as an indication that the government is using the rescue plan as ammunition to push weak banks into the arms of strong ones. PNC will sell $7.7 billion of preferred shares and warrants to the Treasury Department to finance the stock-and-cash deal.

Colin Devine, a stock analyst at Citigroup Global Markets, said in a note to clients Monday that he anticipates “a wave of M&A activity” among life insurers, with Treasury infusions taking “the form of facilitated deal financing such as” PNC will receive. He rates MetLife a top pick, saying it has a strong capital position and is “uniquely situated” to acquire U.S. units from AIG. MetLife shares rose 3 cents, or 0.11%, to $26.21 Monday.

Meanwhile, Evan Greenberg, chairman of trade group American Insurance Association, said a substantial majority of AIA’s members “do not support the inclusion of property-casualty insurers” in the Treasury program and wouldn’t participate if it becomes available. Mr. Greenberg, chairman of ACE Group, said AIA members are “well-capitalized.” Members include Chubb Corp., Travelers Cos. and W. R. Berkley Corp. Property-casualty carriers tend to have more-liquid investments than life insurers, and their core businesses aren’t as volatile as the overall economy because cars, homes and businesses continue to be insured.

One goal of any potential expansion of the Treasury program appears to be trying to ramp up the insurance industry’s role as a lender.

On Sunday, New York Life Insurance Co., one of the highest-rated insurers in the U.S., said that Treasury officials recently asked it and others in the life-insurance industry “for help in developing solutions for strengthening the financial system. We agreed to work with other industry leaders and Treasury so we could play a constructive role in helping shape this important discussion.” The insurer, which is mutually owned, doesn’t require additional capital and hasn’t made any decision to accept capital, if offered, a spokesman said.

Write to Leslie Scism at leslie.scism@wsj.com
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OCTOBER 28, 2008

U.S. May Offer GM $5 Billion Loan
By DEBORAH SOLOMON and STEPHEN POWER
Wall St. Journal

The U.S. Department of Energy is working to release $5 billion in loans to General Motors Corp., according to a person familiar with the matter, a move that could help ease the way for the auto maker’s discussed merger with Chrysler LLC.
GM and Chrysler’s majority owner, Cerberus Capital Management LP, have been negotiating a complex deal in which GM would end up owning its smaller Detroit rival, but the parties have struggled to line up financing. The combined entity would need about $10 billion in new equity to cover the cost of laying off workers, closing plants and integrating the two companies, according to people involved in the talks.

The $5 billion would come from the pool of $25 billion in low-interest loans that was approved by Congress and is being administered by the Energy Department. The loans are aimed at helping Detroit retool plants to meet new fuel-efficiency standards. It isn’t clear how quickly the money could be made available or whether it would come with strings attached.

Although the loans are supposed to speed the availability of fuel-saving technologies, the money could help steady GM’s finances and make it easier for the struggling auto giant and Cerberus to persuade investors to back a deal. Any transaction would involve both Chrysler and GMAC LLC, which loans money for car purchases and other purposes. Cerberus owns 51% of GMAC and GM owns the rest.
Both GM and Chrysler are losing money. Analysts believe each company could start to run short of cash within 12 months.

The auto makers and Michigan’s congressional delegation have proposed at least three plans in recent weeks to unlock federal money for a GM-Chrysler merger. One is to seek an equity investment from the government. Another would draw money for the auto makers from the $700 billion Troubled Asset Relief Program, or TARP, set up ostensibly to help financial firms. A third possibility is accelerating the $25 billion in loans that the Energy Department is managing.

On Monday, White House spokeswoman Dana Perino, speaking of GM, Chrysler and Ford Motor Co., said “it’s a possibility that they could qualify” for Treasury funds under the $700 billion rescue fund, either through a direct investment or participation in the administration’s asset-purchase plan.

Treasury officials, however, are for now playing down that possibility, noting that any immediate federal aid will likely come from the Energy Department.
An Energy Department spokeswoman said Monday the agency is “in the process of developing the rules for the loan program” and that it would be “premature” to set a timetable for when the funds will be available.

The agency has come under criticism from prominent Michigan lawmakers in both parties after initially saying in September it could take “at least six to 18 months or more” to disburse the loans.

—John D. Stoll and Jeffrey McCracken contributed to this article.

Write to Deborah Solomon at deborah.solomon@wsj.com and Stephen Power at stephen.power@wsj.com
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OCTOBER 28, 2008

Federal Reserve Starts Lending Plan
By ANUSHA SHRIVASTAVA
Wall St. Journal

The Federal Reserve has kicked off a much-awaited lending program aimed at jump-starting the $1.45 trillion commercial-paper market, but investors say it could take days or weeks before short-term financing for U.S. companies loosens up.

Under its new Commercial Paper Funding Facility, the Fed is offering to lend money to highly rated companies for as long as three months. The goals are to persuade investors to lend to top-tier companies and give borrowers a backstop if funds can’t be obtained in the open market.

The program’s impact was muted Monday. Fewer companies came to market looking for financing than last week, and most were limited to uncomfortably short overnight loans. Rates rose modestly for debt maturing in 30 days.

“It will be a few more days before we have a good idea on the impact,” said Ira Jersey, interest-rate strategist at Credit Suisse.

The test will be whether rates established in the commercial-paper market are lower than the somewhat punitive rates on the Fed’s loans, which are intended to be a source of financing in emergencies rather than the first stop for companies seeking funds.

A related indicator of success will be how little companies borrow from the Fed. Data on borrowings will be released Thursdays.

For Monday, the Fed set its rates on three-month commercial paper at 2.88%, including a surcharge. For asset-backed commercial paper, the rate was set at 3.88%. New rates will be set daily.

The few companies looking for three-month loans in the open market Monday — including heavy issuers American Express Co. and General Electric Co. — offered to pay rates similar to those set by the Fed, according to Kevin Giddis, head of fixed income at Morgan Keegan.

It isn’t clear whether investors agreed to lend at those rates.

GE and American Express have registered for the new program, giving them the option of selling to the Fed. They didn’t respond to calls about whether they plan to actually use it. The Fed has said several dozen companies have signed up for its commercial-paper program, but isn’t naming them.

Market participants also are waiting for the start-up of another Fed program — the Money Market Investment Funding Facility — which is aimed at supporting money-market funds, the single largest group of investors in the commercial-paper market.
This facility will buy commercial paper and other short-term debt from money-market funds, in theory giving them confidence that they can get out of investments if they need to raise cash to cover redemption requests from their own investors.

Money-market funds have shied away from the commercial-paper market since Lehman Brothers collapsed in mid-September. Investors have been more reluctant to take on the new debt companies need to issue to fund basic operating needs such as rent and supplies.

—Kellie Geressy contributed to the report.
Write to Anusha Shrivastava at anusha.shrivastava@dowjones.com

Posted by: John Gilmore | September 16, 2006

International Instability

October 28, 2008

Chris sums up the current global crisis nicely in this post. Take a close look at what is happening to the world’s shipping business. I believe we’re going to see the same dramatic decline in our stock market in the very near future.

jg

International instability

Monday, October 27, 2008, 9:06 pm, by cmartenson

As bad as the US is, there are worse problems elsewhere. This is why I think this credit crisis will not play out like any previously and why I think there’s a better than even chance of a systemic banking crisis.

In times past when a country experienced a bubble or a banking crisis there was always a country next door that hadn’t where the savvy could hide out. Where does one hide out today?

Europe on the brink of currency crisis meltdown

The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump.

Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992.

“This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon.

Stephen Jen, currency chief at Morgan Stanley, says the emerging market crash is a vastly underestimated risk. It threatens to become “the second epicentre of the global financial crisis”, this time unfolding in Europe rather than America.

Austria’s bank exposure to emerging markets is equal to 85pc of GDP – with a heavy concentration in Hungary, Ukraine, and Serbia – all now queuing up (with Belarus) for rescue packages from the International Monetary Fund.

Exposure is 50pc of GDP for Switzerland, 25pc for Sweden, 24pc for the UK, and 23pc for Spain. The US figure is just 4pc. America is the staid old lady in this drama.

Those figures in the bottom two paragraphs are quite the eye-openers. Somehow Austria’s bank system loaned out 85% of Austria’s GDP to emerging markets that are even now resorting to emergency measures to stem the erosion of the their currencies against the dollar. The problem, apparently, is that these countries were loaned vast amounts of money denominated in dollars.

The faster their currencies fall the more it costs them to pay back their loans. Some of these currencies have fallen by 40% in a matter of weeks.

So we’re going to have to watch this very carefully. The reason this could lead to a systemic banking crisis is that some countries are going to have to resort to currency controls and outright defaults. Not just one at a time, like the Russian and Argentinian defaults of 1998 and 2001, respectively, but potentially a dozen or more. But the world’s banks are all now interlinked to a degree that prevents walling off a country from being easily done. Hence, the chance of a systemic breakdown increases.

And if you wanted to find a more severe crash in any market in the world it would be hard to beat what’s happened to the rates for global shipping. The measure of global shipping rates is known as the “Baltic Dry Index”, and it has collapsed in a most dramatic manner.

For companies that are in the business of shipping, this represents a 90% cut in their pay:

The biggest bubble of them all; globalization

Oct. 24 (Bloomberg) — The 90 percent tumble in the global benchmark for commodity shipping costs since May exceeded the Dow Jones Industrial Average’s plunge during the Great Depression, signaling globalization is “the biggest bubble of them all,” Bespoke Investment Group LLC said.

The Baltic Dry Index’s drop from its peak just five months ago surpassed all of those, along with the Dow’s 89 percent retreat from 1929 to 1932, according to Bespoke.

“The Baltic Dry Index had a meteoric run since the start of the decade, as it became one of the key symbols of the `globalization’ trade,” Paul Hickey, co-founder of the Harrison, New York-based research and money management firm, wrote in a report yesterday. “It now appears that like any `new thing,’ the globalization trade went too far.”

The Baltic Dry Index fell yesterday for a 14th straight session as the freeze in money markets curbed traders’ ability to buy cargo on credit.

This means that global trade is rapidly slowing to a crawl with unknown impacts. The rates are plummeting as fewer international loads are competed for by a vast fleet of cargo ships whose carrying costs demand that they be used.

Certainly for the nearly record number of cargo ships that are being constructed somebody is going to take a huge hit. Many will never be completed. Dockyards and shipping companies alike will go under.

Before too long we might expect shortages of some products to begin showing up here and there.

For those more visually oriented, here’s the chart of the shipping rates. Ouch. Imagine trying to run a shipping business. How would you set a budget and plan for this? Clearly the monetary system is broken and dysfunctional. The sooner we can all admit that, the better.

Posted by: John Gilmore | September 16, 2006

Most Presidents Ignore the Constitution

Pay very close attention to what this article is telling us – because our government’s disregard of our constitution is getting worse – much worse. I’m sure that at some point, we’ll be told that the Constitution is completely outdated and ill-suited to deal with whatever calamity is brought upon us (we see a lot of this already). Remember – it is this ‘old fashioned’ document that has held powerful interests in check for over two hundred years. There’s a reason the Constitution adds checks and balances to our government. Too much power is a very bad thing in this evil world. The founders of our nation were wise – they were not naïve people. They knew that over time, powerful interests could try to takeover the United States of America – from within.

If you study the Illuminati – you’ll see that there are two major obstacles to their plan for world government – the American Constitution and the American middle class. Our constitution creates a Republic where everyone has inalienable rights – not good if you want to control the world. You can’t have inalienable rights granted to the world’s people if you plan to rule the world with an iron fist. Our Constitution will not allow a small group of people to control the world. This is why it’s a stumbling block to the global elite.

The question becomes – if you’re trying to create a world government and the world’s most powerful Constitution stands in the way – how do you remove this Constitution? Do you make a direct assault and begin undermining the Constitution by direct legislation or Executive power? Not in this country. Nothing would cause us to rise up in defiance like a direct assault on our freedom. No – this would not be very effective and would certainly alert everyone to your hidden plans. The best way to begin to remove the rights granted by our Constitution is to do it very deceptively. Let’s make everyone believe that it’s necessary to remove the rights and freedoms provided to the American people – in the name of security. Let’s remove these freedoms under the guise of protection. Let’s create a perceived threat (a problem) and then propose a solution that seemingly solves the problem – while removing Constitutional rights. Now you know why the events of September 11, 2001 took place. In no time at all – the Patriot Act was passed by Congress. The Military Commissions Act then followed. George W. Bush has also signed many Executive Orders (bypassing Congress) that basically creates a dictatorship in the event of another ‘national disaster’. The rights granted by our Constitution are being systematically removed. Once again I must say that it’s an ingenious plan. Evil, but ingenious.

Why is the American middle class a threat? We (a very large group of people) wield too much political and economic power. How do you knock down such a large group of people? Would a direct assault work against us? No – not a chance. Again, deception must be used to overtake such a large group of educated people. How best to do this? If you control a nation’s economy – do you not control the people to a certain extent? You might let them focus on wealth and all of the wonderful things that wealth brings – for a time. When they have become soft and easily manipulated – you then pull the rug out from under them. Take away their wealth and their security – and watch them wither. We have placed our faith – not with our Creator – but with our money. If you take away someone’s money who is focused on wealth – you leave them with nothing. Will they not do whatever you ask in an attempt to get their wealth back – whatever the cost? You are now beginning to understand the Lord’s warnings about wealth. Wealth can come and it can go – do not put your faith in money – do not let it control you. Remember, we are ultimately fighting an evil, spiritual being. He knows what drives you. He knows where your weaknesses are.

What happens if you take away the wealth of a true believer? Does the world come crashing down? No – not at all. A child of God views a trial in this world as a test. A test that, once endured, will strengthen our faith. If we are given wealth, we will use it according to the Lord’s will to advance His kingdom. If we do not have wealth, we will still do whatever we can for the Lord. We are not tossed around by the world – it holds no power over us. Take away my wealth – fine. The Lord will provide. Try to force me to adhere to unbiblical doctrine? Try to make me worship something other than the One, true God? Now you’ve got a problem. I will not – cannot – proclaim something other than the Lord’s Word. I will not – cannot – worship something, anything – other than my Creator. Will not happen – ever. Threats will not work, persecution will not work, taking away my wealth will not work – because my focus is no longer on this world. I have been promised something greater – and that is where my treasure lies.

The following is an excerpt from the Article below. It speaks to two things – 1) our government is violating the constitution with the recent bailout and 2) Raiding the U.S. Treasury is a very bad idea. If you remember – one of the very first posts on this blog related to Alexander Tyler’s study of democracy and why all democracies have eventually failed. We’re watching the theory play out before us.

“The $700 billion bailout of large banks that Congress recently enacted runs afoul of virtually all these constitutional principles. It directly benefits a few, not everyone. We already know that the favored banks that received cash from taxpayers have used it to retire their own debt. It is private welfare. It violates the principle of equal protection: Why help Bank of America and not Lehman Brothers? It permits federal ownership of assets or debt that puts the government at odds with others in the free market. It permits the government to tilt the playing field to favor its patrons (like J.P. Morgan Chase, in which it has invested taxpayer dollars) and to disfavor those who compete with its patrons (like the perfectly lawful hedge funds which will not have the taxpayers relieve their debts).

Perhaps the only public agreement that Jefferson and Hamilton had about the Constitution was that the federal Treasury would be raided and the free market would expire if the Treasury became a public trough. If it does, the voters will send to Congress those whom they expect will fleece the Treasury for them. That’s why the Founders wrote such strict legislating and spending limitations into the Constitution.”

jg – October 29, 2008
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OCTOBER 29, 2008

Most Presidents Ignore the Constitution

The government we have today is something the Founders could never have imagined.
By ANDREW P. NAPOLITANO

Wall St. Journal

In a radio interview in 2001, then-Illinois State Sen. Barack Obama noted — somewhat ruefully — that the same Supreme Court that ordered political and educational equality in the 1960s and 1970s did not bring about economic equality as well. Although Mr. Obama said he could come up with arguments for the constitutionality of such action, the plain meaning of the Constitution quite obviously prohibits it.

Mr. Obama is hardly alone in his expansive view of legitimate government. During the past month, Sen. John McCain (who, like Sen. Obama, voted in favor of the $700 billion bank bailout) has been advocating that $300 billion be spent to pay the monthly mortgage payments of those in danger of foreclosure. The federal government is legally powerless to do that, as well.

When Franklin Delano Roosevelt first proposed legislation that authorized the secretary of agriculture to engage in Soviet-style central planning — a program so rigid that it regulated how much wheat a homeowner could grow for his own family’s consumption — he rejected arguments of unconstitutionality. He proclaimed that the Constitution was “quaint” and written in the “horse and buggy era,” and predicted the public and the courts would agree with him.

Remember that FDR had taken — and either Mr. Obama or Mr. McCain will soon take — the oath to uphold that old-fashioned document, the one from which all presidential powers come.

Unfortunately, these presidential attitudes about the Constitution are par for the course. Beginning with John Adams, and proceeding to Abraham Lincoln, Woodrow Wilson and George W. Bush, Congress has enacted and the president has signed laws that criminalized political speech, suspended habeas corpus, compelled support for war, forbade freedom of contract, allowed the government to spy on Americans without a search warrant, and used taxpayer dollars to shore up failing private banks.

All of this legislation — merely tips of an unconstitutional Big Government iceberg — is so obviously in conflict with the plain words of the Constitution that one wonders how Congress gets away with it.

In virtually every generation and during virtually every presidency (Jefferson, Jackson and Cleveland are exceptions that come to mind) the popular branches of government have expanded their power. The air you breathe, the water you drink, the size of your toilet tank, the water pressure in your shower, the words you can speak under oath and in private, how your physician treats your illness, what your children study in grade school, how fast you can drive your car, and what you can drink before you drive it are all regulated by federal law. Congress has enacted over 4,000 federal crimes and written or authorized over one million pages of laws and regulations. Worse, we are expected by law to understand all of it.

The truth is that the Constitution grants Congress 17 specific (or “delegated”) powers. And it commands in the Ninth and 10th Amendments that the powers not articulated and thus not delegated by the Constitution to Congress be reserved to the states and the people.

What’s more, Congress can only use its delegated powers to legislate for the general welfare, meaning it cannot spend tax dollars on individuals or selected entities, but only for all of us. That is, it must spend in such a manner — a post office, a military installation, a courthouse, for example — that directly enhances everyone’s welfare within the 17 delegated areas of congressional authority.

And Congress cannot deny the equal protection of the laws. Thus, it must treat similarly situated persons or entities in a similar manner. It cannot write laws that favor its political friends and burden its political enemies.

There is no power in the Constitution for the federal government to enter the marketplace since, when it does, it will favor itself over its competition. The Contracts Clause (the states cannot interfere with private contracts, like mortgages), the Takings Clause (no government can take away property, like real estate or shares of stock, without paying a fair market value for it and putting it to a public use), and the Due Process Clause (no government can take away a right or obligation, like collecting or paying a debt, or enforcing a contract, without a fair trial) together mandate a free market, regulated only to keep it fair and competitive.

It is clear that the Framers wrote a Constitution as a result of which contracts would be enforced, risk would be real, choices would be free and have consequences, and private property would be sacrosanct.

The $700 billion bailout of large banks that Congress recently enacted runs afoul of virtually all these constitutional principles. It directly benefits a few, not everyone. We already know that the favored banks that received cash from taxpayers have used it to retire their own debt. It is private welfare. It violates the principle of equal protection: Why help Bank of America and not Lehman Brothers? It permits federal ownership of assets or debt that puts the government at odds with others in the free market. It permits the government to tilt the playing field to favor its patrons (like J.P. Morgan Chase, in which it has invested taxpayer dollars) and to disfavor those who compete with its patrons (like the perfectly lawful hedge funds which will not have the taxpayers relieve their debts).

Perhaps the only public agreement that Jefferson and Hamilton had about the Constitution was that the federal Treasury would be raided and the free market would expire if the Treasury became a public trough. If it does, the voters will send to Congress those whom they expect will fleece the Treasury for them. That’s why the Founders wrote such strict legislating and spending limitations into the Constitution.

Everyone in government takes an oath to uphold the Constitution. But few do so. Do the people we send to the federal government recognize any limits today on Congress’s power to legislate? The answer is: Yes, their own perception of whatever they can get away with.

Mr. Napolitano, who served on the bench of the Superior Court of New Jersey between 1987 and 1995, is the senior judicial analyst at the Fox News Channel. His latest book is “A Nation of Sheep” (Nelson, 2007).

Posted by: John Gilmore | September 16, 2006

U.S. Treasury Seeks Unprecedented Borrowing

Dr. Martenson says it all here. If anyone thinks that this can continue indefinitely – you’re living in a fantasy.

jg – Oct 30, 2008

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Treasury seeks “unprecedented borrowing”

Thursday, October 30, 2008, 5:19 pm, by cmartenson

I nominate this for understatement of the year:

Ryan Says Treasury to Need `Unprecedented’ Financing

“This year’s financing needs will be unprecedented,” said Anthony Ryan, the Treasury’s acting undersecretary for domestic finance, at a Securities Industry and Financial Markets Association conference in New York, where he was a last-minute substitute for Treasury Secretary Henry Paulson.

“Unprecedented” hardly does this justice, we need a more superlative word. “Ginormous” comes to mind.

Perhaps the Germans have a single word that means “future destroying” we could use.
Mr Ryan continues:

Ryan said the Bush administration’s July projection of a $482 billion deficit doesn’t include new programs launched to attack the credit crisis. The bank rescue program, a separate mortgage-backed securities program, the Fannie-Freddie takeover and a student loan program all need funding, Ryan said. Also, the Treasury is borrowing money on behalf of the Federal Reserve and the Federal Deposit Insurance Corp., he said.

First, how come we don’t have a more recent budget projection than from last July? A lot has happened since and I think the Treasury markets would enjoy a bit of guidance on how much paper they will be asked to absorb. Also, I deplore the use of budget projections that exclude items that are, uh, part of the budget.
And here’s one estimate of the range of total borrowing:

“The budget deficit for fiscal year 2009 might reach $1 trillion if Congress passes another stimulus package this winter,” said Lou Crandall, chief economist of Wrightson ICAP, in a research note. “And that’s just the beginning of the bad news — financing needs arising from off-budget items might be nearly as large as the on-budget deficit.”

Crandall estimates 2009’s total borrowing needs at $1.95 trillion. He says Treasury could raise this money with an “aggressive but sustainable” increase in regular borrowing, accompanied by one-time auctions as needed.

The difference, I suppose, between the $1 trillion and the $1.95 trillion number is the difference between the fiscal year (Sept 30 – Sept 30) and the calendar year. So I guess Mr Crandall expects nearly a trillion of additional borrowing in the final 3 months of 2009.

For the record, because I factor in a loss of tax revenues and additional stimulus packages, I place next year’s fiscal year borrowing at between $2 trillion and $2.5 trillion.

Also, I am cheating a little by knowing that this year’s deficit was nearly $1.3 trillion (the first $1 trillion plus deficit on record) even though only $455 billion of that was publicly admitted to by the Bush administration.

I have no good explanation for why the registered deficit was 179% larger than the admitted deficit. Normally the difference is in the vicinity of the excess Social Security funds that were siphoned off, or about $180 billion.
This difference is a whopping $815 billion.

My suspicion is that some of this can be found over on the Federal Reserve Balance sheet but I cannot prove that yet.

Bottom line: The US Treasury department is about to shatter every borrowing record in all of history. Why is China continuing to hold all those US dollars?

Posted by: John Gilmore | September 16, 2006

Brown Expects Support for a Global Crisis Fund

Here we see Gordon Brown talking once again about ‘coordinated responses’ to the ongoing financial crisis.

jg – November 3, 2008
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NOVEMBER 3, 2008

Brown Expects Support for a Global Crisis Fund

By LAURENCE NORMAN
Wall St. Journal

U.K. Prime Minister Gordon Brown said he believes there is support for a global fund to help stem the spread of the financial crisis.

British Prime Minister Gordon Brown with Saudi Foreign Minister Prince Saud Al Faisal at Riyadh Airport before boarding his plane bound for Qatar Sunday.

Speaking to the British Broadcasting Corp. from Riyadh, Saudi Arabia, Sunday, Mr. Brown said he has found support in the region for his proposal. “The Saudis will, I think, contribute like other countries, so that we can have a bigger fund world-wide to avoid the contagion, to avoid this spreading to different parts of the world,” he said.

Mr. Brown last week said the roughly $250 billion in funds available to the International Monetary Fund to help stem the crisis isn’t enough. He called on oil-rich nations and other countries with large foreign-exchange reserves to boost the resources.

Mr. Brown said he hopes to win support for an expanded fund in time for the Nov. 15 summit of world leaders in Washington. “I see the world moving closer together to work to solve these problems, and the reason I’m here is to make sure that all countries in the world, those with big resources like the Gulf states, those with big surpluses like China are working with Europe and America to find a solution to these problems, which are global,” he said.

He said the world economy will get through the downturn much faster if there is “common action and coordinated responses” to the crisis.

He suggested further monetary-policy easing in the U.K. and elsewhere is appropriate. “Now that inflation is brought under control, we are going to see — as we have seen — two cuts in interest rates, and I believe that the trend around the world…is to respond to the fall in oil price and the falling food prices that we’re seeing at the moment,” he said.

Mr. Brown said the Nov. 15 summit would see further “coordinated” policy response to the financial crisis.

The Bank of England cut its benchmark interest rate by one-half percentage point on Oct. 8, part of a coordinated cut by several central banks. The Monetary Policy Committee meets again Nov. 5-6. The Bank of England is expected to make another 0.5 percentage-point cut, to 4%, when it announces the results of its monthly rate-setting meeting Thursday.

Mr. Brown, who met with Saudi King Abdullah on Saturday, reiterated his call for low and stable oil prices.

“There’s a determination that we have a more stable energy market, not this volatility, not this really bad time when so many people saw the petrol prices go up so quickly,” he said. “I want to see more stability as well as lower prices.”

He also called on U.K. companies to respond more quickly to the sharp fall in oil prices by cutting prices. “I hope we’ll see the companies that haven’t yet followed the faster move down doing so in the next few days,” he said.

Mr. Brown also commented on reports of a possible second bidder for U.K. bank HBOS PLC, which is set to be merged with Lloyds TSB Group PLC.

He said the government would consider any new offer. However, he noted that had the government not intervened to encourage a merger with Lloyds, the company “would have fallen altogether.”

“Of course we’ll look at every offer, and of course that’s part of the process of shareholders sorting out what the future is,” he said, “but let’s remember the problems that HBOS had and why we had to intervene with so much money in the first place.”

Write to Laurence Norman at laurence.norman@dowjones.com

Posted by: John Gilmore | September 16, 2006

On Crisis Stage, FDIC Plays Tough

It’s nice to know that the FDIC is now driving banking mergers. Here we see that the FDIC and the Treasury continue to pick and choose who wins and who loses. The gradual destruction of free markets continues.

jg – November 3, 2008
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NOVEMBER 3, 2008

On Crisis Stage, FDIC Plays the Tough

Wells Filing on Wachovia Deal Shows Agency Acting Quickly, Decisively

By DAN FITZPATRICK
Wall St. Journal

In a further sign of the U.S. government’s get-tough approach with banks, the Federal Deposit Insurance Corp. threatened to seize Wachovia Corp. last month if it didn’t find a buyer, passed on an initial government-assisted takeover by Wells Fargo & Co. and rejected an 11th-hour option that would have allowed the Charlotte, N.C., bank to remain independent, according to a Wells Fargo securities filing Friday.

Before Wachovia’s sale, the FDIC gave an ultimatum: sell or be seized. Here, employees at a meeting after the sale.

The FDIC also was a central player in Wells Fargo’s surprise re-emergence as the winning bidder on Oct. 3, edging out Citigroup Inc.

The details offer fresh evidence of a government strategy of trying to rid the banking industry of its weakest performers.

This approach, employed in recent takeovers of Wachovia, Seattle thrift Washington Mutual Inc. and Cleveland-based National City Corp., has drawn some criticism as the Treasury moves to shore up certain banks. In agreeing to acquire National City last month, Pittsburgh-based PNC Financial Services Group Inc. used a federal pledge of $7.7 billion in new capital and potentially billions more in tax savings, prompting Ohio politicians to ask why National City was not offered the same sort of U.S. assistance.

“It is still unclear what factors, terms and conditions Treasury and the various regulators are using to make capital investment decisions,” Ohio Sen. George Voinovich said in an Oct. 30 letter to Treasury Secretary Henry Paulson. Without a clearer explanation, the senator added, “people start questioning whether Treasury officials are picking winners and losers.”

Wachovia’s problems emerged before the Treasury rescue plan was available. In mid-September, management and the board considered an array of alternatives: selling core assets, raising $10-15 billion of new capital, offering an investor 20%-40% of Wachovia’s voting shares or combining with another company. But after negotiations with two different merger partners didn’t work out and a potential deal with the new investor fell through, Wachovia went into the weekend of Sept. 27-28 with concerns about a deposit runoff and its ability to fund its banking activities on Monday, the 29th. If Wachovia couldn’t find a partner by the 29th, management told its board, the FDIC would place the company’s bank subsidiaries into receivership.

The bank’s two remaining options were Citigroup Inc. and Wells Fargo. Citigroup Chief Executive Officer Vikram Pandit had already placed four unsolicited calls to Wachovia in recent weeks to explore a possible transaction, and Wells Fargo Chairman Richard Kovacevich had first discussed the topic with Wachovia CEO Robert Steel on Sept. 20, according to the securities filing.

As the weekend began, Mr. Kovacevich was willing to consider a purchase of Wachovia without any government assistance but backed away from that idea around 7 p.m. on Sunday, Sept. 28, saying the timetable was too tight. FDIC Chair Sheila Bair, feeling that Wachovia’s problems posed “systemic risk” to the banking system, told Wachovia she would try to push through a FDIC-assisted transaction over the next several hours.

Sheila Bair

At 12:30 a.m., on Monday the 29th, Wachovia’s final effort at keeping its stand-alone status was a proposal that the FDIC provide loss-sharing protection on certain loans, take an equity stake and allow the bank to raise $10 billion in new capital. Wachovia argued its proposal involved less risk to the FDIC than a transaction with Citigroup.

Wells Fargo also came back to the table that morning, discussing a loss-sharing agreement with the FDIC that would limit Wells Fargo’s exposure.

The FDIC at 4 a.m. rejected both options in favor of a government-assisted sale of Wachovia’s banking subsidiaries to Citigroup, with the FDIC providing the New York bank with protection on a certain Wachovia loan portfolio. If Wachovia’s board hadn’t accepted the agreement during a 6:30 a.m. meeting that day, the FDIC would have placed Wachovia’s banking subsidiaries in receivership and Wachovia Corp. would likely have filed for bankruptcy, according to the filing.

When Wells Fargo re-emerged later that week with a new offer for Wachovia, it was Ms. Bair of the FDIC who first notified Wachovia’s Mr. Steel that such a proposal would be forthcoming, and she “encouraged” him to give it serious consideration. Ms. Bair also discussed the matter with Wachovia’s general counsel and relayed a message back to Wells Fargo’s Mr. Kovacevich that Wachovia needed to see a board-approved merger agreement.

At that point Citigroup and Wachovia had not yet agreed on their final acquisition document, and there were “substantive issues of disagreement” between the two companies, according to the filing.

When Wachovia’s board met at 11 p.m. on Oct. 2 to consider the new offer from Wells Fargo, they were told again that FDIC would place the company’s banking subsidiaries into receivership over the coming weekend if a merger proposal was not signed by Oct. 3. After board approval, Ms. Bair of the FDIC joined Mr. Steel and Wachovia’s general counsel in breaking the news to Citigroup’s Mr. Pandit.

Mr. Pandit asked Ms. Bair to consider “the effect of this development on systemic issues unrelated to Wachovia” but the appeal fell flat. Citigroup declined comment for this article but said in an Oct. 9 release that Wachovia approached Citigroup, instead of the other way around, and that “we stood by while others walked away.”
Wells Fargo and Wachovia announced their agreement at 7 a.m. on Oct. 3. It now is scheduled to close by the end of the year.

Write to Dan Fitzpatrick at dan.fitzpatrick@wsj.com

Posted by: John Gilmore | September 16, 2006

Central Banks and Governments Continue to ‘Fight’ Crisis

We continue to see central banks and governments around the world ‘fight’ the current financial crisis. Now that it appears deflation (and rapidly slowing global growth) is the key problem (not runaway inflation), we’re seeing central banks around the world cut interest rates and reduce loan reserve restrictions in an attempt to inject additional liquidity into the world market. We also see governments (see article below on Korea) increasing spending or talking about doing so. Central bankers also continue to recommend additional government spending to help the crisis.

The reason that we’re seeing these actions is that private banks around the globe are failing or are in serious trouble. As we’ve learned, the current global monetary system requires continual debt creation – someone has to provide new money or the system collapses. Everyone continues to treat the symptoms (loan defaults, credit ‘crisis’, slowing economic growth, etc.) while the disease (world’s debt-based monetary system) continues to wreak havoc on the world’s economies.

Also notice that we’re starting to see where central banks are saying that they have reduced interest rates and have provided additional liquidity – so there’s not much more they can do. What they’re saying is that the world is running out of options – get ready for a new global ‘solution’ as things rapidly deteriorate. I’m very interested to hear what is announced after the upcoming economic summit of world leaders in Washington D.C. on November 15.

jg – Nov 3, 2008
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NOVEMBER 3, 2008

Italian Central Banker Tells States to Act

By LUCA DI LEO
Wall St. Journal

ROME — European Central Bank board member and Italian central bank Gov. Mario Draghi called on governments to sustain demand by boosting spending or cutting taxes, warning that the scope for using monetary policy to boost the economy is limited.

“Given the minimum level reached by America’s official interest rates and the ample liquidity put in circulation by central banks, the room for monetary-policy maneuver is reduced,” Mr. Draghi told a meeting of Italy’s top bankers Friday.

“To sustain demand on a global level, the anticyclical action of budget policy may be required,” Mr. Draghi said, warning that the world economy would stagnate until at least mid-2009.

Central banks around the world last week unleashed a new assault on the global economic downturn. The U.S. Federal Reserve on Wednesday cut its key rate by half a percentage point to 1%. Its move was accompanied by cuts in China and Norway. ECB President Jean-Claude Trichet last week signaled that the central bank is likely to cut its key rate this week from its current 3.75% level.

Mr. Draghi said European Union budget rules, which call on states to keep their deficit below 3% of gross domestic product, allowed for increased spending during tough times. His remarks indicate that central banks want governments to act since they are running out of ammunition.

Mr. Draghi, a former Goldman Sachs executive, said the crisis made state intervention more desirable.

Mr. Draghi effectively gave the green light to Prime Minister Silvio Berlusconi’s government to approve further measures to shore up banks. But Mr. Berlusconi’s cabinet, which has boosted liquidity and guaranteed bank debt this month, on Friday disappointed those in the market who were expecting further moves.

“It is not the government’s duty to have banks. Having shares in banks can only be a transitory necessity,” Economy Minister Giulio Tremonti told the same banking conference, adding that government intervention could be harmful.

His remarks were taken as a sign that no move by the government is imminent.
Write to Luca Di Leo at luca.dileo@dowjones.com

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NOVEMBER 3, 2008

India and Pakistan Ease Lending to Help Growth

By ABHRAJIT GANGOPADHYAY and NEELABH CHATURVEDI
Wall St Journal

NEW DELHI — The Reserve Bank of India unexpectedly cut its key lending rate on Saturday for the second time in as many weeks, and also lowered the amount of money banks have to keep in reserve as a deepening global financial crisis threatens to stall growth.

The Indian central bank said it cut the repurchase rate — its main short-term lending rate — by 0.5 percentage point to 7.5% to ease the impact of the global liquidity crisis on India. It had cut the repurchase rate by one percentage point on Oct. 20, its first such cut since March 2004.

The central bank also cut its cash-reserve ratio — the proportion of deposits that banks have to set aside as cash — by one percentage point to 5.5%. The cut in the cash-reserve requirements will release 400 billion rupees ($8.11 billion) into the banking system.

In Pakistan, the central bank said Saturday that a one-percentage-point reduction to its cash-reserve ratio will take effect immediately, instead of the previous plan to implement it on Nov. 15. The State Bank of Pakistan has cut the cash-reserve ratio by four percentage points to 5% since Oct. 11, including the rate cut that was moved forward. Pakistan’s foreign reserves have fallen steadily since November 2007, as foreigners pulled out money over rising political uncertainty and the weakening economy.

Meanwhile, the New Zealand government Saturday announced it would guarantee banks’ wholesale funding on an opt-in basis to ensure domestic financial institutions can access funds. Finance Minister Michael Cullen said the decision will ease access to international funding markets for New Zealand banks.

The global financial crisis has had a rapid and deep effect on India’s economy, which has been seen as a candidate to help the world weather the current downturn. Just a few weeks ago, the overriding concern for policy makers was containing inflation, especially in the run-up to a national election expected early next year. Inflation is a particularly sensitive political issue here because of the impact it has on India’s hundreds of millions of poor.

But as the financial crisis has deepened, the threat to India’s economic growth has increased. The central bank recently downgraded its estimate for gross domestic product growth in the year ending March 31, 2009, to a range of 7.5% to 8%, from 8% previously.

—Haris Zamir, Shri Navaratnam and Jackie Range contributed to this article.

Write to Abhrajit Gangopadhyay at Abhrajit.gangopadhyay@dowjones.com and Neelabh Chaturvedi at neelabh.chaturvedi@dowjones.com
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NOVEMBER 3, 2008

China Drops Strict Loan Caps on Banks
Central-Bank Move to Help Growth Marks First Acknowledgment of Lending Curbs

By ANDREW BATSON
Wall St. Journal

BEIJING — China’s central bank said it is no longer capping the amount of loans that commercial banks can make, abandoning a frequently criticized policy as it redoubles efforts to sustain the nation’s economic growth amid the global financial crisis.

A spokesman for the People’s Bank of China clarified the bank’s policy in a dispatch by the official Xinhua news agency during the weekend following a string of three interest-rate cuts, the most recent unveiled Wednesday.

Some economists had questioned whether the rate cuts would help boost flows of credit to households and businesses because the central bank since late 2007 also has imposed strict limits on the amount of new loans that banks can make.
Those limits were designed to keep China’s economy from overheating at a time when growth was still running relatively high.

The central-bank spokesman, Li Chao, said those credit curbs are no longer being enforced. “At present, the central bank is no longer applying hard constraints to the lending plans of commercial banks,” Mr. Li was quoted as saying by Xinhua.
Mr. Li defended the original decision to impose the credit curbs as being justified by the economic conditions at the time, which included high inflation and the threat of excess capacity. “These policies were necessary and effective,” he said.
Mr. Li’s comments mark the first time the central bank has formally acknowledged the existence of the credit curbs.

Top-Down Instructions

Although the controls on lending were open secrets among businesses and in the press, the central bank never publicly discussed them. Its instructions on how much banks could lend were delivered orally to top executives, a practice that business groups criticized as unnecessarily secretive and arbitrary.

The loan limits were partially eased, though not removed, at the beginning of August.
The use of credit quotas — a practice that had been largely phased out in recent years as China’s state-controlled banks were reorganized to run on a more commercial basis — was an attempt to curb growth in bank lending without raising interest rates.

The measures appeared to be effective, reducing growth in lending from a pace of above 17% last year to nearer 14% in recent months.

Critics, however, have said that much of the growth in credit simply ended up in harder-to-track areas like underground lenders or off-balance-sheet vehicles set up by banks.

News of the end of the credit quotas came amid further signs of a slowdown in China’s economy, which is being battered by weakening in overseas demand and in the domestic housing market.

Economic Outlook Dims

The purchasing managers’ index published by the China Federation of Logistics & Purchasing declined in October to its lowest level since the index was launched in January 2005.

The reading of 44.6, down from 51.2 in September, indicates a sharp contraction in manufacturing activity, led by a decline in new export orders and demand for construction materials like steel.

The worsening economic outlook for China, which has deteriorated more rapidly than most analysts expected, had already generated calls for the removal of the loan constraints.

In a commentary published last week, Fan Jianping, the chief economist of the State Information Center, a major government think tank, suggested canceling the loan-quota system in 2009.

The willingness to abandon the policy before then gives some backing to Chinese officials’ repeated vows to be flexible and open-minded in finding ways to deal with the impact of the financial crisis and global economic slowdown.

“To guard against the economic and financial impact of this crisis on China, we will flexibly adjust economic policies, including monetary policy, when necessary, and strive to minimize the possible negative effects of this crisis,” said Mr. Li, the central-bank spokesman.

Write to Andrew Batson at andrew.batson@wsj.com
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NOVEMBER 3, 2008

South Korea Plans $11 Billion in Tax Cuts, Other Stimulus
By EVAN RAMSTAD
Wall St. Journal

SEOUL — The South Korean government early Monday proposed a fiscal stimulus plan of tax cuts and new government spending amounting to 14 trillion won, about $11 billion, for next year to help cope with the likelihood of slower economic growth.

Of the total, 11 trillion won will come from new spending and 3 trillion won will come from tax cuts. Government officials have been discussing ideas for stimulating the economy for the past two weeks. Monday’s announcement marked the first time officials placed a value to their planning. Shares on South Korea’s stock market were trading up 3% after the announcement and, in currency trading, the South Korea won was slightly lower against the U.S. dollar.

The Ministry of Strategy and Finance said 90% of the new spending will be sent to provincial and local governments for infrastructure and construction projects. Almost two-thirds of the spending will occur in the first half of next year, a step that recognizes how quickly the global slowdown may impact South Korea.
The country has been relatively insulated from the economic troubles that began with the collapse of the U.S. housing market, in large part because South Korean banks didn’t buy many securities tied to subprime mortgages.

But when the economic crisis spread to credit markets and consumer purchasing, South Korea became more vulnerable because of its banks’ borrowing on foreign markets and its heavy reliance on the manufacturing and exporting of products like TVs, cellphones, cars and steel.

Because of the global slowdown, government officials have said they expect South Korea’s economic growth to slow next year to below 4%. Economists’ forecasts for the nation’s growth next year range from 2.5% to 3.5%. South Korea’s annual growth this year is now expected to be just below 4%. That’s down from earlier projections of 4.5% to 5%. The stimulus package amounts to about 4% of the government’s annual budget.

Write to Evan Ramstad at evan.ramstad@wsj.com

Posted by: John Gilmore | September 16, 2006

Rescue Cash Lures Thousands of Banks

This quote from the article below says it all:

“There’s a perception in the market that the government is actively picking winners and losers…we wanted it well-known in the market that we’re on the list of survivors,”

Now that the government has gotten into the banking business – free markets are being turned upside down. No one wants to be left out – so the tentacles of government continue to spread throughout our banking system.

Everyone is running in fear – and they can’t see the danger.

jg
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NOVEMBER 3, 2008

Rescue Cash Lures Thousands of Banks

By ELIZABETH WILLIAMSON
Wall St. Journal

WASHINGTON — Treasury and banking regulators say as many as 1,800 publicly held institutions could apply for government investments in coming weeks, out of concern that failing to do so could make them losers in a banking sector reshaped by the Treasury’s $700 billion rescue plan.

Depending upon conditions still being crafted by Treasury, thousands more private banks could apply for government capital as well, a Treasury spokeswoman said Sunday.

Only days ago, many healthy banks were saying they didn’t need taxpayer money under the Troubled Asset Relief Program. These healthy banks said they worried that taking government investments could unfairly tar them as in need of a bailout. In the past week, that perception has been reversed, due in large part to efforts by Treasury, banking lobbyists and legal advisers to sell the TARP.

Henry Paulson, secretary of the Treasury Department, which has been making efforts in the past week to persuade banks to apply for capital infusions from the government as part of the financial-rescue package.

Now institutions across the U.S. worry that if they don’t try for the money, the market will judge them as too unhealthy to qualify, or lacking the savvy to deploy cheap government capital on acquisitions and investments.

“There’s a perception in the market that the government is actively picking winners and losers…we wanted it well-known in the market that we’re on the list of survivors,” said Roy Whitehead, chairman, president and CEO of Washington Federal Inc. in Seattle, one of about 20 regional banks approved by Treasury for the program last week.

In the past week, Treasury said, hundreds of publicly traded institutions have applied for the program, or signaled their intent to do so by the Nov. 14 deadline. Responding to lobbying by banking trade groups and their members, Treasury last week extended that deadline for private banks to give them a chance to apply as well.

Under the program, Treasury takes an equity stake in an institution in exchange for an investment of as much as 3% of risk-weighted assets, to a maximum of $25 billion.
Treasury spokeswoman Jennifer Zuccarelli said architects of the Treasury program anticipated the huge interest, and that the $125 billion remaining for the program after the first nine big banks committed to the funds in October will be enough.

But with new types of institutions — last week, Treasury said insurers would be eligible — being added almost weekly, some banks and their advisers say they aren’t so sure. They are scrambling to commit to the program, worried they will be left out in the cold when the deadline passes.

“It seemed like the consensus in the industry was…go out and get this,” said William Marsh, president and chief executive of Farmers National Bank of Emlenton, in Emlenton, Pa. Mr. Marsh said his bank is healthy and viable without government money, but he leans toward taking the money anyway.

Helping banks to understand and apply for the Capital Purchase Program has become a cottage industry in Washington, where firms with lobbyists and lawyers under the same roof have been adding banking clients by the dozens.

In a seafood restaurant in Washington’s Georgetown neighborhood Friday, Norman Antin, a partner in Patton Boggs’s banking and regulatory group, read a note on his BlackBerry. House Financial Services Chairman Barney Frank, it said, is joining other Democratic leaders in demanding government money be used for lending first, not acquisitions. Banks and their lobbyists, like those at Patton Boggs, oppose such restrictions. They are in constant contact with bank regulators and lawmakers on Capitol Hill, and send dispatches on developments in the ever-changing program to clients in real time.

Patton Boggs partner Kevin Houlihan said the firm’s banking and regulatory group now spends half its time on TARP, though the firm declines to break out the revenue created by the sector. Last week, after Treasury re-emphasized that only healthy banks would qualify for the program, five bankers contacted him in a day. He encouraged them all to apply.

“It’s cheap capital, cheap insurance and a bonus for the institutions that are participating,” he said.

Lawyers at Skadden, Arps, Slate, Meagher & Flom, whose Washington office is located 50 yards from the Treasury, are marrying banks with private investors to improve their financial picture — and their chances of being approved for TARP.

Some banks are still reluctant to participate in the government program. Last week, Cullen/Frost Bankers Inc. one of Texas’ largest banking institutions, issued a news release explaining why it won’t apply for government funds. “Cullen/Frost is well capitalized now and for the foreseeable future, with sufficient capital to grow our business and take advantage of acquisition opportunities,” Cullen/Frost Chairman and CEO Dick Evans said in the statement.

Such banks are now in the minority, said Hal Reichwald, co-chair of the financial-services group at Manatt, Phelps & Phillips LLP in Los Angeles. About 100 Manatt clients, old and new, are considering TARP capital, and more are in the pipeline.
—Daniel Fitzpatrick contributed to this article.

Write to Elizabeth Williamson at elizabeth.williamson@wsj.com

Posted by: John Gilmore | September 16, 2006

Economic Crisis Continues

A few highlights from articles in today’s Wall St. Journal. People are placing their hope with Central Banks (rate cuts, increased liquidity, etc) and governments – which I’ve said before – is not a wise move. The question becomes – how long before stock markets figure out what’s happening with the rest of the economy? You know it’s serious when experienced business executives issue quotes like this:

“the worst month in the post-World War II era”
“This is clearly a severe, severe recession.”
“Never in all of the years I’ve been in business have I seen a worse outlook for the economy”
“never in all my years as a bookseller have I seen a retail climate as poor as the one we are in. Nothing even close.”

What about the bailout? Not helping – but it is adding significant debt to the U.S.:

“The U.S. Treasury estimated it will borrow a record $550 billion in marketable debt in the October-December quarter to pay for a slew of emergency programs aimed at easing the credit crunch.”

jg – Nov 3, 2008

DETROIT–U.S. auto sales in October plunged an estimated 31% to about 850,000 vehicles, as the financial crisis and tightening credit kept buyers away from showrooms. It was the first time since February 1993 that auto makers sold fewer than 900,000 cars and light trucks in a month. When adjusted for increases in the U.S. population, October was “the worst month in the post-World War II era,” Michael DiGiovanni, the top sales analyst at General Motors Corp., said in an conference call. “This is clearly a severe, severe recession.”

WASHINGTON — Amid uncertainty about the economic outlook, U.S. banks continued to tighten their standards on loans to households and businesses in the third quarter, according to a Federal Reserve survey of bank executives.”Large net fractions of domestic institutions reported having continued to tighten their lending standards and terms on all major loan categories over the previous three months,” said the survey, released Monday. Additionally, banks said the uncertain economic outlook and their reduced tolerance for risk also prompted them to reduce credit limits on existing credit card accounts to both prime and nonprime borrowers.

Manufacturing activity in the U.S. slowed sharply in October, falling to the lowest level since 1982 and signaling that a recession is at hand. On the eve of Election Day, the Institute for Supply Management reported that overall activity sank to 38.9 last month from 43.5 in September. Only two industries—computer and electronic products and apparel—reported growth, while 16 industries, including furniture, plastics and petroleum products, reported contraction. It was the first ISM reading this year to herald a recession.

Circuit City Stores Inc., the second largest consumer electronics chain in the U.S., said it will immediately close and liquidate 155 stores and lay off thousands of employees as it struggles to survive an increasingly dreary holiday shopping season. Citing a deteriorating economy, tightening credit limits by its suppliers, and an updated assessment that found its inventory was worth less than it expected, Circuit City said it would close the stores in 55 U.S. markets Tuesday and immediately begin liquidation sales on Wednesday.

PARIS — Société Générale SA Monday said net profit in the third quarter fell by 84%, as the French bank increased its provisions and continued to reduce its exposure to risky assets. France’s second-largest bank said net profit fell to €183 million ($233.2 million) from €1.12 billion in the same period a year earlier. Third-quarter revenue slid 5% to €5.11 billion from €5.38 billion in the year-earlier period.
Viacom Inc.’s third-quarter net income fell 37% as the media company faced challenges in both its networks and filmed-entertainment segments. “The economic environment and ongoing uncertainty have posed new challenges for the media industry, and Viacom has not been immune to the impact of these forces,” said Chief Executive Philippe Dauman.

The souring economy is aggravating the troubles of Whole Foods Market Inc., a onetime Wall Street darling now mired in a nearly three-year slump. Analysts say the upscale grocer probably will have to trim its earnings forecast for the current fiscal year and announce further cuts to capital spending or new-store plans when it reports fiscal fourth-quarter results Wednesday.

WASHINGTON — The U.S. Treasury estimated it will borrow a record $550 billion in marketable debt in the October-December quarter to pay for a slew of emergency programs aimed at easing the credit crunch. The $550 billion estimate is $408 billion more than what Treasury projected in July 2008. The latest projection for the current quarter would leave the Treasury with an estimated end-of-December cash balance of $300 billion. That figure includes $260 billion for a new program Treasury created in September to help finance new Federal Reserve programs to address liquidity pressures in financial markets. “The increase in borrowing is primarily due to higher outlays related to economic assistance programs, lower receipts, and lower net issuances of state and local government series securities,” Treasury said in a notice Monday afternoon.

For months, many mutual-fund investors could take comfort in this: They had endured worse during the tech-stock collapse. The hard lessons learned from that earlier, harrowing ride led many to believe they were better positioned for this bear market. But U.S. stock-market declines during October were so deep and wide that even tame investments were pummeled. Losses from the steep plunge that began just over a year ago now top those from 2000-2002.

Grim. There’s no other word for the European Commission’s outlook for the euro zone and wider European Union economy in its regular autumn survey. But the outlook may get grimmer yet for those countries with the biggest current account deficits unless the European Central Bank comes up with a series of sharp interest-rate cuts. That would probably see the euro fall even further against the dollar.

The chairman of Barnes & Noble Inc. last week told employees via an internal memo that the nation’s largest bookstore retailer is “bracing for a terrible holiday season,” and that he expects “the trend to continue well into 2009, and perhaps beyond.” “Never in all of the years I’ve been in business have I seen a worse outlook for the economy,” wrote Mr. Riggio. “And never in all my years as a bookseller have I seen a retail climate as poor as the one we are in. Nothing even close.”

Private-equity firm KKR & Co. LP won’t complete its initial public offering until 2009, once again delaying its going-public plans amid the growing financial crisis.

BRUSSELS — The euro-zone economy is now in recession and will remain at a standstill for most of next year, the European Commission said Monday in its autumn forecast. The commission, the European Union’s executive arm, said financial markets are still in a “precarious” condition, creating significant risks to its already bleak economic outlook.

Posted by: John Gilmore | September 16, 2006

U.S. Debt Could Tie Obama’s Hands

It seems people are finally waking up to reality. There is no money for the campaign promises made by our President-elect. This will become increasingly clear as tax revenues begin to drop dramatically at the same time our deficits sky-rocket. ‘Constrain’ isn’t the word I would use here. At some point – there will be no money for economic stimulus – or anything else. Things are going to ‘change’ – but not in the way most people expect.

“I don’t think that anything on the stimulus end will be constrained by these deficits,” said David Greenlaw, a Morgan Stanley economist.

We should stop comparing our debt to other nation’s debt and start asking the right questions – why does every nation have such enormous debt? Why does it seem that everyone – nations, corporations, individuals – has to manage such massive debt loads?

jg – Nov 5, 2008
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NOVEMBER 5, 2008, 4:43 P.M. ET

U.S. Debt Could Tie Obama’s Hands

By JON HILSENRATH
Wall St. Journal

The U.S. government is on course for an unprecedented borrowing binge in coming months, a development that could constrain President-elect Barack Obama’s economic agenda.

The Treasury Department laid out near-term borrowing plans Wednesday, saying it expects to tap financial markets for $550 billion in the final three months of 2008 and another $368 billion in the first three months of next year through issuing Treasury securities with a wide range of maturities.

Economists project that total government borrowing could pass $1.5 trillion in the fiscal year, which ends next September, in one year pushing up the government’s total debt burden by more than 25%, a large and possibly jolting increase.

The sharp rise poses a potential dilemma for Mr. Obama’s activist agenda. Few economists believe the Treasury will be constrained in the next year in its ability to manage its rising borrowing needs or in advancing another fiscal stimulus program. But in the long run, rising government debt could make it harder for Mr. Obama to pursue new spending and tax-cut programs aggressively.

“I don’t think that anything on the stimulus end will be constrained by these deficits,” said David Greenlaw, a Morgan Stanley economist. “But if you’re talking about health care reform and some of these longer-term programs, there is some constraint there.”

A range of factors are behind the mammoth borrowing increase. The recession has slowed individual income and corporate income tax receipts. Outlays are rising for unemployment insurance, food stamps and other programs meant to be an economic stabilizer.

Meantime, the Treasury is embarking on a $700 billion program to buy distressed assets from Wall Street and invest in financial firms and has already increased borrowing in support of Federal Reserve financial rescue efforts.
Furthermore, Congress is likely to pass a new economic stimulus plan in the weeks ahead that could run well over $150 billion.

“We’re really expecting private, foreign, domestic investors and foreign government investors to increase their Treasury debt holdings by a huge proportion,” said Rudy Penner, a budget expert at the Urban Institute.

In theory, such a sharp increase in new supply of Treasury bonds and notes might jolt investors, pushing up interest rates. That hasn’t happened so far, in large part because investors have been reluctant to hold riskier assets.

Yields on 10-year Treasury bonds, at 3.7%, are well below levels reached in mid-2007, when they briefly moved above 5%. Yields on 1-month Treasury bills, at less than .2%, represent almost costless borrowing for the U.S. government, and have served as a green light to policy makers for a new economic stimulus plan.

“A large fiscal stimulus package of $300-$500 billion appears to be required to prevent an even deeper economic slump than the one we are now forecasting,” Goldman Sachs economists said in a recent report on the fiscal outlook.

Economists break into two camps on the longer-term threat of mounting budget deficits.

One camp sees the debt as manageable compared to other countries and compared to the past. Even with $1.5 trillion of new borrowing this year, the U.S. government’s publicly held debt would amount to about 49% of gross domestic product, according to Morgan Stanley.

That’s much lower than Japan’s government debt, which exceeds 100% of GDP. It is also below the U.S. peak of more than 100% reached after World War II. As the economy improves and the government’s borrowing needs diminish, this camp holds, the deficit picture should improve.

But others warn that the current increase in borrowing is coming at the worst possible time, because the budget picture is on track to darken amid spending on Medicare, Medicaid and Social Security with the aging of the population.

“The problem is that over the next number of years, the long-run budget pressures are going to become more and more apparent,” Mr. Penner says. “That is going to make it more and more difficult to reverse the deficits.”

Write to Jon Hilsenrath at jon.hilsenrath@wsj.com

Posted by: John Gilmore | September 16, 2006

The Looting Operation Continues

It’s nice to know that the bailout money is being put to good use. You see here how greed overwhelms everything else – even common sense. What are these people going to do when they no longer have wealth? When everything falls apart – it’s going to be very ugly for awhile. The following article was written by Chris Martenson.

jg
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The looting operation (con’t)

Wednesday, November 5, 2008, 9:13 pm, by cmartenson

At the time, some thought that my characterization of the bailout as a “looting operation” was too strong, and told me so.

I am more certain of that language than ever.

By the time you read this, America will have a new President. I hope he’s better with money than the last resident of the White House. Just look at how the Bush gang is spending the $700 billion bailout package for banks — throwing it at financial institutions with few strings attached.
As a result, many Wall Street institutions are using billions and billions of taxpayer dollars to pay for fat cats’ bonuses.

Goldman Sachs, which is getting $10 billion from the bailout plan, is paying out $6.85 billion in bonuses, according to media reports. That’s $210,000 per employee. And that’s despite a 47% drop in its profit and 53% drop in its share price.

· Morgan Stanley, which is also getting $10 billion from our government, is doling out $6.44 billion in bonuses or $138,700 per employee, even though its profits tumbled 41% and its shares are off by 69%.

· And even the failures at Lehman Brothers are collectively getting over $1 billion in bonuses.

Some conservatives have been bemoaning the “nationalization” of America’s big banks. Yet we didn’t nationalize anything — we don’t control those banks. They’re free to spend the bailout money as they please.

And we got hosed.

Bonuses for Lehman employees? More than 65% of the bailout money to GS and MS being spent on bonuses?

I guess I am confused by what the word “bonus” means in the context of business performance.

It’s okay if you are, too.

Posted by: John Gilmore | September 16, 2006

Nations Strive for Unity on Financial Crisis

This is like watching a grand drama play out on the world’s stage. Every nation has its role – to give the appearance that there is much dissention among the nations as they strive to solve this crisis. And just like a play – those involved in the production already know the outcome. After much debate and the appearance of cooperation – in the end we’ll see the solution appear – as if the actors decided the ending. We all know that actors simply read their lines and put on a good show – it’s the people writing the script who ultimately control the production.

Who – might you ask – is writing this script? It’s easy to say that the ‘illuminati’ or whatever you want to call this cartel of secret societies/international bankers is behind the scenes – orchestrating all of this. As I’ve said many times before – to truly understand our world – you must be able to see and understand the spiritual component. The writer of this evil script is our spiritual enemy – and I’m sure that he’s pretty proud of himself – after all – pride caused his downfall and it continues to consume him. However, we can take solace in the fact that our Creator knows our enemy’s script – and has incorporated the evil that is present in the world – into the ultimate script – our Father’s plan to end evil and restore us. So, let the world’s screenwriters continue to write and let the world’s actors continue to act on the world’s stage. Those of us who know the ending of this grand play will simply continue to watch, learn and listen – until our Father asks us to enter stage right.

jg – Nov 10, 2008
_____________________________
Nations Strive for Unity on Financial Crisis
By BOB DAVIS

November 10, 2008

Wall St. Journal

WASHINGTON — Leaders of 20 nations will gather in Washington Friday, supposedly to speak with one voice about how to handle the economic crisis that engulfs the world.
When it comes to action, though, don’t count on unity. A nationalist Tower of Babel is more likely.

The French want to rein in unbridled global capitalism and build a new regulatory order. The Americans are suspicious of that.

The British first said they wanted a “new Bretton Woods,” which sounds like a call to remake or even replace the International Monetary Fund and other international institutions conceived at that 1944 New Hampshire conference. Now they want a more powerful IMF.

Finance Ministers and Central Bank Governors from around the world at the opening of the G-20 summit in Sao Paulo, Brazil.

But the Russians would try to veto the latter idea. They want an IMF that won’t impose what Arkady Dvorkovich, a top Kremlin economic adviser, calls “political conditions” on borrowers as it does now.

Meanwhile, the Chinese — who Sunday announced a sweeping economic-stimulus plan — want more influence on IMF decisions. Everyone else wants the Chinese to bankroll IMF lending programs whether or not the power structure is changed quickly.

Group of 20 finance ministers and central bankers met during the weekend in São Paulo to prepare for the summit. Speaking at a news conference Sunday, IMF Managing Director Dominique Strauss-Kahn recognized that leaders hold differing views about the best way forward. He said there is reason to be optimistic about the G-20 summit because everyone at the table agrees coordinated action is crucial.

“If there were already a single voice, then you wouldn’t have a need for a meeting,” Mr. Strauss-Kahn said. Differences of opinion “are always the case at the beginning of a meeting.” Joseph Guinan, a senior analyst in Brussels at the German Marshall Fund, a U.S.-European think tank, said, “We’re still at a phase where nobody trusts a version of how we move forward that’s propounded by anyone else.”

The problems plaguing the conference are part conceptual, part political. It’s far from clear how to stanch the economic crisis from getting worse given the complex interaction between housing problems, tightened credit, bank solvency and slumping consumer demand globally. The IMF plans to use the conference to lobby nations for a big dose of Keynesian pump priming — running big budget deficits to cut taxes and boost spending. The U.S. has started in this direction, but many European countries are skeptical.

How to head off a potential future crisis is also an imponderable. It’s easy to talk about more regulation. But what kind? And how much should regulation be transnational?

The main political problem dogging the conference is the U.S. America’s economy is so vast and its influence over international institutions so large that significant change in the global economic system can’t occur without U.S. assent.

But President George W. Bush has just more than two months to serve and can’t bind the U.S. beyond that, while the president-elect, Barack Obama, isn’t ready to take up global economic overhauls. “The United States has only one government and one president at a time,” Mr. Obama said Friday, although representatives of other nations are talking to Obama aides. European leaders are proposing a second summit 100 days after the Washington confab — in late February, about a month after Mr. Obama takes office.

The best that’s likely to come of this week’s meeting is a commitment to make financial reform a continuing priority. After the Asian financial crisis in 1998, the IMF pushed for changes in the “global financial architecture,” including an international bankruptcy court to handle country defaults. But once the global economy recovered, interest in change plummeted and the bankruptcy-court idea died.

At this meeting, the IMF plans to showcase some new ideas, including work it is doing on identifying asset bubbles before they develop. IMF economists are studying past crises globally to see how asset prices develop into major problems over several years, to assess whether there were indicators of trouble that could help predict problems in the future.
The IMF also is debating internally whether to nominate itself as a global financial regulator or propose a “network” of international institutions.

European nations are pushing a somewhat different network — a “college of supervisors” for the largest financial institutions: Regulators of, say, Citigroup from different countries would meet informally to swap information.

The weakness with all these proposals is enforcement. For years, the Europeans and the U.S. have ignored IMF advice on how to deal with problems at home, while they expect developing nations to hew to IMF requirements in order to qualify for emergency loans.
This past spring, the IMF worked up a plan for the U.S. to recapitalize its banks and presented it to the Treasury, where it was ignored. A Treasury official says the report wasn’t even passed along to the Treasury secretary’s office. The British and French are no different, said Simon Johnson, a former IMF chief economist.

Mr. Obama didn’t take positions on remaking the global financial system during the campaign. But it will be an issue forced upon him quickly. During the Asia crisis, some of his top economic advisers — then in the Clinton White House — used the IMF to push U.S. economic policy.
This time, the Obama administration will be judged internationally, in part, on whether it is willing to listen to advice as well as dole it out.

—John Lyons in São Paulo contributed to this article.
Write to Bob Davis at bob.davis@wsj.com

Posted by: John Gilmore | September 16, 2006

China Announces Stimulus – and Stock Markets Rise

China announced a half trillion dollar stimulus plan over the weekend (November 9th) – and naturally – stock markets rally in China and Europe – and the DJIA is expected to rise as well. Countries around the world continue their attempts to revive the world’s economy using the same methods that are destined to fail. Stock markets rally on this news because they see more cheap money flowing into the system and they ignore the underlying economic data – even though all of the economic data is pointing to a deep, global recession. The following headlines (all published over the past couple of days) are telling us what’s happening in the real economy – and sooner rather than later – stock investors are going to realize this.

General Motors Corp. and Ford Motor Co. posted steep losses in their core operations and together burned through a staggering $14.6 billion in cash in the third quarter, raising the possibility that Washington may have to step in to finance a historic downsizing of the U.S. auto industry.”

“Regulators seized a $5.1 billion Houston bank led by mortgage-bond-pioneer Lewis Ranieri and a small bank in Los Angeles Friday, raising the number of bank failures this year to 19 and showing how even the most experienced financial executives are struggling to survive the financial crisis. Prosperity Bank, of El Campo, Texas, agreed to assume the $3.7 billion in deposits held by Franklin Bank, of Houston, and purchase $850 million in assets, leaving the Federal Deposit Insurance Corp. to dispose of the remaining $4.25 billion. (Nov 10, 2008)”
“Troubled electronics retailer
Circuit City Stores Inc. filed for Chapter 11 bankruptcy Monday in an effort to stay ahead of lenders owed $898 million.”

Nortel Networks swung to a $3.41 billion third-quarter loss and said it plans to eliminate 1,300 jobs as the economic slowdown hurt its financial performance. The Toronto-based company also plans to introduce salary and hiring freezes, cut or consolidation of executive and management positions and suspend certain preferred-share dividends.”

Dish Network Corp. posted a 54% decrease in third-quarter net income on an investment-related charge and a second-straight quarterly reduction in subscribership while sister company EchoStar Corp.’s net loss widened on a similar charge.”

“Silicon Valley is drowning in “underwater” options. But with the stock market in turmoil, investors might be uneasy bailing out high-tech employees. Employees at scores of companies, including Yahoo Inc. and Google Inc., are holding stock options, the right to buy shares at a preset price, that have been rendered virtually worthless because those companies’ shares have fallen below the exercise prices.”

“The global financial crisis claimed a high-profile casualty in the former Soviet Union over the weekend when Latvia’s biggest home-grown bank was effectively nationalized by the Baltic nation’s government.”

“Mail and logistics company Deutsche Post AG said it will cut 9,500 jobs and close all of its DHL express service centers in the U.S. amid heavy losses in the market there. In a statement released Monday, the German company said that new round of cuts are on top of 4,500 job cuts it already announced and blamed heavy losses at the unit, which competes with rivals UPS Inc. and FedEx Corp.

Fannie Mae‘s third-quarter net loss widened on a $21.4 billion write-down of deferred tax assets it would have used to offset taxes on future profits, showing the red ink at the government-sponsored provider of funds for home mortgages isn’t expected to end soon.”
“U.K. factory gate prices declined at a record pace in October, as oil prices continued to fall sharply on concerns that the world economy is sliding into recession, data from the Office for National Statistics showed Monday.”

DONGGUAN, China – “Workers have flocked to southern China for plentiful manufacturing jobs in industries that offer better pay than farm work. Now, they are finding themselves in an unusual jam: lining up for increasingly scarce employment.”

Chris Martenson has written a blog post below showing the perverse logic of the world’s stock markets. As always, he’s done an excellent job of presenting the truth of what’s really happening.

jg
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Jobs report shows 240,000 losses and more Fuzzy Numbers

Friday, November 7, 2008, 11:44 am, by cmartenson

The Dow Jones is up roughly 225 points on the news that 240,000 people lost their jobs in October. This perverse sort of reaction defines how Wall Street works. Wall Street cheers this sort of news, because it implies that another rate cut is on the way.

So the logic boils down to this: The worse the news, the greater the chance that the Fed will shower us with even more cheap money.

In a more perfect monetary system, good news would be rewarded and bad news would be punished but that is just not how Wall Street works. Quite the opposite.

Of course, nobody ever seems to question this logic, or whether it even makes any sort of sense at all. To my way of thinking, the problems we are now experiencing stem from having entirely too much cheap money flooding the system for too long, and so I greet every new rate cut and Fed liquidity program with a grimace, knowing that they will merely prolong the agony.
But Wall Street cheers the prospect of cheap money and new credit, because it is those sources of funds that perpetuate their amply-rewarded jobs.

Meanwhile today is “job report Friday,” and the news was predictably bad, but not as bad as ‘expected’.

U.S. Unemployment Rate Climbs to 14-Year High of 6.5%

Nov. 7 (Bloomberg) — The U.S. unemployment rate rose to the highest level since 1994 as companies slashed payrolls, setting the stage for the steepest economic decline in decades and a tough start for Barack Obama’s presidency.

The jobless rate rose to 6.5 percent in October from 6.1 percent the previous month, the Labor Department reported today in Washington. Employers fired 240,000 workers after a loss of 284,000 in September, the biggest two-month slide since 2001.

“We’re heading for a deep recession — banish the word mild from your vocabulary — it’s big, it’s bad and it’s broad-based,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts.

This data fits in with the general theme of this recession being unlike any in recent memory. In my estimation, the job losses are just getting started, and we can fully count on another 12-18 months of increasing losses.

I reserve the possibility that the total number of losses could be far worse than any prior recessions, for two reasons. First, this is the largest credit bubble ever to burst, so this means the bottom will be lower than any prior events. The second reason is that the US is now an 80% service-based economy. Those jobs are easy come, easy go, so the number of them that “go” could be a real shocker.

And, of course, these numbers would have been a lot worse if the venerable Birth-Death model at the BLS had not added (yes, that’s right, added) an additional 71,000 jobs back onto the sampled losses.

This is beyond preposterous. Certainly by now, if this were an honest mistake of honest statistical modelers, they would have admitted publicly that their model is clearly broken and in need of repair.

I am certain that we’ve been in recession since February, and yet, during that time the BLS job modelers have added 1,180,000 jobs to the official landscape.

The Birth-Death model, despite negative GDP, negative spending, negative industrial output, and negative hiring activity, has not recorded a single losing month from February onwards. How is that even remotely possible? Perhaps they should rename it the Birth-Birth model?

As a sanity check, note that the model has added construction jobs in each and every month, without exception, despite the largest fall-off in residential construction ever on record.
One wonders what is in this model? If I were building such a model, I would use inputs such as “spending activity” and “units built/shipped” as my drivers.

I strongly suspect that their “model” is little more than this formula: (prior amount of jobs) x (some factor).

At any rate, after subtracting out these mythical 71,000 jobs for October, the reported number would have been -311,000 jobs.

Worst of all, I suspect that all 1,180,000 jobs added by the Birth-Death model are in error and will have to be removed from the official numbers in the future.

This constant fibbing to ourselves about the true state of affairs is harmful because it prevents accurate diagnosis and treatment of what ails us.

It’s time to stop, and I call upon somebody at the BLS to please come forward with the truth.

Posted by: John Gilmore | September 16, 2006

Economic Slide Continues

I have found that when it comes to understanding what is really going on with the economy, it is much better to let companies tell the tale. Governments and politicians will always try to ‘spin’ results – good or bad. If we focus on the actual results of companies, we get a much clearer picture of what is happening. All of the excerpts below were taken from articles published in the Wall St. Journal over the past two days. The message here is that things are not good (in any industry that I can see) and the future looks to be worse. I have searched for good news or signs of any type of recovery – but I don’t see anything that says this will end soon.

jg – Nov 11, 2008
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WASHINGTON — The U.S. government’s financial-system rescue plans are coming under pressure as a growing array of distressed companies signal the need for assistance. On Monday, mortgage giant Fannie Mae said it is losing money so rapidly it may need a cash infusion from the Treasury Department by year’s end. The funds would come from a special $100 billion pool Treasury set aside back in September to aid the company. Fannie Mae had a loss of $29 billion for the third quarter.

With a less-onerous government bailout plan in hand, American International Group Inc. (AIG) reported a $24.5 billion quarterly loss Monday due to big investment losses and another $7.1 billion in write-downs on its portfolio of credit derivatives. The new $150 billion rescue package for AIG — the largest government loan to a single company — that also was announced Monday eases the terms of the previous deal, and officials portrayed it as helping the company get some of its most serious problems under control.

Starbucks Corp. said it will open fewer stores internationally than planned and offered a more pessimistic earnings forecast for the coming year as the coffee chain said fiscal fourth-quarter earnings plummeted 97%.

Goldman Sachs Group Inc. shares fell to a 5½-year low as doubts deepened that the firm widely regarded as the smartest on Wall Street can find a way to return near the profit level it had during its heyday.

American Express Co. won fast approval to become a bank-holding company, helping the credit-card giant gain access to a chunk of the $700 billion in federal funds being pumped into financial firms. The move shows how quickly financial-services firms that have long relied on the capital markets are racing to shore up their funding sources as the credit crisis drags on and economic turmoil spreads around the world.

Circuit City Stores Inc.’s bankruptcy-court filing Monday underscores how this economic downturn may differ from others in recent memory: The U.S. retail sector is losing its place as the employer of last resort for the newly unemployed.

Toll Brothers Inc. on Tuesday reported a 41% plunge in building revenue for its latest quarter, as the luxury-home builder said the recent worsening of the financial crisis wreaked havoc on its business. “Unfortunately, the preliminary signs of stability we had discussed in early September … were upended by the past month’s financial crisis,” said Chairman and Chief Executive Robert Toll. The Horsham, Pa., company said the resulting blowback — including job-loss fears, slumping consumer spending and the stock-market plunge — pushed cancellations up sharply and resulted in record-low traffic and demand.

A strong sale of three-year Treasury notes and renewed worries about the health of the banking system propelled prices higher in a holiday-shortened session Monday. The 10-year benchmark note rose 5/32 point, or $1.5625 for each $1,000 invested, pushing the yield down to 3.760%, as yields and prices move inversely.

It is a testament to the sour mood on Wall Street that even the announcement of a stimulus package from China did little to lift the spirits of investors for more than a few hours. One of the hardest-hit sectors in 2008 has been the shipping industry, which has declined as investors have reacted to the downturn in key economic indicators by shunning those companies. The most popular measure of the industry’s state is the Baltic Dry Index, which fell to 820 Monday. This index, which measures the cost of shipping raw materials around the world, hit 11793 in May and has lost 93%. Shares of shipping companies have been beaten down as a result, with most down by more than 60% on the year.

LONDON — HSBC Holdings PLC said more U.S. consumers fell behind on their credit-card, home-equity and other loans in the third quarter, in a fresh sign of the troubles facing big lenders already handling collapsing mortgages.

LONDON — European economies are sliding deeper into recession, with retail sales falling in Britain and factory output declining in Italy and France. Europe’s central banks are already cutting interest rates in an effort to support growth. As the economic outlook worsens, a growing number of governments are also considering fiscal stimulus packages like those the U.S. and China have announced.

TOKYO — Japanese machinery orders posted their largest drop in a decade in the third quarter, the government said. Japan also said it expects a modest pickup in the near-term, reinforcing fears that capital spending won’t be able to rescue the economy from its current situation.

As Iceland continued to await an international bailout package, a Finnish finance-ministry official said Iceland will need to provide more details before Nordic governments can support it. Iceland, whose economy has been ravaged by the financial crisis, has requested a $2.1 billion loan from the International Monetary Fund to help it restore financial stability. It is looking for about $4 billion on top of that to back up its effort.

Amid all the noise of the markets, it is the relative silence of the corporate-bond market that may be most troubling. Since August there have been just seven U.S. junk-bond deals, according to Dealogic, and 83 deals for all of 2008. Not only is that total a fraction of the number of deals done last year, it is just one-third the number done in 2002, the last time that market struggled. Without the ability to sell debt, companies will be fighting for their lives. And even those that can borrow could be hurt by usurious interest rates.

Signs of a slowdown in China are spreading, with weak economic data for October illustrating why the government hurried to announce its massive stimulus plan. New data announced Tuesday show slowing imports, weakening home prices and a drop in export orders, all pointing to a sharp decline in activity that will take time to reverse.

LONDON — Vodafone Group PLC on Tuesday reported a 35% drop in first-half net income, hurt by an impairment loss on its Turkish unit, and warned that full-year sales would fall short of guidance.

Nortel Networks Corp. posted a $3.41 billion quarterly loss and said it plans to lay off 1,300 more workers, raising questions about its chief’s turnaround strategy and fueling demands to break up the troubled company.

Sirius XM Radio Inc. reported a $4.88 billion net loss for the third quarter, reflecting a big impairment charge stemming from the decline of the company’s share price since the 2007 agreement to merge satellite-radio operators Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc.

Dish Network Corp. reported a 54% decline in third-quarter net income as the satellite-television provider continued to lose subscribers. The Englewood, Colo., company is in a precarious position. Dish serves a lower-end segment of consumers compared with rival DirecTV Group Inc., and has been hammered by the economic downturn. More pressure is expected next year when Dish Network’s largest partner, AT&T Inc., switches to DirecTV.

Sprint Nextel Corp. swung to a third-quarter loss as its subscriber base continued to decline, but the wireless carrier sought to reassure investors concerned about its liquidity by announcing an amended credit agreement.

General Motors Corp. stock fell to its lowest level since 1946 as concern intensified that the auto maker could run out of cash and be forced to file for bankruptcy protection.

Four years ago, DHL’s parent stormed into the U.S. with an advertising campaign designed to take on FedEx Corp. and United Parcel Service Inc. One television ad showed a freight train loaded with DHL vans rattling UPS and FedEx trucks stopped at a rail crossing. “I didn’t see that coming,” the UPS driver muttered. Now it’s DHL that has been blindsided. On Monday its parent, Deutsche Post AG, announced a massive retreat. The company said it will pull the plug on domestic U.S. deliveries by the end of January and cut about 9,500 jobs. DHL will continue to deliver and pickup international shipments in the U.S.

Tyson Foods Inc. posted a 50% jump in fiscal fourth-quarter earnings, while warning that it could swing to a loss in the current quarter amid a weakening global economy, a strengthening dollar and volatile commodity markets.

DUBAI — Emirates Airline announced an 88% drop in six-month net profit, evidence that even carriers in the oil-rich Persian Gulf have been affected by the global economic upheaval.
In response to plummeting demand for steel in China and elsewhere, Rio Tinto, the world’s third-largest miner by production, is cutting output by 10% to stem a price freefall. Iron ore prices have fallen by more than 50% since this summer as demand for such steel-intensive products as appliances, autos and construction girders have tumbled around the world.

Ailing mall owner General Growth Properties Inc. warned Monday in a government filing that its failure to refinance or extend $1 billion in debt due this month could trigger default on billions of dollars in debt and its ability to continue operations would be in “substantial doubt.” One of the nation’s largest shopping mall owners, General Growth made the warning in a quarterly filing with the U.S. Securities and Exchange Commission. The company, based in Chicago, faces an additional $3.07 billion in debt coming due next year.

Las Vegas Sands Corp. said it has secured more than $2 billion in capital-funding commitments and also will suspend casino developments from Macau to Pennsylvania as it seeks to avoid defaulting on bank covenants that require it to maintain certain levels of cash flow.

Independent fashion boutiques flourished in recent years as young women snapped up the latest designer apparel, no matter the price. But now, in the current crunch, they are among the retail industry’s hardest hit.

Now, India is waking up to a new reality. The combination of high fuel costs and taxes and a slowing economy has hit the airline industry hard. The financial crisis has cut carriers off from a lifeline of credit. They are defaulting on payments for fuel and falling behind in dues owed to airports. The industry, which has emerged in the past five years after the government opened the market to private carriers, is set to lose a record $2 billion this year, analysts estimate, second only in losses to the U.S. industry.

Weak print advertising swung Tribune Co. to a loss in the fiscal third quarter, as the media company continues to be pounded by its debt costs and a deteriorating advertising market. Tribune, the owner of eight major daily newspapers and a string of local television stations, loaded up with debt to go private last December. With newspaper ad sales in freefall and a credit crunch pressuring debt-laden companies, Tribune’s results are being watched closely for signs of strain.

Clear Channel Outdoor Holdings Inc.’s third quarter-net income fell 83% amid an advertising slowdown.

MELBOURNE — National Australia Bank Ltd. said it raised three billion Australian dollars (US$2.05 billion) through an institutional share placement to help bolster its balance sheet amid increasingly challenging economic conditions globally.

Moody’s Investors Service cut its credit ratings on Genworth Financial Inc. after the Richmond, Va., insurer posted a third-quarter loss last week.

German insurer Allianz SE said the soured investments at its soon-to-be-sold Dresdner Bank unit cost it €900 million ($1.15 billion) in the third quarter. Chief Financial Officer Helmut Perlet said the group could face an additional €1 billion in impairments on equities in the fourth quarter if stock markets don’t recover.

Gordon Brown (UK Prime Minister), would-be savior of the ailing global economy, has begun ratcheting down expectations for a speedy global response.

Stocks fell as investors feared that even China’s $586 billion stimulus plan couldn’t prevent slowing demand for goods and services world-wide, and as worries about auto makers and banks persisted. The solvency fears on Wall Street have spread to Detroit: Shares of Dow Jones Industrial Average component General Motors fell $1, or 23%, to $3.36 — the stock’s lowest level since just after World War II — on fears the auto maker’s shareholders will be wiped out even in the event of a government bailout.

“The economy is falling faster than interest rates are and as long as that’s the case it’s going to remain a trader’s market,” said Bruce Bittles, chief investment strategist for Robert W. Baird.
KKR Financial Holdings LLC withheld its quarterly dividend payment and obtained new financing to shore up its balance sheet, marking the latest struggle for the publicly traded affiliates of Kohlberg Kravis Roberts & Co.

BILLINGS, Mont. — The Yellowstone Club, an exclusive mountain retreat for the ultra-rich, said it filed for bankruptcy protection Monday after failing to secure new financing, underscoring that even the elite can’t escape the country’s current economic troubles.

LONDON — GLG Partners LP, the large London hedge fund, has seen the amount of money it manages fall by almost a third in recent months amid poor investment performance and investor withdrawals. Between March and the end of September, GLG’s assets had shrunk by about $7.3 billion to $17.3 billion. The firm, which Monday reported a third-quarter net loss, also said it is struggling with a tougher borrowing environment and is restructuring some of its largest funds to hold onto investor cash. The disclosures by publicly listed GLG provide an insight into the struggles of asset managers generally.

Banco Santander is piling on the pressure. Rival Spanish banks may protest they don’t need to follow its example and raise capital, but that is just what Santander itself said less than two weeks ago. As recently as the end of October, Santander said it was comfortable with a core Tier 1 ratio of 6.3%. Monday, in an abrupt volte-face, Santander announced a €7.2 billion ($9.2 billion) rights issue, a move that should ensure Santander can avoid state intervention and the restrictions that come with it.

Though inventories of listed homes have been falling, they remain unusually large. Meanwhile, some real-estate agents say sales, after improving in recent months, stalled in late September and October as falling stock prices and worries about the economy rattled potential buyers.
One year ago, just as the credit doors were swinging closed, Blackstone Group LP succeeded in pulling off one last deal and it was a beaut: The $26 billion leveraged buyout of Hilton Hotels Corp., with its 2,900 hotels and 490,000 rooms throughout the world. Hilton’s portfolio of hotel brands includes the flagship Hilton chain as well as Embassy Suites, Doubletree, Hampton Inn and the Waldorf Astoria in New York City, pictured here. Today, investors in the private-equity giant, the banks that provided $20 billion to finance the acquisition and — in a strange twist of events — U.S. taxpayers, may be wishing the firm hadn’t been quite so skillful at getting the deal done. The sharp downturn in the hotel market — with more hotel owners and operators posting dismal results and giving dour forecasts — is making that deal look like a burden for Blackstone, which sank $6 billion of equity into the acquisition. That was the biggest equity investment ever made by the 23-year-old firm founded by Stephen A. Schwarzman and Peter G. Peterson, and some analysts believe much, if not all, of that equity has been wiped out, at least on paper.

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