Waiting for the Other Shoe to Drop . . .
Vol: 117 Issue: 20 Monday, June 20, 2011
Have you ever seen money simply vanish? Ever look in your checking account and see money disappear without anyone accounting for it?
Let’s say that yesterday, you had $15,000.00 in your savings account. You check it today and there is only $7500.00 in there so you ask the branch manager where your money went.
“I dunno,” he tells you. “Sorry about your bad luck.”
Are you going to be satisfied with that answer? Or are you going to say, “Listen, Dude, $7500.00 doesn’t simply vanish! Where’s my money?”
And you would be right. $7500.00 can’t just disappear. It is either an accounting error or it has been stolen. Before it’s over, somebody at that bank is going to have to explain to you where it went and make it right.
Or will you simply shrug your shoulders and forget about it? Of course not! Not only is your money gone, but somebody stole it – that adds insult to injury.
You no longer just want your money back – you want whoever stole it to face justice – it’s the principle of the thing.
It is just wrong to allow some thief to live large off the sweat of your brow – or off anyone else’s for that matter. Even if you got your money back, you don’t want this thief left free to victimize someone else.
One of our fellowship tipped me off to the Global Europe Anticipation Bulletin (LEAP) which reported that before the Crash, the world was holding about thirty trillion dollars worth of ‘phantom’ US money — money that LEAP terms “ghost assets”.
About half that money – fifteen TRILLION dollars — simply vanished during the financial collapse of 2009.
Not that it was transferred or spent or banked or stuffed into a mattress. . . . it simply vanished from existence. But as we’ve seen, money doesn’t simply vanish. It has to go somewhere. Doesn’t it?
It does, if it ever existed in the first place. LEAP charitably calls it “ghost assets.” There’s another name for it –economic fraud. Here’s how that works, brought down to the scale of an ordinary individual.
Suppose you wanted to get a mortgage from a broker but to qualify, you needed to show $15,000.00 in the bank –but you only have $7500. So you borrow $7500 from friend and deposit it temporarily to fool the mortgage broker.
The money wasn’t really yours – it was a bookkeeping trick using “ghost assets” that you never really had.
Of course it is illegal and if you get caught, you could find yourself facing some serious jail time for fraud.
Unless you are the US government, that is. The TARP program was even worse than in our hypothetical. In our example, we borrowed the money for our fraud from a friend. In the case of the TARP bailout, the money wasn’t borrowed, it was counterfeited.
The Fed printed money that we didn’t have and gave it to the Treasury to lend it back to ourselves at interest. The money is counterfeit and doesn’t actually exist. The interest, on the other hand, is real.
The fifteen trillion that vanished in 2009 was only the first shoe to drop. According to LEAP, the other fifteen trillion dollars will start going transparent by August and will have completely vanished by year’s end.
The first time around, it was mainly private money that was affected – but there wasn’t enough of it to cover the shortfall. This time around, it will be public money – US debt – that will have to be ‘vanished’.
The illusion of a global recovery was never that convincing – that is one reason that the mega corporations that took TARP bailout money sat on it instead of investing it in job creation.
When the next crash came, (for they knew with certitude that it HAD to come) they didn’t want to be caught short.
LEAP is forecasting that the other shoe will drop — beginning in August.
According to the Obama administration, the government will run out of money to pay its bills by August 2 unless the debt ceiling is raised before that time.
The FCIC announced the failure of two more banks last week, one in Florida and the other in Georgia. In Florida, state regulators closed the two branches of First Commercial Bank of Tampa Bay.
Georgia regulators closed McIntosh State Bank Friday evening. The FDIC took over the Jackson-based bank as receiver and agreed to let Hoschton-based Hamilton State Bank assume all of the deposits, which stood at $324.4 million at the end of March.
McIntosh had four branches and about $339.9 million in total assets. This brings the total of bank failures so far this year to 47.
In 2008 (when the first shoe fell) there were but 25 bank failures, but it had a cascading effect; in 2009 140 banks closed their doors; 157 more failed in 2010.
The Fed has policy meetings scheduled for tomorrow and Wednesday but it is unlikely that the Fed will come up with any more magic fixes to staunch the bleeding.
A report last week showing the biggest gain in underlying consumer prices in nearly three years poured cold water on speculation that the Fed might launch QE3–or a third round of Treasury purchases aimed at keeping interest rates at ultralow levels.
It’s not going to happen. It can’t happen.
The core inflation is rising faster than anticipated and it isn’t all the fault of higher fuel prices – the core rate is the inflation rate with food and fuel prices stripped out.
According to Fed Chairman Ben Bernanke, the Fed has done all that it can. There can be no further stimulus, and it is an overt admission that the stimulus program we embarked on in 2009 has failed.
Housing prices are deflating at a faster rate than they did during the Great Depression, raising fears that we may be looking at a total economic collapse in the coming months.
Inflation is bad news because it raises prices. Inflation is the result of too much money chasing too few goods, causing prices to spiral upward until the bubble bursts and prices have to fall back to earth.
The effect the bursting bubble has on the economy is called ‘recession’ because that’s the way the economy recedes, like waves receding on the shoreline. They recede, then they come back strong.
Deflation is what happens when prices begin to spiral downward. At first blush, deflation sounds like good news, especially if you are on a tight budget. But deflation is really inflation’s evil twin.
By way of analogy, rapid weight loss sounds like a great idea to a dieter – unless the weight loss is due to a terminal illness like cancer. Deflation is like economic cancer.
Deflation is generally the result of excessive production capacity leading to an oversupply of goods relative to demand. And falling prices reduce returns on investments, reducing the investment pool.
As prices continue to spiral downward, consumers begin to hang onto cash, rather than spend it, knowing that if they wait, the prices will fall still more. At that point, we’ve moved from dieting to a wasting disease.
It stops being a good thing.
Deferred purchases lead to more inventory. Too much inventory means idle factories and worker layoffs, which in turn further reduce domestic demand. The cycle functions much like an economic cancer, a wasting disease that continues to consume its own body.
Unchecked inflation leads to economic recession. Unchecked deflation leads to economic depression. That is why deflation is the evil twin.
Instead of receding, like a wave that will go out and come back to the shoreline, the economy is deflating, like the water level is dropping. The receding wave goes out, but doesn’t come all the way back.
The Crash of 1929 wasn’t the cause of the Great Depression. One can trace the beginning of the slide to October 1929, but it wasn’t the cause. The Great Depression didn’t even start until three years later.
In January, 2009, Ben Bernanke made headlines with this comment: “We own the printing presses. We can print all the money we need.”
Ben Bernanke is an acknowledged expert on the causes and errors of the Great Depression. He once even admitted that the Great Depression was the result of Federal Reserve policy.
The Fed had a printing press in 1929, too, and it used it to print all the money they needed. By 1933, the government was forced to order the confiscation of all privately-owned gold to pay its bills.
That marked the start of the Great Depression, which lasted for seven years, ending only with the outbreak of World War II.
America is on track for another Great Depression that began as a stock market crash in 2007 and got progressively worse as the Fed focused on taming inflation by flooding the marketplace with dollars.
Following the historical template of 1929-1939, America should slide over from recession into a full blown Depression sometime around 2012, which lines up almost perfectly with the European LEAP forecast.
I’m not predicting that the Rapture will occur in 2012. But all the signs are pointing to the probability of worldwide economic collapse, together with worldwide famine resulting from growing global food shortages by year’s end.
The Four Horsemen of the Apocalypse symbolize the first four judgments of the Tribulation Period. The first, the Rider on the White Horse, is the antichrist.
We know from Daniel 9:27 that the antichrist will come to power as a result of his confirming a peace deal between Israel and ‘the many’ — current headlines are all about the prospect of a Middle East conflagration by year’s end unless somebody comes up with a workable peace plan.
The Rider on the Red Horse is symbolic of War. Since this war continues after the revelation of antichrist, it is most probably global, rather than regional.
Particularly since Revelation says it claims a quarter of the population — about 1.8 billion people.
The Rider on the Black Horse symbolizes Famine. But what John describes is more along the lines of famine caused primarily by economic depression.
“A measure of wheat for a penny, and three measures of barley for a penny; and see thou hurt not the oil and the wine.” (Revelation 6:6)
It symbolizes a day’s food will cost a day’s wages. Oil and wine are symbolic of great wealth. John says the wealthy will not be hurt – a textbook picture of an inflation/deflation scenario.
So follow along with me. . . before the Black Horse of Famine comes the Red Horse of War. And before that comes the White Horse bearing the antichrist.
I am not predicting that the Rapture will happen in 2012 – the Bible prohibits date-setting, but Jesus tells us that we can know when it is near, even at the doors.
I don’t know when the Rapture will happen. But most secular economists are forecasting the Rider on the Black Horse will saddle up at some point before the end of next year.
And the Black Horse comes in third.