Wake Up! You must deal with what IS to survive this ECONOMIC CRISIS

In my counseling practice, I often use this phrase, “Deal with what IS!” People get themselves in trouble because they won’t deal with the realities of their lives. They hold onto to hopes that have no evidence to support they will come true, or plans (solutions) that they obsessively think will work. When an individual does this, they fail to deal with the facts that are before them. It’s chosen denial, or ignorance, or even insanity. It is much better deal with what IS, to deal with the facts and truth of a situation, relationship, or reality. In my work, I try to help individuals do this. For some, they get it and turn things around. For many others, they reject my counsel and continue to live in blind faith or cling to obsessive, faulty solutions that they are convinced will work. Ignoring reality can have serious consequences upon your life and the lives you influence! Therefore, it’s always better to deal with what IS!

“…and do not lean upon your own understanding… do not be wise in your own eyes…”
(Proverbs 3:5-6)

As a country, we are facing an economic situation that not only have we not seen since the great depression, but for two-hundred years! In England, they are going back 300 years! You think I’m crazy? The Bank of England’s interest’s rate is now at a 300-year low (Dohmen). It's best to deal with what IS! The longer you wait to deal with this reality, the more you could be hurt by it… just like in personal issues that I see in my practice.

The world market lost $60 trillion last year. That is a figure we can’t even fathom. C. Martenson illustrates this way: One million dollars would equal a stack of $1,000 bills 4 inches high. Notice, it’s a $1,000 bill, not a $100. One-billion dollars would equal a stack of $1,000 bills stacked about 360 feet high. One trillion dollars would equal a stack of $1,000 bills about 67 miles high! 67 miles! Now, multiply that by 60 and you’ll have an idea of how much wealth was lost last year globally. Oh, and by the way, the US debt obligations, both federal and state, are about $60 trillion (Martenson).

When I was a securities representative (“stockbroker”) in the mid-nineties, I always heard that 2009 would be a pivotal year for the economy because that is when the baby-boomers would begin to retire and pull their investments out of the market economy. It was predicted then that 2009 would bring in the era of bull markets, when the stock market would decline more than rise. What we didn’t know then was the impact of runaway credit upon the market. Never before in history have we seen so much money owed on credit, by governments, corporations, and individuals. It was the availability of credit that gave us the boom years of the 80’s, 90s and early 2000s. For example, from 2003-2006, 80% of the GDP growth (how much the US economy grows per year) was from mortgage refinancing! It was coined the “home-ATM” (Dohmen).

Credit spending is spending money from a loan of some sort. That is what we have been doing on the federal, state, corporate, and personal level for decades now. At the end of 2007, we maxed out. Now it’s time to pay for all that spending. But when we’ve been using debt to pay for things (once again, on a federal, state, corporate, and individual level), how do you pay for things when you can no longer get a loan? The Fed’s answer is to make more credit available so that more loans can be made and to keep the game going. But where does it end? You can’t keep doing this forever, can you? No you can’t, and during the last quarter of 2007 lenders began saying, “Enough! We can’t play this game anymore.” The end of this crazy, experimental game has arrived and this is the reason for the crisis. We can’t live in denial anymore. The house of cards can no longer be supported and has started to fall. We have lived far beyond our means, like never before in history, and now we must pay.

“But those who want to get rich fall into temptation and a snare, and many foolish and harmfuldesires which plunge men into ruin and destruction.

For the love of money is the root of all sorts of evil…”

(I Tim. 6:9-10 NASB)

Credit has dried up in an economy that is dependent upon credit. It first hit the banks last fall, now it’s hitting corporations and we will be seeing massive layoffs and bankruptcies this year. As people loose their jobs not only will they no longer spend, which will deepen the crisis further, but they will have less taxable income. Less taxes from corporations and individuals means less money for government. Next to greatly struggle will be local and state governments (Dohmen). Massive reduction in services will take place. In California, the Governor is proposing tax increases and additional fees. Expect a mass exodus from that state! Next to go will be small foreign governments, than larger ones. It’s already happening! Some Europeans countries tried to sell government backed bonds to raise money and they couldn’t get enough buyers (Dohmen). Dubai, the famous city in the middle of the desert currently building the world’s tallest building and largest indoor ski mountain, will become the symbol of hubris, of a world given over to insanity! Google Dubai and look at the real estate projects. It’s incredible… incredibly insane!

Is the US federal government immune from this? No! We’re at the top of the food chain, with Japan (due to their strong currency… for the moment), but eventually it’s going to effect us. Just like individual who can’t get a loan because of too much debt, a country can experience the same fate, even the US Federal Government! Keep your eye on foriegn countries. We are a world economy now so we need to watch whats happening overseas as well as in the US.

“They know nothing, they understand nothing. They walk in darkness”

(Psalms 82:5).

This downturn is going to be bad, potentially really, really bad! You need to prepare now! Don’t put your hope in the Federal government to solve this problem. It doesn’t matter who the President is, this problem is way too big to be fixed by one man or Federal spending (Dohmen, Martenson). In fact, all this government spending will make thing worse, not better. Our currency could be at risk of collapse by the excessive printing of money! You can’t just print money without consequences. It will become worthless and no one will want it. This has happened to the US before during the Civil War and times before. This is probably the biggest threat we face, yet the politicians from both sides of the isle are ignoring it, believing it will all turn around if we just throw enough money at it. Are they dealing with what IS? No! They haven’t been for decades and there’s no reason to believe they will now! They got us into this mess beginning decades ago, long before Bush and Clinton, who just made the growing problem worse.

The bottom line? Now is NOT the time to put your head in the sand and hope it will all turn around in a year or so. There is no credible evidence of that reality (Dohmen, Martenson). We are being lied to by the government and media so that we don’t panic. I’m not endorsing panic, but I don’t think ignorance is a wise option either. It’s time to investigate more, to read up on what’s really going on. It’s time to become a financially informed citizen. Read experts, people who are educated and who think outside the classic mindset. I’ve reference two that I think are pretty good, but there are more. Many a financial planner is leading his or her people astray! Don’t trust them just because of their title. I use to be one, and I know that many of them don’t have any idea how to handle a true crisis. They just push the party line, holding to beliefs that are based upon an expanding market… that to hold and wait for the upswing is the best bet. What if an upswing doesn’t come for years and years to come? Wouldn’t it better to deal with what IS than to wait and see, to hope on a future that is not credibly supported? Faith is based upon something solid, something that has shown to be legit and true. To exercise blind faith is not faith, but foolishness.

My advisor thought I was crazy to pull out when the DOW was at 9500. I couldn’t ignore the facts anymore and decided to park my assets on the side than continue to see them fall. I’m not telling you what to do. You have to make that choice… and get enough info. to do so… but don’t just sit around and hope for better days or trust one person’s opinion. That could be a very costly mistake! And don’t just trust CNBC either (the TV financial channel). There are some who are worth listening to, but as a whole, they probably are too optimistic and fearful of making the tough calls. When Jim Crammer of Mad Money told people in late September to sell 20% of their portfolio to be safe, critics thought he was crazy and only causing a panic. Turns out he was right, but most people on TV are not willing to stick their necks out like that.

We may entering THE end times as described in the Bible. I don’t know, but one thing is for certain, we are certainly in the end times of prosperity build on credit. Dealing with that reality, that IS, may very well feel like THE end times, even if it’s not. These are dangerous times. You need to draw closer to the Lord and to become a financially informed citizen. Be an informed citizen of both kingdoms, the Kingdom of God and the financial kingdom, so that you can speak with wisdom and lead yourself, your loved ones, and others through these impending dark times.

I leave with the wisdom of Gandolf… spoken to Frodo in the dark caves of Mornia-

Frodo: “I wish the ring had never come to me. I wish all of this would have past.”
Gandolf: “So do all who live to see such times, but that is not for them to decide.

All you must decide is what to do with the time you have been given.”
The Lord of the Rings: The Fellowship of the Ring

References:

Dohmen, Bert (2009). 2009: The year of pain, disillusionment and challenges. The Wellington Letter, 32(1). For subscription, see: http://www.dohmencapital.com/
Martenson, Chris (2008). The Crash Course. http://www.chrismartenson.com/