How Have The Mighty Fallen (as the gold becomes dim)

by Dr. Richard Bacon

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Last December the Dow Jones Industrial Index was at 13,851. Today (20 November 2008) it closed at 7,552 down another 5.56% from yesterday’s close.

The Secret Order of Goldman – Sachs has been sacked of its gold, man! But in the meanwhile, so have American investors who kept buying higher and higher priced stocks regardless of price to earning ratios.

In the last year we saw spot gold go from $680/oz to over $900/oz and now back down to $746/oz. [no, it’s not yet time to begin buying again]

The downward plummet is not over yet: we don’t know where the DJIA will finally end up because we don’t know if there will even be any earnings this year to figure a correct price to earning ratio, and the market is presently at an 11 year low. That’s right! The last time the stock market was below 7700, people were talking about a stain on Monica Lewinsky’s dress. From an all-time high to an 11 year low in 11 months. That is 45% of the paper value of the stock market GONE in less than a year. Of course that percentage is also about the same as what the average California homeowner has lost in equity in his home over the past 11 months.

We’ve been told that if we didn’t bail out investment banks with $750 billion (the approximate amount of our entire defense budget in a two-front war year), it would be the end of the world. So congress unthinkingly and almost without hesitation voted for TARP (troubled assets relief program). But instead of buying up foreclosed mortgages and saving the American dream, the treasury department decided to buy up investment banks’ stocks and save your brokers’ bonuses. Perhaps instead of TARP, we should call the program TRAP (taxpayers’ redistribution of assets program). Is there any truth to the rumor that Henry Paulson is the reincarnation of Mordecai Jones?

So for the past two or three days, there has been a new group of Armani-clad beggars at the congressional redistribution trough. The auto-makers have suddenly discovered that western civilization depends upon them continuing to do business as usual. And they showed up in corporate jets to hold their hats out before Barney Franks (also known as Queen of the Hill) and friends; now that is adding insult to proposed injury. We are a long way from the bottom on this. If congress gives any money at all to the carmakers, they will simply increase the length of the line of folks who have their hands in your pockets. Let the Japanese and the people in right-to-work states build the cars. The future lies elsewhere, anyway.

It seems that there were three things that Jesus warned about the problems of laying up treasures on earth. One and two were moths and rust. The third was the thief who breaks in and steals. Sometimes God uses moths and rust and sometimes he uses thieves. And sometimes he just blows on it and it disappears into the pockets of the international banksters.

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Dan Amos offers the following:

“Those fearing deflation assume that every American consumer is stereotypical: an overextended, credit card-addicted, house-flipping gambler. This is simply not the case. Many Americans don’t have a mortgage. And most Americans with mortgages are still making their payments. They have, however, temporarily reigned [sic] in discretionary spending because of falling house and stock prices.

“Those fearing deflation also assume that demand for debt is low and falling. But demand for debt doesn’t always come from businesses or households looking to invest more or spend more. Any business or household looking to refinance existing debt at lower rates – and there are many – is a source of demand for new debt. Banks borrowing at the Fed window at 1% or less will be looking to supply this new debt by make [sic] highly profitable loans to creditworthy borrowers.

“Once borrowers refinance, they may not be as aggressive about spending or expanding business as they used to be. But at least they will have access to credit. In the Great Depression, they did not. So the economy fell into a negative feedback loop of asset sales, bank failures, and rising unemployment.

“Treasury and the Fed will keep taking extreme measures to slow down the pace of credit contraction and housing prices – cutting off this deflationary feedback loop. This could include nationalizing Fannie Mae and Freddie Mac and using the Treasury’s low borrowing costs to refinance hundreds of billions in existing mortgage debt into new 40- or 50-year mortgages with reduced principal balances.

“Sure, such an action would guarantee a decade or more of stagnation in housing prices, but it will also slow or flatten the rapid decline in prices. This is the essence of the Treasury and Fed actions: to stop the deleveraging from getting out of control – even at the cost of future economic stagnation. Like it or not, I think this is the most likely outcome from this crisis.”

My proposal: I think I shall once again take up the topic of The Almighty And The Dollar in our biblical institutes hour.

We need stability right now more than anything else economic. Contact, Recruit, and Invite! And remember that the plan for taking over the world is to explain to others God’s plan for taking over the world.

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Dr. Richard Bacon is Pastor of Faith Presbyterian Church Reformed, Mesquite, Texas, http://fbpminister.wordpress.com

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