Collision course with fiscal disaster

By , May 22, 2009 8:55 pm

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Friday, May 22, 2009

 

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How to Keep Your Finances From Imploding —
Even if Washington Torpedoes Its Own!

by Mike Larson

Dear Subscriber,

Mike Larson

I’ve been talking a lot lately about how our country is on a collision course with fiscal disaster. We’re borrowing money like crazy. We’re spending trillions we don’t have. Our budget deficit is exploding, with red ink spewing as far as the eye can see! Longer-term threats to government programs like Medicare and Social Security are getting graver by the day.

Meanwhile, the Federal Reserve is adding more and more garbage to its balance sheet every week. It’s trying to reinflate the last bubble by pumping massive amounts of money into the economy and slashing interest rates to the bone. And it’s expanding its tentacles into every corner of the credit markets. This is undermining the Fed’s independence and virtually guaranteeing that future rate decisions will be compromised by politics.

Former IMF chief economist Kenneth Rogoff has a nutty plan ... He wants the Fed to adopt a whopping six percent inflation target!

Former IMF chief economist Kenneth Rogoff has a nutty plan … He wants the Fed to adopt a whopping six percent inflation target!

More worrisome: We could be staring down a significant wave of dollar devaluation and inflation, delivered by the Fed and sanctioned by academia. Heck, just this week two prominent economists — former White House adviser Gregory Mankiw and former International Monetary Fund chief economist Kenneth Rogoff — encouraged the Fed to let inflation get out of control. Rogoff suggested the Fed adopt a whopping six percent inflation target!

Are these guys nuts?

Look, we can’t control everything Washington does. But we can take steps to keep OUR finances from imploding, even if Washington insists on torpedoing its own. So this week, I’d like to share my suggestions on how to gird yourself for tough times ahead …

Step #1: Save More …

I’ll warn you right up front: This Money and Markets column will make liberal use of the “S” word. No, not that one. I’m talking about “savings!”

The Fed is doing all it can to destroy your savings. It’s taking steps that could crush the purchasing power of your dollars. And by driving interest rates to practically zero, it’s making it so your ultra-safe funds can’t generate much of anything in interest.

You can do one of two things:

  1. Take the Fed’s bait and shovel your money into risky junk bonds or high-yielding CDs being offered by troubled banks. That could theoretically increase the yields your savings generate.

But doing so exposes you to significant principal risk if your deposits are uninsured or if junk bond prices fall. Is that really the best option?

  1. Increase the amount of money you save to offset the loss of future interest income. This isn’t the “fun” way to confront the Fed’s assault on your savings. It takes dedication and a willingness to tone down your discretionary spending. But it’ll help fortify your balance sheet against the risk of a deeper economic recession — and give you the peace of mind so many folks are lacking today.

Mainstream economists would have you believe the second approach is almost un-American. They talk in Ivory Tower language of the “paradox of thrift” — the economic collapse that a widespread increase in savings would supposedly bring about.

I say you tell those guys to take a hike, and start saving more! We can’t keep living beyond our means as a country — or individuals — without consequences, no matter what those pointy-eared economists keep telling us.

Step #2: Borrow Smart …

The U.S. is running out of money. And Treasury bond buyers are bidding less aggressively and demanding higher interest rates on newly issued debt.

The U.S. is running out of money. And Treasury bond buyers are bidding less aggressively and demanding higher interest rates on newly issued debt.

I’ll be the first to acknowledge that savings can’t fund every purchase you need to make. Sometimes, you’re just going to have to borrow money. But here too, you have to make sure you don’t take the Washington approach. You know: Piling on more and more debt … spending more and more money you don’t have … and demonstrating absolutely ZERO concern for the potential consequences.

The Treasury may be able to get away with this for a while, though even that’s debatable. After all, the Treasury bond buyers we’ve always counted on to pony up to the bar are bidding less aggressively and extracting higher interest rates on newly issued debt.

What’s more, as an individual borrower, you don’t have the same market power as Uncle Sam. If you run your cards up to or near their credit limits, or you max out your home equity line of credit, chances are it’ll hurt your credit score. That, in turn, will lead to a re-evaluation of your creditworthiness. It’ll prompt existing creditors to cut your credit lines and new potential creditors to shy away. They might even offer you less money or charge you higher interest rates.

And don’t get me started on home loans …

Nowhere did borrowing get more out of control in recent years than in the mortgage arena. Borrowers let their appetites get the better of them. They borrowed too much money to buy too much house on too risky terms. As a result, foreclosure rates are exploding higher and people’s financial lives are being ruined.

If there’s anything good to come out of this whole sorry affair, it’s a lesson that serves as a warning to future borrowers. I hope you listen …

Simply put: If you can’t qualify for a 30-year fixed, fully amortizing mortgage … save up for a down payment of at least 5 percent or 10 percent … and restrict yourself to a monthly principal, interest, tax, and insurance payment that eats up no more than 28 percent of your gross monthly income, then I’ve got news for you. You should NOT be buying a home!

Stay clear of loading your home up with other debt, such as second mortgages and equity lines of credit.

Stay clear of loading your home up with other debt, such as second mortgages and equity lines of credit.

Greedy bankers will always try to find a way to subvert these rules so they can pad their own pockets. Don’t take the bait!

The same goes for loading your home up with other debt, such as second mortgages and equity lines of credit. These tools can have practical uses — such as home improvement, where the money you’re borrowing can possibly help increase the home’s value. But charging pizzas or trips to Aruba on your HELOC is a sure-fire way to get yourself into serious debt trouble, especially in a market where home prices are still tumbling.

I know this may not be exactly what you want to hear … but hear it you must. Because in these days of Washington insanity, the best thing we as individuals can do is take charge of our own finances — before they take charge of us!

Until next time,

Mike

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Israel and the Church

By , May 20, 2009 9:10 pm

Deuteronomy 6:4:Hear O Israel, the Lord our God is One Lord”.

We would ask in all sincerity, what people belong to Israel, and what people belong to the church. We find that Israel is made up of the descendants of Abraham through Isaac and Jacob, while the church is made up of the spiritual seed of Abraham through Christ.  God speaking to Abraham some 1900 years before Christ had this to say in Gen 22:17:that in blessing, I will bless thee, and in multiplying I will multiply thy seed as the stars of heaven and as the sand which is upon the sea shore”. God pictured the seed of Abraham both as the sands of the sea (earthly people-Israel) and as the stars of heaven (heavenly people-Church). Paul confirms this in Romans 9:4-5:  4:“who are Israelites; to whom pertaineth the adoption, and the glory, and the covenants, and the giving of the law, and the service of God, and the promises” if these things belong to Israel, where does the church come in, does the church have the right to claim the promises and the glory of God? Paul continues in verse 5 Whose are the fathers and of whom as concerning the flesh Christ came”. And of course the church and Christianity came of Christ.

Just like all seed of Abraham is not Israel, nor are all Christians  of Christ. Only that seed of Abraham that came from the promise, Isaac, is Israel and only those Christians that know who Christ is, are the Church.

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World-Wide Financial Armageddon

By , May 12, 2009 5:56 pm

Revelation 13:16And he causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand or in their foreheads:

What a historic year 2008 was. Never before in the history of our nation has so much happened so fast and yet so much has gone unnoticed.

Very few times in our Nation’s history has a sitting Senator become President, yet this election the three finals were sitting Senators; McCain, the Republican; Obama and Clinton, the Democrats. And of course historic is the possibility of the first woman or the first Black American to be President.

Now we have the first Black American President, (a sitting Senator), his Vice-President (a sitting Senator) and his Secretary-of- State is a sitting Senator.

Both Obama and Clinton are socialists and Obama border-line Marxist.

What is the easiest and fastest way for the Anti-Christ to enter the world scene? I believe that the U.S. and the other “free”  “capitalist” nations during the last three months of 2008 did this with their bail out decisions which are about to create a World-Wide Financial Armageddon.

Folks, with Obama, Reid and Pelosi in power, those bail outs are only the tip of the iceberg. Before the end of 2009, look for the total of these financial enhancements (money the Nation does not have) to reach close to three Trillion Dollars.

I wrote the above back on 12 January 2009.

Wow”” was I ever off, or at least on the timing. It took this administration only 90 days to reach that three trillion mark and now we are looking at a possible ten trillion deficit ove the next seven to ten years. His own economic advisors are now telling Obama that there are not enough rich people to tax that which will cover his spending desires. I predict that by early next year we will all be told to bear the burden of higher taxes. If Obama gets his way, the average household will have an additional tax increase of approximately $3400.00. yearly.

Be not deceived, the slight rallys in the stock market will be the still before the storm. The recession will end but employment will continue to rise, creating inflation and drive the global markets and economics into one of the worst depresison in two hundred years. I’m not an economist, but true economists would be able to connect all the elements to support my beliefs. Folks, I’ve been there, I’m 65 years old and I don’t get my news and advise from the nightly shows and the lies out of Washington.

More on this next month.

 

 

 

 

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