Financial Management Seminar

Note From Rabbi Loren On April 26, 2010: Most of this Seminar was put together in 2006-2007, which was 3-4 years ago, before the financial crisis hit. Even though I am not an economist, I was able to discern what was about to happen and the proper action to take. Even though some of the articles are dated, this seminar is still relevant.

STEWARDSHIP

A steward is a person who manages another's money, property or financial affairs. The children of God should consider themselves to be stewards of the Lord's resources. Everything that we are, and everything that we have really belongs to Him. The Earth is the Lord's and all it contains, the world, and those who dwell in it. The Lord owns us because of creation. He is our Creator and we are His creation, and so we belong to Him. Also, the Lord has a claim on us because of redemption. You are not your own. You have been bought with a price. He purchased us with the very highest price - the life, the blood, the death and the resurrection of the Son of God. We belong to Him. If He owns us, then surely He has a right to claim everything that belongs to us, including our possessions. With this in mind, here's a simple formula for being a good manager of the finances that we have been entrusted with: give ten percent, save ten percent, and live on the other eighty percent.

A FAITHFUL MANAGER SHOULD TRY TO GIVE 10 PERCENT

In the time before the giving of the commandments at Mount Sinai, the Torah records that Abraham and Jacob both gave a tenth, a "tithe" or ten percent of what they had. When it comes to our responsibility to give money under the Covenant made with the Jewish people at Mount Sinai, it becomes more complicated, because we are dealing with the economic system of an entire nation. According to my understanding, each year two tithes were required of the Jewish people, along with other special offerings.

The First Tithe and the offerings took care of the Temple, the Priests and the Levites, and is described in Numbers 18:8-29. The Priests and their families were allowed to eat those parts of the sacrifices that were not burnt on the bronze altar. The firstfruits - the first part of our crops, were also given to the Priests. Our firstborn animals were sacrificed and eaten by the Priests. Instead of our firstborn sons being required to serve at the Temple, the tribe of the Levites were substituted in their place, but our firstborn sons had to be redeemed with five shekels of silver, which was given to the Priests. This is called “Pidyon Haben” - the Redemption of the Firstborn son, which is still practiced among more religious Jewish people to this day. The Levites, who were far more numerous than the Priests, and who assisted the Priests, were supported by the First Tithe of the Jewish people. The Second Tithe is found in Deuteronomy 12:5-7 and 14:22-29. The Second Tithe was connected to the Seven Year Cycle, and it was designated to take care of the poor, the Levites in the local area, and the worshipers' needs when they went up to Jerusalem to celebrate the Three Holidays.

There were other important economic principles under the Covenant made at Sinai: every seven years the Land of Israel was allowed to rest. It was not to be planted. God promised to provide enough during the sixth year, so that we could survive until the harvest two years later. Also, every seven years a person's debts were forgiven (Deuteronomy 15:1-3). If you got into financial difficulty, you were allowed to borrow from a fellow Israeli. He was allowed to loan money to you, but he could not charge interest. At the end of seven years, if you could not pay him back, the debt was to be forgiven. If things became desperate enough, you could be sold into servitude, and work off the debt for six years. The seventh year you were to be released and given enough resources to start off fresh. Every fiftieth year, during the Shanat Yovel (the Year of Jubilee), on Yom Kippur, all property that had been leased was restored to the original owners. If your family had a piece of property that was the family's inheritance, and things had gone badly for you, you were allowed to lease out your property until Shanat Yovel, when it had to be returned to your family.

If the Chosen People followed all of God's commands, including His wise economic principles, He promised to bless and prosper us as a nation spiritually, physically, materially and economically. Poverty would be at a minimum; debt, if there was any, would always be manageable. Our people would never become so indebted that the entire nation would go into a devastating bankruptcy, with all the terrible economic, social and political consequences it brings.

As we turn our attention to the New Covenant Scriptures, it is critical to understand that the New Covenant Community made up of Jews and Gentiles is not the same as the nation of Israel living under the Covenant made at Sinai. We are under a New Covenant and function in a new dispensation that God manages in a new way. Most Messianic Jews and Christians are living outside of Israel, in various nations with their own governments and economic and social systems. When it comes to our responsibilities to give, there are similarities to what came before, but there are differences as well.

Just as the Temple, the Priests and the Levites had material needs, so too every New Covenant Congregation has financial needs that need to be met. We have two full-time rabbis on staff - Rabbi Glenn Harris, and myself, to serve the various needs of our synagogue, and needs beyond the synagogue. For example, we need to pay the rent each month. We have phone bills. We have computers to maintain and our website to support. We send evangelistic mailings that reach 50,000 homes. We send out a monthly newsletter. We hand out literature. We support others who are reaching out with the Good News to the Jew first, and also to the Gentiles. We help the poor in our community and elsewhere. We try to help with the needs of those who get into financial difficulties among us. We have a growing Shabbat School that needs to be funded. We need to buy food to help with our Onegs (times for food and fellowship on Shabbat). We want to bring in special speakers and artists, who deserve to be financially supported for their labors. To do these things, we need money. We are a New Covenant Community, and as a community, all of us are responsible to make sure the bills get paid.

The New Covenant Community (the Church) is not the nation of Israel living under the Covenant made at Sinai, nor are our rabbis the Levitical Priests, nor do we offer bulls, goats, lambs and other offerings as the sons of Aaron did at the Jerusalem Temple, nor are we are living under the same economy as the nation of Israel from Sinai to the Destruction of the Second Temple. Rather, we are a religious community living within another nation - the United States, with it's own government and financial and social system. For these reasons, we don't teach tithing as was commanded to the Jewish people under the Torah. Nor do we like the way that the majority of the non-Messianic Jewish community raise finances. The financial needs of most non-Messianic synagogues are raised by charging their members annual dues. Membership entitles you to various privileges, including admission to High Holiday services. If you don't pay your dues, many synagogues will not give you a ticket to enter the High Holiday services. We don't feel that membership dues are the right way to raise the necessary funds for our synagogue. We don't teach "tithing" and we don't structure our finances around membership dues. Instead, we teach generous, cheerful giving. We recommend - we don't demand, we only suggest - that at least ten percent is a reasonable amount to give - like Abraham and Jacob did before the giving of the Law.

OTHER PRINCIPLES FOR GIVING TEN PERCENT

Why should we give? How should we give? To whom should we give? Let's start with the first question, "How should we give?" The Word of God tells us how: we are to give sincerely and with the right motives: Rabbi Paul, writing in 1 Corinthians 13:3, pens the following: If I give all my possessions to feed the poor, and if I surrender my body to be burned, but do not have love, it profits me nothing. You need to give with the right motives, out of genuine love for the God of Israel, and out of genuine love for man. We give out of love - not to receive back material things. This is one of reasons the reasons I don't like the "seed money" or "30, 60, 100-fold return teaching" as it is taught in the corrupt "Prosperity Movement".

We are to give quietly: In Matthew 6:2-4 Yeshua teaches us: So when you give to the poor, do not sound a trumpet before you, as the hypocrites do in the synagogues and in the streets, so that they may be honored by men. Truly I say to you, they have their reward in full. But when you give to the poor, do not let your left hand know what your right hand is doing, so that your giving will be in secret; and your Father who sees what is done in secret will reward you. Give as quietly and privately as possible. Declaring your giving to the IRS to get a tax break is permissible. You won't lose your reward.

We are to give systematically - Rabbi Paul was very concerned about the poor Messianic Jewish believers in Jerusalem who were persecuted and impoverished, and so he would raise funds from the Messianic Congregations that were prospering financially, to help the poor Jewish believers. Writing to the congregation in Corinth, he instructed them: Now concerning the collection for the saints (poor Messianic Jews in Jerusalem), as I directed the congregations of Galatia, so do you also. On the first day of every week each one of you is to put aside and save, as he may prosper, so that no collections be made when I come (1 Corinthians 16:1-2). That's systematic giving.

We are to give generously, willingly and cheerfully: Now this I say, he who sows sparingly will also reap sparingly, and he who sows bountifully will also reap bountifully. That's generous giving. Each one must do just as he has purposed in his heart, not grudgingly or under compulsion, for God loves a cheerful giver (2 Corinthians 9:7-8). That's voluntary, cheerful giving.

We may even want to give sacrificially: 2 Corinthians 8:1-5: Now, brothers, we wish to make known to you the grace of God which has been given in the congregations of Macedonia, that in a great ordeal of affliction their abundance of joy and their deep poverty overflowed in the wealth of their liberality. For I testify that according to their ability, and beyond their ability, they gave of their own accord, begging us with much urging for the favor of participation in the support of the saints, and this, not as we had expected, but they first gave themselves to the Lord and to us by the will of God. That's spiritual and sacrificial giving! You remember how the Lord commended the poor widow above all? It took place that last week of the Messiah's life on Earth, right before Passover, and He was in Jerusalem at the Temple, and He looked up and saw the rich putting their gifts into the treasury. And He saw a poor widow putting in two small copper coins. And He said, "Truly I say to you, this poor widow put in more than all of them; for they all out of their surplus put into the offering; but she out of her poverty put in all that she had to live on'' (Luke 21:1-4). It's not so much the amount that we give, but the generous and sacrificial heart that loves God - that's really what is important to Him.

To whom should we give? The Word of God makes it clear that we are to give to our congregation, so that the leaders who are serving the Lord can be supported: 1 Timothy 5:17-18: The elders who rule well are to be considered worthy of double honor, especially those who work hard at preaching and teaching. For the Scripture says, "You shall not muzzle the ox while he is threshing" and "The laborer is worthy of his wages." The elders are to rule, to lead the congregation, and those who rule well should receive double honor - and honor here means "money," as is made clear in two more of Paul's quotations on this same subject. 1 Corinthians 9:7-14: Who at any time serves as a soldier at his own expense? No one - soldiers expect to be paid a decent salary. Who plants a vineyard and does not eat the fruit of it? No one - people who plant vineyards do so expecting to eat the fruit. Or who tends a flock and does not use the milk of the flock? No one - the shepherd expects to benefit from his flock. The natural order of the world - the soldier, the one who plants a vineyard, and the shepherd, teaches us that workers have a right to get paid for their labors. But is nature all we have to turn to for instruction on this subject? I am not speaking these things according to human judgment, am I? I am not inventing this - this is not something I am making up with my own, limited, human understanding, is it? No, this is taught in the Torah. This is not a new teaching I've invented. God has already taught us about the need to financially support our spiritual leaders: Or does not the Torah also say these things? For it is written in the Torah of Moses, "You shall not muzzle the ox while he is threshing.'' God is not concerned about oxen, is He? Or is He speaking altogether for our sake? Yes, for our sake it was written, because the plowman ought to plow in hope, and the thresher to thresh in hope of sharing the crops. In other words, it is right and proper for spiritual leaders to expect to be paid for their services. If we sowed spiritual things in you, is it too much if we reap material things from you? No, it is not too much for rabbis and pastors to expect to get paid, especially since we understand that spiritual things are of more value than material things. Rabbi Paul continues his question and answer method of instruction in verse 13: Do you not know that those who perform sacred services eat the food of the Temple, and those who attend regularly to the altar have their share from the altar? Yes, we know that Paul. The Torah is quite clear that the Coheneem - the Priests, were supported by eating some of the sacrifices offered at the Temple. Therefore, what is the conclusion? So also the Lord directed those who proclaim the Good News to get their living from the Good News. Paul has shown us that from the natural order of earning a living in the world, and from the Torah, that those who are professionals, serving the Lord, are to get their living, are to get paid, are to be financially supported. It is the Lord who is speaking here through Paul. It is the Lord who is directing this.

Galatians 6:6-7: The one who is taught the word is to share all good things with the one who teaches him. Do not be deceived, God is not mocked; for whatever a man sows, this he will also reap. Our spiritual leaders, who teach the congregation, especially in a full time capacity, are to be supported, and hopefully, supported generously by the members of the congregation. God is pleased with those who give generously to support their rabbis and pastors, and the Lord will reward that generous giver, but He may withhold reward to the one who is stingy toward the synagogue.

Besides our teachers and leaders, we should also give to those who are traveling and bringing the Good News to others. John, in his third letter, writes in verses 5-8: Beloved, you are acting faithfully in whatever you accomplish for the brothers, and especially when they are strangers; and they have testified to your love before the congregation. You will do well to send them on their way in a manner worthy of God. For they went out for the sake of HaShem - the Name - God, accepting nothing from the Gentiles. These missionaries and evangelists did this for God's sake - to please the Lord, and serve Him, and fulfill His purposes. And, they did not accept money from those who were not believers. Therefore we ought to support such men, so that we may be fellow workers with the truth. We need to support missionaries and evangelists so that they can go and preach the Truth, the Good News that alone can save us, to all people everywhere, and extend the Kingdom of God in other areas. By financially supporting these men, we become "fellow workers" with them. We are partners with them, co-laborers, and God will reward us along with them. Isn't that great? That although you may not be able to bring the truth about the Messiah to other areas, by financially supporting those who do, God considers you a fellow worker, a co-worker with them? Way cool! How do we support such men? Generally, the best was is by giving to your church, so that together the church may support them. However, if you want to support a missionary or evangelist, but your church is not prepared to do so, you might want to support them yourself.

Wealthy congregations can give to poorer ones. Rabbi Paul, in his letter to the Romans, in Romans 15:26-27, writes: Macedonia and Achaia (Believers in Greece) have been pleased to make a contribution for the poor among the saints (Messianic Jews who were poor) in Jerusalem. Yes, they were pleased to do so, and they are indebted to them. For if the Gentiles have shared in their spiritual things, they are indebted to minister to them also in material things. In the First Century, wealthier congregations gave money to help poor and persecuted Believers. In this case, the richer Gentile Believers gave money to poor Messianic Jews living in Jerusalem. Referring to the same situation, Paul wrote this to the Corinthians: For this is not for the ease of others and for your affliction, but by way of equality at this present time your abundance being a supply for their need, so that their abundance also may become a supply for your need, that there may be equality; as it is written, "He who gathered much did not have too much, and he who gathered little had no lack" (2 Corinthians 8:13-15). Just as the Jewish people gathered up the manna, and if someone gathered too little, and someone else gathered too much, they distributed it so that everyone had enough, so that's what Believers are to try to do for one another. It's nice when one congregation looks out for another, and then, maybe if the situation is ever reversed, they will be in a position to help you out in your need. Isn't this what family does for one another? I think this is what the Lord meant when He responded to Peter's statement that Yeshua's disciples had left everything and followed Him. Yeshua said: Truly I say to you, there is no one who has left house or brothers or sisters or mother or father or children or farms, for My sake and for the sake of the Good News, but that he will receive a hundred times as much now in the present age, houses and brothers and sisters and mothers and children and farms, along with persecutions; and in the age to come, eternal life.

Established and mature congregations can give to help beginning and immature congregations. 2 Corinthians 11:7-9: Or did I commit a sin in humbling myself so that you might be exalted, because I preached God's Good News to you without charge? I robbed other congregations by taking wages from them to serve you; and when I was present with you and was in need, I was not a burden to anyone; for when the brothers came from Macedonia they fully supplied my need, and in everything I kept myself from being a burden to you, and will continue to do so. The congregation in Corinth was young, immature, and didn't have much respect for the great Emissary Paul, or really understand how much authority the Lord had entrusted to him. So, he decided not to receive money from the immature Corinthian congregation, but instead be supported by the more mature Macedonian congregation, who did understand who he was. There were and still are Churches and Messianic Synagogues that did support us at the beginning, when we were young and just starting off. Some continue to help us now. I thank God for all of them! What a help and blessing and encouragement they were and are to me. And now we are getting more established, and we are starting to help others!

Apart from giving to support our congregation, we should also give charity to various needy people and other good causes (see Matthew 6:1-4, Luke 12:33).

Why should we give? There are lots of good reasons. First, giving is part of God's nature. Love and goodness are two of the attributes that describe the nature of God, and love and goodness both imply giving. For God so loved the world that He gave His only begotten Son, that whoever believes in Him shall not perish, but have eternal life (John 3:6). It is God's very nature to look outside of Himself and seek to give. On the other hand, fallen human nature is consumed with self. It wants to take. It may even be willing to steal, kill or destroy in order to take more for itself. When we give out of love, we become more like God. We're givers, not takers. Truly it is better to give than to receive.

Giving is an evidence of God's activity in your life: 2 Corinthians 8:1-4: Now, brothers, we wish to make known to you the grace of God which has been given in the congregations of Macedonia, that in a great ordeal of affliction their abundance of joy and their deep poverty overflowed in the wealth of their liberality. For I testify that according to their ability, and beyond their ability, they gave of their own accord, begging us with much urging for the favor of participation in the support of the saints. It was the grace of God working in the Macedonian congregations that produced this generosity, this tangible expression of love. Giving is an evidence of God's activity in your life.

Giving is the expression of genuine love: 1 John 3:17-18: Whoever has the world's goods, and sees his brother in need and closes his heart against him, how does the love of God abide in him? Little children, let us not love with word or with tongue, but in deed and truth. Don't merely talk about your love for God and man, and the spiritual level you have attained, and how your life is so much better now that you are a Believer.

Giving meets the needs of others and serves the Messiah Himself. Romans 12:13: We are to "contribute to the needs of the saints." There are real needs among God's sons and daughters, needs which need to be met. Helping meet those needs is our responsibility. And, by do so, we serve King Messiah! When the Son of Man comes in His glory, and all the angels with Him, then He will sit on His glorious throne. All the nations will be gathered before Him; and He will separate them from one another, as the shepherd separates the sheep from the goats; and He will put the sheep on His right, and the goats on the left. Then the King will say to those on His right, "Come, you who are blessed of My Father, inherit the kingdom prepared for you from the foundation of the world. And the reason for this blessed, eternal inheritance which originates before the world was created, that the good people will receive? For I was hungry, and you gave Me something to eat; I was thirsty, and you gave Me something to drink; I was a stranger, and you invited Me in; naked, and you clothed Me; I was sick, and you visited Me; I was in prison, and you came to Me." Then the righteous will answer Him, "Lord, when did we see You hungry, and feed You, or thirsty, and give You something to drink? And when did we see You a stranger, and invite You in, or naked, and clothe You? When did we see You sick, or in prison, and come to You?" The King will answer and say to them, "Truly I say to you, to the extent that you did it to one of these brothers of Mine, even the least of them, you did it to Me" (Matthew 25:31-40). We did it to you Lord? You mean that You so love and identify with your human brothers, that if we met their needs, we are doing something for You, who need nothing? We can actually do something for You? Wow!

Giving helps us combat the temptation to be worldly and too materialistic. Messiah warned us: Beware, and be on your guard against every form of greed; for not even when one has an abundance does his life consist of his possessions (Luke 12:15). A man's life does not consist in the abundance of the things which he possesses. Striving after wealth doesn't make sense since it is not substantial, it doesn't satisfy and it won't last. We are better advised to set our hearts on the true wealth which will last forever. 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 neither moth nor rust destroys, and where thieves do not break in or steal; for where your treasure is, there your heart will be also. Giving produces eternal dividends - treasures in Heaven which will last forever. How we spend our money also reveals where our heart is really at. You want to know the spiritual maturity of somebody? Look at his checkbook! Is he investing for treasures on Earth, or in Heaven? Beware, and be on your guard against every form of greed. Giving helps us combat the fallen human heart's tendency toward materialism and greed. Remember the rich young ruler who came to Yeshua and asked the good Rabbi what he needed to do to inherit eternal life? Yeshua reminded him to keep God's commandments, to which the young man responded, "All these things I have kept from my youth." But Yeshua knew that he did not truly love God with his whole heart, that there was an idol there. A god of materialism was dwelling in the inner Temple.

The Son of God knew that no one can serve two masters; for either he will hate the one and love the other, or he will be devoted to one and despise the other. We can't serve God and wealth. And so Messiah said to a rich young man, "One thing you still lack; sell all that you possess and distribute it to the poor, and you shall have treasure in Heaven; and come, follow Me." "Follow Me - become one of My disciples. I am the long awaited King Messiah, the Son of God who has come from Heaven, bringing redemption, salvation, reuniting the world to God. I need some good and talented young men like you. I am personally inviting you to follow Me, to work with Me in the Tikkun Olam - the Restoration of the world. Follow Me!" What an opportunity Yeshua presented this man with! What a privilege to be one of His disciples! This man may have become as well known as Peter or Paul. 2,000 years later we might know about him, and study his life, and the great contribution he made to the Kingdom of God. But unfortunately, when the man heard these things, he became very sad, for he was extremely rich, and he would not become one of Yeshua's followers. And Yeshua looked at him and said: "How hard it is for those who are wealthy to enter the kingdom of God! For it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God."

Messiah also said: Blessed are you who are poor, for yours is the kingdom of God... But woe to you who are rich, for you are receiving your comfort in full. Woe to you who are well-fed now, for you shall be hungry. Woe to you who laugh now, for you shall mourn and weep. Giving helps us combat the fallen human's hearts tendency toward greed, materialism, worldliness, selfishness, which is idolatry.

Giving is part of worship which delight's God's heart: Hebrews 13:16: Do not neglect doing good and sharing, for with such sacrifices God is pleased. You mean, my giving is like a one of the burnt offerings that were offered in the Holy Temple, which rose up and made a delightful aroma in the nostrils of God? That's right! God is pleased with our sharing. Paul, writing to the Philippians, commends them for their giving to support his service to the Lord, and concludes with these thoughts: I am amply supplied, having received from Epaphroditus what you have sent, a fragrant aroma, an acceptable sacrifice, well-pleasing to God (Philippians 4:18).

Giving honors God - Proverbs 3:9: Kabed - honor the Lord from your wealth and from the first of all your produce. When we give to the Lord, it brings Him kavod - honor, glory.

Why we should not give: The New Covenant Community is not the same as God's specially Chosen Jewish People, His Am Kadosh - His Holy Nation. God does not promise to bless partakers of the New Covenant in the same way - financially, materially, physically, as He did to the Jewish people. We don't give to get back financial rewards in this life. We give expecting only spiritual blessings, and treasures in Heaven, and that our basic physical needs will be met. I find all teachings offensive that offer physical material blessings if we give. That is not the right motivation for giving. Don't give to get rich. Don't fall for any spiritual get-rich-quick con-game, any "sow your seed money into my ministry to get your 100-fold return" scheme from some religious charlatan. The Prosperity Teaching is a fraud and those who teach it are religious fim-flam men.

Watch out for greed in the guise of religion. Those who want to get rich fall into temptation and a snare and many foolish and harmful desires, which plunge men into ruin and destruction. For the love of money is the root of all sorts of evil, and some by longing for it have wandered away from the faith, and pierced themselves with many a pang... do not fix your hope on the uncertainty of riches, but on God who richly supplies us with all things to enjoy (1 Timothy 6:6-10, 17).

Recommendation: Try to give at least ten percent of your income. The majority of your tithe should go to support your congregation, but other needy people and good causes that the Lord calls your attention to should receive your charity as well.

A GOOD MANAGER SHOULD TRY TO SAVE TEN PERCENT
PRINCIPLES OF INVESTING

You want to know the secret of getting wealthier? There is no secret! It takes time and work and discipline and delayed gratification. You must delay present gratification for your future good. You must defer present pleasures in order to have future security. You must find ways to consume less and save more now, and then put the savings into good investments which grow over time.

Know what real money is: "Money" is any article, substance or even an entry in a record-keeping system, that is used as a medium of exchange, means of payment, or measure of value. Money allows profits, assets, purchases, and virtually every single facet of a civilization to be transferred, and stored for future use. Barter allows for simple transactions, but money is necessary for more complicated transactions, and modern commerce is impossible without it. Human beings have used various things as money - cows and other animals, animal skins, beads, tree bark, stones, seashells, paper and other things. The best kind of money is something that is scarce so that the supply can only increase slowly, valuable, widely acceptable, enduring, divisible into various sizes and compact so that it is easily transportable.

Since gold and silver have met these requirements better than anything else, for most of history, and for most of the civilized world, "money" was silver and gold. In fact, the Hebrew word for money is "kesef" - which means "silver." If we go back early in man's history, to the time of Abraham, we discover that when Sarah died, Abraham wanted to buy the cave of Machpelah in order to bury her. He bought the property in which the cave was situated for four hundred shekels of silver, which is around two hundred ounces.

The US Constitution seems to require that money be gold or silver, not just pieces of paper based on intangible promises. Article 1 Section 10 states: "no state shall ... make anything but gold and silver coin a tender in payment of debts." During most of American history, gold and silver, or paper money that was backed by gold and silver, was our money. But in the 20th Century the world launched a great monetary experiment. The United States and every other government stopped backing their money with gold and silver. In 1933, during the Great Depression, our government confiscated our citizens' gold. In 1966 our silver coins were eliminated, and in 1971 we went off the gold standard altogether so that other nations could not redeem our dollars in gold.

Gold is like the anchor of a boat. A boat needs an anchor or it will drift and crash. The world's connection to the anchor has been broken since the 1930s, and we are now drifting closer and closer to the rocks.

Inflation is the supply of money going up without the amount of available goods or services going up. It is an increase of the money supply above the growth rate of the economy. The problem with paper money which is not backed by silver or gold is that governments won't live within their means. To stay in power, and reward their voters, they will cheat by printing more paper money, which dilutes the value of the money already in circulation. More money available to purchase the same amount of goods and services causes inflation, which is detrimental to a currency and an economy. It is a kind of "false balances." It is a kind of lying and cheating and defrauding.

There are different kinds of "money" of and they are of different quality. Gold and silver are the truest form of money and the safest. They are not dependent on someone's ability to repay. They have inherent value. Bonds and credits paper money are also forms of money, but a lesser quality of money. When they talk about increasing"liquidity" they are talking about increasing bonds and various forms of credit and the paper money supply, they are talking about creating inflation.

Larry Edelson, of MoneyandMarkets.com wrote: As long as there is no gold standard - nothing and no one to hold back politicians from spending money and creating debt at will - then the value of the U.S. dollar will keep plummeting and inflation will keep rising. As examples he notes that "a postage stamp in the 1950s cost 3 cents; [today] it's 41 cents: That's 1,266% inflation. A gallon of gasoline at full-service stations used to cost 18 cents; [today] it's $3.25 for self-service: That's at least 1,705% inflation. In 1959, the average price of a new house was $14,900; [today] it's $220,900: That's 1,382% inflation, despite the recent price dip in the real estate market. A dental crown used to cost $40 in the late 1970s; [my] dentist just quoted me $1,400. That's 3,400% inflation. In 1970, seniors paid $5.30 a month for Medicare insurance. Today, they pay $93.50 a month. That's 1,644% inflation.

Most paper monies become worthless over time. Someone observed: "All currencies, not only the American dollar but all currencies, always go down, mainly because of democracy. The voters will vote for a person who is going to spend too much. And so you have to expect all currencies to go down. America has started to spend too much and the currency has already gone down a lot. But other nations now realize that and they don't want to lose out to America. So they make their money go down, too”.

Learn to measure values in real money terms - gold and silver: The stock market may go up, as the government allows inflation to occur, but if you look at the value of the stock market in terms of gold, it will not be going up, but going down. Try to measure the value of things in terms of gold and silver - especially the price of the stock market and the price of houses. If you do, you will see that stocks have gone down dramatically in the past 10 years. I think that the price of housing will also be going down dramatically if you measure it in terms of gold and silver.

HUMAN ECONOMIES ARE UNSTABLE AND IMPERMANENT

They are hurt by war, collapses of the government, and financial instability. Do not weary yourself to gain wealth, cease from your consideration of it. When you set your eyes on it, it is gone. For wealth certainly makes itself wings like an eagle that flies toward the heavens (Proverbs 23:4-5). In this fallen, unstable world, wealth is insubstantial and can disappear very quickly. You set your eyes on wealth and it is gone. It makes itself wings and flies away like an eagle - fast, high, and for a long time! This is true for individuals, corporations and nations.

At about the time our original 13 states adopted their new constitution in 1787, Alexander Tyler, a Scottish history professor at the University of Edinborough, had this to say about the fall of the Athenian republic some 2,000 years prior: "A democracy is always temporary in nature; it

simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse over loose fiscal policy, (which is) always followed by a dictatorship".

James Cook wrote the following in 2006: "You can continue to believe the wizards of Wall Street and Washington, who claim their inflationary brew will perpetuate prosperity, or you can listen to the classical economists who have combined the lessons of history with the basic principles from two centuries of sound economics. Whether you choose to listen or not, be assured that the following inevitable consequences of inflation will cloud your future; an ongoing financial and economic crisis, moral and cultural disintegration, stagflation, bigger government, runaway social spending, higher taxes and a shrinking dollar. Somewhere out there lies complete and total collapse. That utter collapse is coming as surely as the sun will rise tomorrow and the government will keep inflating until the bitter end".

Fractional Reserve Banking, by its very nature, is inherently unstable: Banks expand the supply of money and credit (money and created are related) when they take your money, and lend it out to others, but they are able to loan out more than they take in. Banks only keep a small percentage in reserve (10% or less), so if there is a crisis, or people lose confidence in the system, and everyone wants their money back at the same time, it's not possible. When that happens the banks become "bankrupt" - ruptured, so they can't function. (You too can expand the money and credit supply! Have good credit and write some IOUs. People can sell these IOUs to others, who sell them to others, and they become a kind of money).

Taking on too much debt creates instability: In the United States, individual, corporate and governmental debt levels are very high, and bankruptcies are at record levels. Within twenty-five years we have gone from the biggest creditor to the biggest debtor nation. Many other nations are likewise deep in debt. The Daily Reckoning observes: "In the early 1930s the residual debt of the Roaring Twenties totaled more than 250% of GDP. Today, the still-growing debt of the Dollar Standard Era reaches more than 350%. At all other times - that is over the plains and valleys of the rest of the century, debt to GDP averaged only about 150%." Mr Bonner goes on to describe the accumulation of debt in the United States: "First, there were the debts from the Revolution itself... which were paid down quickly. Then came the War of 1812, War with Mexico, and the Civil War. Each time, spending was increased, debts were taken on, and then... after the war... the debt was paid down, or paid off completely. WWI saw federal debt explode from $3 billion to $26 billion. Presidents Harding and Hoover paid it down to $16 billion. But then came the Depression, Roosevelt, and WWII. By 1945, federal debt had reached $260 billion. But then came something new. The war did not end. It continued as ‘The Cold War'... which meant, rather than paying down the debt, it was increased. Under Ronald Reagan, America's debt seemed on course for Mars. Less than $1 trillion in 1980, it soared to $2.7 trillion before Reagan left office. One might have expected some relief after the Cold War was over. But the habit of getting something for nothing is hard to break. By the time George W. Bush took office, the debt had risen to $5.7 trillion... The Bush Administration added more debt to the nation than had been built up in the first 200 years of its existence."

The Federal Reserve was created in 1913 to help stabilize the US economy, and make sure our money was sound, but that didn't prevent the financial and investment excesses of the 1920s which led to the stock market crash and bank failures of the Great Depression. It wasn't until 1954, 25 years later that the stock market recovered to its pre-Depression heights. In the 1930s an English economist (Keynes) suggested that governments could manage the economy, stimulate it with measures like work programs, deficit spending and monetary policy (raising or lowering the interest rates, expanding or shrinking the money supply). The US government adopted this economic philosophy, started running bigger and bigger deficits, but even when the stimulation did help, they never cut back on deficit spending, and so over the past 50 years, through both Democratic and Republican administrations and congresses, the deficit only got worse.

We are so far in debt we will not get out unless we begin to reneg or limit Social Security and other programs, or pay the debt back with inflated dollars.

In many ways our recent prosperity should be considered artificial prosperity, since in large part our "prosperity" was based on borrowed money. If you are making $75,000 per year, but you are able to borrow another $75,000 for a year and spend it all, you might feel rich during that year, but it's deceptive and won't last and you will be much worse off at the end when you have to start paying it back. If you extract an extra $100,000 of "equity" (what happens if the price of your house goes down and all your equity vanishes?) out of your house by refinancing or by home equity loan, and each year for five years you spend $20,000 more than you ordinarily would because of that "equity", you can seemingly prosper - for a while - until the money needs to be repaid. But, it is not real prosperity and real wealth, as people discover when the loan needs to be repaid and the equity vanishes. Debt based "prosperity" is not genuine prosperity!

In general, the best policy is to avoid debt - neither to borrow nor to lend, as Rabbi Paul taught the saints in Rome: owe nothing to anyone except to love one another (Romans 13:8). The lender worries if he will be repaid, and the one who is in debt takes on additional financial pressure and other stresses that result. A little debt may be OK, but too much debt brings financial ruin. If you do borrow money, you are obligated to pay it back as soon as possible. The wicked borrows and does not pay back (Psalm 37:21).

In our economy, taking out a mortgage on a house may be the only way a family may ever be able to live in a house. Houses have traditionally been an investment - they usually, although not always, go up in value. Since the Great Depression, buying a home with a reasonable mortgage has generally better than renting. Now, with the housing bubble bursting, and the cost of renting far less than the cost of carrying a mortgage, taxes and home upkeep, in many cases it makes more sense to rent. However, when it comes to most other things, you would be prudent to pay cash. If you can't pay cash, then you probably shouldn't buy it. You can use a credit card, if it is paid off at the end of each month. If it is not paid off right away, credit card debt can be a financial destroyer. When you are in debt, it is the moral and ethical and right thing to pay it off as soon as possible. Pay your debts on time. Only have one or two credit cards at the most and try to pay off the full amount each month. When you are in debt, buying non-essentials and luxuries is immoral! Live within your means! Get out of debt! Be careful with your ATM cards.

Financial shenanigans create instability: Differing weights are an abomination to the Lord, and a false scale is not good (Proverbs 20:23). There are lots of ways to cheat people out of their money. In times past, those who wanted to cheat you would have differing weights. They would have a weight that weighed less for what they paid or a weight that weighed more for what they received; this was done to cheat, but it was done deceptively, disguised as proper business practice. Cheating in business happens all the time, and there are many modern equivalents. Bill Buckler of the Privateer newsletter explains, with all the fudging, lying, and outright deceit running rampant today, "We are all in the middle of history's biggest ever 'Potemkin Village' - a prosperous looking facade designed and erected to disguise the financial ruins behind it."

Injustice creates instability: Abundant food is in the fallow ground of the poor, but it is swept away by injustice (Proverbs 13:23). There is no need for poverty in this world - there are enough resources and food in the world around us, and plenty of opportunities. God has designed the Earth to yield enough if justice and decency prevail. It is injustice that takes away what labor produces and unfortunately, there is much injustice in the world. We need to pursue justice through our prayers, our votes and our actions.

We are now living in a one-world economic system, and that can create instability: Not too long ago nations' economies were more independent of one another, so that if one nation was having problems, another nation might be doing better, and its stronger economy might be able to help the weaker economy. But we are now living in a high-tech one-world economy so that financial crises in one country can very quickly wreak havoc across the world. Currency crises in other nations (the yen-carry trade), governments defaulting on debt, weakness in other nations' banks, a derivatives crisis, can rapidly spread here. Years ago when news traveled more slowly, there was time for the economic and political decision makers to work at solving the problems, but the time allotted them today is much shorter. This technologically interconnected, one-world economy can add financial instability.

Investors are human beings and tend to move in herds and may act irrationally (All we like sheep have gone astray). This herd mentality can add instability: Every so often market economies will go into a mania, a period of excessive excitement or "irrational exuberance," where people lose common sense and invest in companies or goods, driving them up to stratospheric levels. When the financial bubble bursts, the excessive valuations come back down to the starting level or below. One of the classic manias was the 17th century Dutch Tulip Bulb Mania. "Tulips were first imported into Europe from Turkey in the mid 1500's. The flowers soon gained in popularity, and a demand sprang up for different varieties of the bulbs. The supply (and increasing popularity) of rare varieties of tulip bulbs couldn't keep up with the demand, and prices soon began to rise sharply. Prices rose to such heights that by 1610 one rare bulb was considered an acceptable dowry for a bride! As prices soared, ordinary citizens soon began to view tulip bulb speculation as a sure fire way to get rich. Holland, the largest producer of the bulbs, became the epicenter of the mania. People mortgaged their homes and businesses to buy the bulbs. The prices for many rare bulb types reached several hundred dollars each. One bulb of a very rare variety even changed hands at over $20,000! By 1637 people began to see that prices had reached an outlandish level. The smart money began selling and a crash soon followed. Many Dutch families lost the homes and businesses they had mortgaged to take part in this ‘sure thing' investment" (From "A Brief History of the 17th Century Dutch Tulip Bulb Mania" at www.tulipsandbears.com/tulip.htm).

From  Manias, Panics and Crashes: The upswing usually starts with an opportunity - new markets, new technologies or some dramatic political change - and investors looking for good returns. It proceeds through the euphoria of rising prices, particularly of assets, while an expansion of credit inflates the bubble. In the manic phase, investors scramble to get out of money and into illiquid things such as stocks, commodities, real estate or tulip bulbs: a larger and larger group of people seeks to become rich without a real understanding of the processes involved. Ultimately, the markets stop rising and people who have borrowed heavily find themselves overstretched. This is "distress", which generates unexpected failures, followed by "revulsion" or "discredit." The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

The housing bubble is worldwide, and is the biggest bubble in history. It will likely be followed by the biggest crash in history.

ABN Amro Bank Fears World Housing Crash
Daily Mail, June 11, 2007

Soaring borrowing costs could spark a housing slump on a global scale, investment bank ABN Amro has warned.  Families have taken on "unsustainably large" mortgages, leaving them vulnerable to the sharp increases in bond yields and official interest rates seen in recent weeks, wrote economist Dominic White. "The decline in global interest rates has now been largely reversed," White said. "Rising real interest rates could result in greater economic volatility. I believe this leaves housing markets vulnerable to a correction on a global scale." Although fears for the health of the US housing market have captured headlines, the degree of over-valuation is more "severe" in Britain, Australia, Spain and Ireland, ABN Amro calculates.

Someone recently wrote: After the greatest debt bubble, housing bubble, asset bubble, credit bubble, leverage bubble, derivatives bubble, cash-out HELOC bubble, mortgage fraud bubble, hedge fund bubble and deficit spending bubble the world has ever seen, the pop will be historic. And it's not just housing values that will collapse.

Manias, also known as bubbles, always go back to where they started - or below! They generally overshoot on the way down. Bill Bonner: The force of a correction is equal and opposite to the deception and delusion that preceded it.

Living in a fallen, sinful world, a cosmos that is under a curse, means that unexpected, unpleasant events will happen which can create financial instability: Unusual floods will strike, hurricanes will hit major population centers, earthquakes will devastate cities. Horrible man-made events like wars, massacres, unexpected terrorists attacks (including the possible use of biological, chemical or nuclear weapons) may take place. These unexpected "black swan", "rogue wave", "out-of-left-field" events can trigger a financial crisis. "History is nothing but one dreary lesson, over and over again. Namely, you cannot allow the money supply to expand faster than the economy, because all that new money devalues all the existing money, which causes prices to go up, which puts people into a funk and it destroys the economy. Nor can you have a fiat currency, because there are no natural limits to how much money and credit a government can create, which devalues the money, which causes prices to go up, which puts people into a funk and it destroys the economy. Nor can you allow excessive degrees of fractional banking, as there are no natural limits as to how many times a bank can multiply each dollar of deposits, which causes the value of money to go down due to its excessive creation, which causes prices to go up, which puts people into a real funk and it destroys the economy" (Richard Daughty).

I think that God might even want to remove the wealth of our nation, since Proverbs 19:10 informs us: Luxury is not fitting for a fool. Luxury is not proper for a fool - someone who ignores God and does not live according to His wise principles. The wealth and prosperity of a fool only deepens the delusions that will eventually destroy him. People frequently mistake wealth for success, supposing that all is well with them, and they don't need to bow their knee before the King of kings. They fool themselves into thinking that they have succeeded in life, when in reality, they are headed toward destruction. It's more fitting for fools to mourn and weep, not to laugh and live in luxury. And what is true of the foolish man is also true of a foolish nation. The nation that forgets God, and ceases to live according to God's wise laws, may discover that since luxury is not fitting for a fool, God will remove that luxury.

HOW TO INCREASE YOUR WEALTH

Proverbs 13:22 tells us: A good man leaves an inheritance to his children's children. A good man, through his good character, hard work, prudence, generosity, faithfulness to the Lord in giving, and by not spending all his wealth on himself, and by teaching his children to do the same, leaves an inheritance to his children's children. There is nothing wrong with having enough money to leave something to your children and grandchildren, and Proverbs tells us how:

Have a financial plan: The plans of the diligent lead surely to advantage, but everyone who is hasty comes surely to poverty (Proverbs 21:5). Those who diligently and patiently work hard, and have a good economic plan - who think ahead about how to improve their circumstances, will have an advantage over those who make hasty, thoughtless financial decisions.

Work hard: He who tills his land will have plenty of food, but he who follows empty pursuits will have poverty in plenty (Proverbs 28:19). Do you want abundance? Go to work! Be diligent and work hard, and if you do, you will generally have more than enough to meet your needs. Hard, diligent work is the basic way to create wealth.

Work to improve yourself: Buy truth, and do not sell it, get wisdom and instruction and understanding (Proverbs 23:23). In the US, college graduates make something like twice as much money over a lifetime as those who do not graduate from college. Jewish people value higher education, and many have entered professions. This is due in part to our history; we were not allowed to own property in Europe, and our money was often confiscated. But, one could take one's education and a profession with them if they were exiled. Getting children a good education, including college, should be one of the highest priorities for the family.

Work honestly: Wealth obtained by fraud dwindles, but the one who gathers by labor increases it (Proverbs 13:11). How you get your wealth is important. Wealth acquired by illegal or immoral methods usually diminishes. Don't go for get-rich-quick schemes, even if they seem "spiritually" based. Don't gamble or play the lottery. Don't engage in spiritual gambling by sending in "seed money" to prosperity teachers and expect a "hundred fold" return. Don't cheat or steal. Wealth that is not the result of good hard honest work is seldom permanent.

Work ambitiously and creatively: Where no oxen are the manger is clean, but much increase comes by the strength of the ox (Proverbs 14:4). Some inconvenience and extra work is the price of growth and accomplishment. There is no milk without manure. Only as we work hard, and invest in better tools and technology, do we get a larger return. If you don't expand your business you will save yourself some headaches, but you won't get as much increase either.

Beware of co-signing a loan: Do not be among those who give pledges, among those who become guarantors for debts. If you have nothing with which to pay, why should he take your bed from under you? (Proverbs 22:26-27). It makes no sense to ruin your own finances on account of those who live beyond their means, or who mismanage their own affairs, or waste what they have. Thousands of stories could be told of those who either loaned money to a friend or family member, or co-signed a loan for them, which were not repaid, and wound up ruining their own finances. And do you know who is the insurer of last resort for trillions of dollars of obligations? The United States government (which is you and me) has taken on responsibility for the nation's banks, through the FDIC, and other pension insurance and other insurance programs, amounting to billions of dollars of obligations. If things don't work out right, this may wind up seriously harming our national economy.

Live right: Adversity pursues sinners, but the righteous will be rewarded with prosperity (Proverbs 13:21). Bad habits are expensive. If, instead of smoking one pack of cigarettes a day, you would instead take the money ($5.00 a pack) and invest it at 5% interest, at the end of 10 years you would have approximately $23,000! Besides destroying your will, mind, body and relationships, drugs will wipe out your finances. Divorces are generally financially devastating. Having children outside of marriage and having them raised by a single mother is financially difficult. They are one of the poorest segments of society.

Live within your means: He who loves pleasure will become a poor man; he who loves wine and oil will not become rich (Proverbs 21:17). Wine and oil represent the finer things of life, so this is an admonition against pursuing a life of fun, games, pleasure and luxury. By placing too much emphasis on pleasures, you may live beyond your means, and your responsibilities may be neglected, which may result in poverty. It is the frugal and the self-denying who, by living carefully in the present, pave the way to easier circumstances in the years to come.

Pretend to be poor: There is one who pretends to be rich, and has nothing (the newest cars, clothes, but he is in debt - everything is leased, or has very little money left); another pretends to be poor, but has great wealth (Proverbs 13:7). The more you save, defer purchases, and then invest wisely, the more you will have. Adam Hamilton observed: "Building wealth is hard work. Few, if any, shortcuts exist and it takes diligence, persistence, and sacrifice over years or decades to amass significant amounts of capital. The only way for a nation, company, or individual investor to become wealthy is to consume less than they earn. Savings is the key to wealth accumulation. While initially a saved surplus seems to grow excruciatingly slowly, eventually it starts to accelerate and ultimately ramps up parabolically due to the "miracle" of compound interest."

Suggestions

* Eat an inexpensive meal one or two days a week.

* Limit how many times you go out to eat.

* Do you really need cable TV, the newest clothes, expensive tennis shoes?

* Do you need all that junk food, soft drinks, desserts?

* Grow some of your own food. Plant a fruit tree or fruit bush. Apples, cherries, apricots, peaches, plums, paw paws, currents, raspberries, all grow well in Michigan.

* Can someone in your family learn to do their own haircuts?

* Consider getting a good used car, not the newest car.

* I have a friend who says: tell me what you think you need in order to live - and I will tell you how you can make do without it."

Simple Ways To Save Money
(from the USAA Magazine, Winter 2006)

* Get a new dishwasher: Today's Energy Star dishwashers typically use 40 percent less wat4er and 25 percent less energy than non-qualified appliances, according to the Department of Energy. Savings: #25 dollars per year if you are replacing a dishwasher manufactured before 1994 - twice that if you wash by hand. 

* Find checking and savings accounts with low minimum balances and few, if any, fees: Look for accounts with free checks and free online bill paying. If your account doesn't reimburse you for ATM fees from other financial institutions, you could be spending more than $100 a year on these alone. Savings: $45 or more a month, according to bankrate.com. 

* Choose a light-colored roof: You'll cut energy costs significantly over the 30-year lifetime of a roof on a typical 2,000-square-foot home, according to research by Lawrence Berkeley National Laboratory. Savings: A national average of $750 over the life of the roof, but maybe more in warmer climates.

* Slow down: If you accelerate and make abrupt stops, you could decrease your fuel consumption by as much as 2 miles per gallon. Savings: At least $400 a year if you drive an average 12,000 miles a year, according to Runzheimer International.

* Solar Hot Water System: With the federal energy tax credit, you can get 30% off a solar hot water system - which costs around $3,500 installed. Some states offer rebates of 60% off of the rest. Savings: Energy bill savings start at $500 the first year and increase over time, according to the California Energy Commission.

* Shop online for a car: Geography makes a big difference in car prices. Whether you are shopping for a new or used car, go online and see what auction sites and dealers have to off in various parts of the country. Savings: From several hundred to several thousand dollars, based on make, model and region.

* Stay married: Divorce is expensive - an average of $22,000 if contested. Savings: As much as $70,000 or more if the conflict goes to trial, reports leal publisher and advisor Nolo.

* Pay-as-you-go cell phones: People who only use their cell phone to say things like, "I'll be home in an hour" should consider the pay-as-you-go system. Savings: About $400 per year, depending on the phone provider.

* Challenge your tax assessment: As the value of the housing market declines, challenge the amount your local government says your house is worth. Prove that similar homes in your area are selling for less, and you might get a lower valuation and tax bill. Savings: At least several hundred dollars annually.

* Save your change: Pennies, nickels, dimes and quarters can add up. Put them in a jar and you can save $30 per month.

* Make sure your cash is working for you: Keep more in your checking account than you need for bills until your next paycheck, and move the extra to a higher-interest account, such as a money market or high-interest savings account, or buy short term government bonds through Treasury Direct (www.savingsbonds.gov). Savings: At least $50 per year for a balance of $1,500.

* Change the diapers: Disposable diapers are easy, but they cost about 20 cents apiece. Save almost half that using cloth diapers through a diaper service. Better yet, wash your own. Savings: About $200 per child per year for a diaper service; around $400 per child per year if you wash your own diapers.

* Bring a thermos to work: You can't get a cup of coffer for less than a dollar, unless you brew it at home. Forego the coffee shop, make your own, and bring it with you. It will stay warm all morning in a thermos. Savings: Around $500 per year, if you are spending $2 a day on coffee, according to MSN Money.

* Wait for the movies to come out on DVD: Savings: for a couple, you save 10 dollars per movie.

* Raise your insurance deductible: Generally, the higher deductible the better. Decide what you can afford and set your deductible above that amount. Savings: On an auto policy, about 15 percent to 30 percent for someone who raises his deductible from $200 to $500, estimates the Insurance Information Institute.

* Use every last bit: Throwing away tubes of anything without squeezing out the last little bit of usable product is like throwing money into the trash. Cut the bottoms off toothpaste, hair goo, even medicine containers. Savings: $25 or more per year.

IMPORTANT ECONOMIC PRINCIPLES

Beneficent Capitalism: The Bible teaches the right to own private property and goods, along with the right to sell or buy, along with social responsibility - in other words, a responsible form of capitalism. It doesn't teach Socialism that is enforced by the state. Freedom of economics goes with political and religious freedom. A lack of economic freedom goes hand in hand with a lack of political and religious freedom.

Diversify your investments: Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the Earth (Ecclesiastes 11:2). Businesses, stocks, bonds, real estate, precious metals, are all viable investments at various times.

The Majority Is Usually Wrong: (the "all we like sheep have gone astray" principle). The Minority Is Often Right. Be Willing To Be A Contrarian. Investing is like having faith in the invisible, and being part of a persecuted minority: you often must go against the crowd, and buy when others are selling, and sell when others are buying. Buy low and sell high. If you are buying when everyone else is buying, the price is already been bid up, and you are over paying.

The Law of Supply and Demand: demand raises the price and creates more supply. More supply lowers the price. Free markets automatically set the best prices. If there is not enough of a good or service, the price will rise, more will be made, and the price will go down, until it reaches a state of equilibrium. If there is too much of a good or service, the price will go down, less of that good or service will be offered, and the price will rise, until it reaches a state of equilibrium.

The Business Cycle - Booms and Busts: An article by Ken Frenke in the January 2005 edition of "Money Matters" describes the typical business cycle. "At the peak, the economy is strong. Interest rates and inflation are typically low. Stock prices are high and investors believe in ‘buy and hold.' Consumers are confident, as reflected in their high debt and low savings. There is an air of optimism. Ironically, it's at such times that economic contractions begin. People become less confident about their finances. Interest rates and inflation move higher. Debt becomes a burden. Consumers cut spending and the economy slows, driving stock prices down. This continues until a trough is reached, at which point the economy may be stagnant or in recession. Interest rates and inflation are high. Stock prices are low, and investors don't believe in ‘buy and hold.' Consumers lack confidence, save a large percentage of their income, and pay off debt. Pessimism prevails. Of course, this is when economic expansion begins! As consumers pay down debt, they feel better about their personal finances. Inflation and interest rates begin to fall. People spend more, businesses grow, and the economy recovers, driving up stock prices. Optimism abounds. Consumer take on new debt, which, for a while, further strengthens the economy, leading to another peak. The cycle then begins again."

When the government interferes in the business cycle, and people expect the government to bail out the economy or their investment, this creates what is known as "moral hazard". People invest without enough care. Risk is encouraged, and reckless and bad investments are created.

Recessions and depression cleanse the financial system: people lower their debt levels, they save more, businesses retrench, bad debts are dealt with and the system gets ready for a new expansion. Because the government interfered with the last business cycle, by lowering interest rates too much, and borrowing and spending too much, and expanding the money supply, and lowering taxes, the system never got properly cleansed. This only deferred the pain and made things worse. People kept on spending and going into more debt. Other bubbles - bond and real estate, were created.

Stock vs Commodities cycles: There are 15 to 20 year cycles for stocks, vs commodities (real things like metals, oil, gas, wood, sugar, coffee, grain, animals, etc.). They tend to go in opposite directions. From 1980 to 2000 we went through a 20 year bull market in stocks, and a 20 year bear market in commodities. After 2000 the new cycle came in. Jim Rogers, an expert in commodities, recently said that the shortest bull market for commodities lasted 15 years, the longest 23 years, and if history is any guide, they've got a long way to go. Gold and silver are the kings of commodities.

Supercycles: There are normal business cycles that take place every few years - booms followed by busts, economic advances that are followed by recessions. Around 1920 a Russian economist named Nikolai Kondratieff theorized that every 50 years there are economic supercycles. Let's assume the cycle starts off with a very severe recession. Unemployment is high, markets are very low, bankruptcies become common, so that debts are eliminated. Eventually the economy starts to recover. Jobs are created, business expands, people are frugal and save every penny; people and businesses invest wisely. The economy recovers and starts to prosper. Then, a couple of generations later, most people have forgotten the lessons of the preceding generations. They spend too much and take on too much debt. People and businesses take foolish risks and make bad investments; they overinvest and overbuild, thinking it is a new era, and that good times are here to stay. Eventually, the overexpansion can't be sustained, and the bubble bursts, and a severe recession or depression takes place, that once again starts of process of eliminating the excesses, and cleansing the economic system. It's similar to the cycle described in the book of Judges: many within a generation know the Lord. They are virtuous and faithful. God blesses and prospers them. But their prosperity works against them. They become proud, arrogant, and turn their backs on God. So, the Almighty allows their enemies to conquer them. They are humbled, repent of their sins, and turn back to the Lord. God raises up a man to deliver them, and blesses them, and the cycle begins again.

Giant Supercycles: "The average age of the world's greatest civilizations from the beginning of history, has been about 200 years. During those 200 years, these nations always progressed through the following sequence: From bondage to spiritual faith; from faith to great courage; from courage to liberty; from liberty to abundance; from abundance to complacency; from complacency to apathy; from apathy to dependence; from dependence back into bondage."

The Greater the Risk, the Greater the Reward: there is risk in every investment. The more risk, the greater the reward.

If It Sounds Too Good To Be True, It Probably Is:

A Fool and His Money Are Soon Parted:

Don't Catch A Falling Knife: Beware of buying too early into a falling market. I'm thinking of the current housing market, which may that another four or five years to reach bottom.

Bubbles/Manias Revert To Their Beginning Point, Or Below:

Protect yourself: No one else is going to do it. "They" are not your friends. They want your money.

Interest rates: interest is the cost of borrowing or renting money. 5 percent is an average and is a decent return on your money if there is no inflation.

Bonds: bonds are loans. The greater the risk, the more they pay. The value of bonds goes down as interest rates rise. The value of bonds go up as interests rates go lower. Over the years, a good return with no inflation is 5 percent.

Buy Low and Sell High: In an article called Long Valuation Waves published on October 18, 2002, Adam Hamilton (www.ZealLLC.com) advises us on how to buy low and sell high. There are many ways to value stocks, but two primary methods have steadfastly withstood the ravages of time and have emerged unscathed through all the trials and tribulations of history. While often maligned in today's greed-laden post-bubble atmosphere, the mighty price-to-earnings ratio and humble dividend yield still remain the ultimate long-term strategic valuation tools. P/E ratios are easy to calculate in theory, but in today's environment of ubiquitous earnings and accounting games one must be cautious on what earnings to use. Generally the most conservative possible "E" should be used, SEC-reported GAAP numbers. To compute a P/E ratio, the price of a stock is simply divided by its latest annual earnings per share. If a stock is trading at $50 today and earned $5 per share last year, its P/E ratio is 10.

Publicly-traded companies often make quarterly cash payments directly to their owners, the stockholders. Some percentage of corporate earnings are paid out in cash dividends. To compute a dividend yield, all one has to do is find out how much a company has paid in cash dividends over the last year and then divide this by its current stock price. If a stock is trading at $50 today and paid out $2 per share in cash dividends to its shareholders last year, then it has a dividend yield of 4%.

Long-term strategic valuations of stock markets can always be discussed and understood in terms of P/E ratios and dividend yields. Fortunately, both P/E ratios and dividend yields are virtually immune to distortions from the ravaging effects of the inflation plague the Federal Reserve has shamefully unleashed upon the American people. Stock prices, earnings levels, and dividend streams are all influenced more or less equally by inflation over the long-term, so these two valuation tools thankfully do not require inflation to be explicitly considered in the calculations.

If valuation truly matters, indeed it is everything for the long-term investor, and P/E ratios and dividend yields can measure general valuation levels, we also need to understand where fair-value lies. Without the blessing of the vast wisdom of market history, a rookie investor will have no idea whether a P/E of 10 or 100 is a better omen for the future prospects of the stock markets. Dr. Irving Shiller, in the admirable selfless interest of advancing general market knowledge, generously placed his research data on his website (http://aida.econ.yale.edu/~shiller/) for the world to use. In Shiller's data, the average historical P/E ratio for the general US equity markets (the S&P Composite Index) from 1895-1995 was 14.6x earnings. This number is slightly higher than other historical studies I have seen, indicating a 13.5x historical US equity P/E, but the core message of the data is still loud and clear. Fair-value for stocks is right around 14x earnings, a P/E of 14.

Why 14 you wonder? Profits are everything for equity investors. Nothing else matters over the long run. When you choose to purchase a company, the only reason you make the buy is because you expect it to earn profits. As a stockholder, you are entitled to your fractional ownership share of corporate profits. If a company does well, its profits will translate into a higher share price and higher dividends and you will reap a good return on your investment. Over centuries of equity investing in the United States and Europe, public companies have had average share prices hovering around 14 times their annual earnings. It has been the long-term fair-value around which stock markets have faithfully oscillated. A P/E of 14 suggests it will generally take 14 years, not considering growth and compounded returns, for a company you purchase to earn back your full purchase price for you.

A P/E of 14 corresponds to a simple annual return of about 7% (1 divided by 14), which is fair. It was fair a century ago, it is fair today, and it will still be fair a century from now. 7% is a reasonable return to earn for a saver, an investor, and a reasonable "cost" for a "borrower", a company. Imagine if you could only make 1% in the stock market, it would feel far too low right? What if your mortgage cost you 20% like credit cards? It would feel far too high right? 7% is like Goldilocks' legendary porridge, just right! Interestingly, the long-term historical return for the US equity markets averages right around 7%. The more one studies valuations, the more it cements everything else studied on the markets together into a coherent and understandable whole! Shiller's dataset showed that the average dividend yield for the general US equity markets was 4.6% from 1895-1995. 4.6% can be considered historical fair-value for US equity dividend yields. Armed with this priceless information, the prudent investor is able to make rational, intelligent strategic decisions about when to buy low and sell high! If general US equity P/E ratios are around 14, they are fairly-valued, neither a buy nor a sell. If they are one-half fair-value, 7x earnings, they are a screaming buy indicating very cheap stocks. Conversely, if they are 50% higher than fair-value, at 21x earnings, they are expensive and should be sold. If general P/E ratios explode up to twice fair-value, 28x earnings, they are in speculative bubble mania territory and extreme caution should be exercised. Stocks should generally be sold immediately from bubble-level general P/E ratios. Similar logic applies to dividend yields, with 4.6% being fairly valued. Dividend yields have an inverse relationship to P/E ratios however, while low P/Es are strong buy signals so are high dividend yields. Low dividend yields signal overvaluations and historic sell signals.

Tying everything we have discussed together, Shiller's wonderful historical earnings and dividend data brilliantly illuminate the essence of investing. Buy Low Sell High. With fair-value general US equity valuations being 14x earnings and 4.6% dividend yields, we now have a benchmark to know when valuations are too high suggesting a great sell point or too low suggesting a great buy point. In a nutshell, the message of the markets encapsulated in the graph of Shiller's landmark data is this…If you buy general US stocks when they are undervalued, a P/E near 7, you are likely to reap astounding profits in the following years. On the other hand, if you buy the US markets when they are overvalued, a P/E above 21, you are likely to lose capital or see no gains for decades. Buy low, when valuations are cheap, and sell high, when valuations are expensive.

INVEST WISELY, UNDERSTANDING THE TIME WE ARE IN

* I believe it was Dr. Kurt Richebächer who observed the following: "You hear and read it all around you. Massive monetary and fiscal stimulus in the United States is, after all, paying off. The economy is finally on the road to a self-sustaining recovery... What we see, for our part, scrutinizing the numbers, definitely does not have the slightest similarity with the self-sustaining recoveries of the past, neither in their pattern nor in their impetus. When the stock bubble burst in 2000, the Fed alleviated its negative economic impact with the rapid massacre of short-term interest rates and repeated public promises to keep them at their rock-bottom lows. America's powerful leveraged speculating community heard and responded promptly with a frenzied stampede into the highly leveraged carry trade of long-term bonds. Promptly plummeting long-term rates promptly slashed mortgage rates, which just as promptly unleashed and propelled the unprecedented mortgage refinancing orgy. Equity extraction from owner-occupied homes has been running at an annual rate of around $600-700 billion both in 2002 and 2003. In hindsight, it is manifest that this huge equity extraction from homes has been the main source of all movements in the U.S. economy and its financial markets over the past two years. The extracted money went into the purchases of houses and stocks, driving up their prices, which provided the sharply higher collateral values for more and more consumer borrowing and spending... The lowest interest rates in half a century have definitely failed to generate a self-sustained, strong economic recovery. The only identifiable result so far has been the creation of an array of bubbles in various assets - stocks, bonds, housing - all of them fueling higher consumer spending.

Peter Schiff: "As the Dow burst through the 13,000 milestone this week, few understood the hollowness of the achievement. Measured against the rising dollar-denominated prices of just about everything else on the planet, the Dow has actually lost value over the past seven years. Measured against the truest benchmark, the price of gold, the record high for the Dow was set back in January of 2000 when its price equaled approximately 43 ounces of gold. Today it is only worth about 19 ounces.

To better appreciate just how much of stock gains can be attributed to inflation, consider that the record high for the Dow in 1929 of approximately 380 also equated to 19 ounces of gold. So despite all of the hoopla and a thirty-fold increase in stock prices, the Dow has actually gained no real value during the past eighty years. The entire rise from 360 to 13,000 has been an illusion made possible by the magic of inflation. So much for the concept of stocks being a "can't lose" long term investment - unless you feel that eighty years is not quite a long enough time horizon! Now that is not to imply that the Dow has not generated returns during those years: it has. However, those returns have been a function of dividends and not appreciation. But its not yields that Wall Street celebrates, it's prices. By dazzling investors with higher prices, they distract their attention from the unpleasant reality that they are actually treading water. What difference does it make if you have more dollars if the dollars themselves have less purchasing power?

Despite its recent eclipse of 13,000 the Dow now buys 30% fewer euros than it did then back in 2000 when it was priced at approximately 11,500. It also buys 35% fewer gallons of milk, 40% fewer bushels of corn or wheat, 65% fewer ounces of silver, 70% fewer barrels of oil, 80% fewer pounds of copper, and 90% fewer pounds of uranium. Try figuring what the Dow will buy in terms of other necessities, such as housing, insurance, college tuition or hospitalization. Any way you measure it, the Dow is worth far less today then it was in January of 2000.

Back in 1980 one Zimbabwe dollar was worth more than one U.S. dollar. Therefore a billionaire in Zimbabwe was also a billionaire in America. Today, almost everyone in Zimbabwe is a billionaire yet few of them can afford a pack of chewing gum. Do you think that anyone invested in the Zimbabwean stock market these past 30 years cares how many record highs that market has made? Many might feel that a comparison of the U.S. to Zimbabwe is ridiculous. However, fundamentally there is no real difference between a Zimbabwean dollar and an American dollar. They are both simply pieces of paper, the value of which depends on the resolve of politicians not to print too many of them. During the difficult economic times that lie ahead, the pressure on the Fed to run its printing presses full throttle will be immense.

Think back to the German experience with hyper-inflation during the Weimar Republic. At the time of its currency meltdown, Germany was a major economic power (even after the devastation of the First World War). Yet that status did not prevent its currency from becoming worthless. The impetus for Germany's hyper-inflation was the fact that its industrial base had been badly damaged during the war, yet under the terms of Treaty of Versailles it was obligated to pay enormous reparations to the Allies. Lacking the ability to export enough goods to repay its debts, it resorted to a printing press instead. America is now in a similar predicament. Although our industry was not destroyed by bombs, it's gone just the same. While we might not be bound by a treaty to pay reparations, the trillions of dollars of American IOU's now owned by foreigners will be just as burdensome an obligation. It is hard to image we can "repay" these debts without civil unrest, massive inflation, or both.

The point to remember is that when it comes to records, it is real purchasing power, not nominal value, that counts. Measured by its purchasing power, the Dow has clearly lost value over the past seven years. Those who have remained invested in Dow stocks during that time period are clearly poorer as a result. Those who continue doing so will likely lose even more wealth in the years ahead, regardless of how many more nominal record highs the Dow sets."

* Debt levels are at all time records, bankruptcy filings are on the rise, the government deficit is rapidly growing. Doug Noland, in an article dated April 8, 2005, notes that "contemporary finance," as we have come to know it, has commenced a radical shakeout. The scope of the problem is staggering. There is Fannie and Freddie, with their combined books of business of $3.8 Trillion backed (hopefully) by a little sliver of shareholder's equity. Troubled GM and Ford have total liabilities of $740 billion, with equity stated at $45 billion and absolutely dismal prospects. AIG has total liabilities of almost $700 billion (SH Equity of $83bn). Combined, these five companies' exposure of almost $5.3 Trillion is in the neighborhood of 30 times reported equity. In the best of times, there was no room for error or chicanery. These may be the worst. And one does not want to forget MBIA. This troubled risk guarantor has written insurance - "Net Debt Service Outstanding" - to the tune of $890 billion, with shareholder's equity of $6.6 billion. To witness such a massive and pervasive Credit system problem at this pinnacle stage of system excess and asset inflation portends a devastating down cycle.

* Our GSEs, (Government Sponsored Enterprises) are overextended and underfunded.

* Our trade deficit is at record levels.

* Stock markets are high. P/E ratios are high. Stocks may be going up because people are fleeing dollars, bonds, into stocks as hedge against inflation.

* As interest rates go up, new bonds get more attractive. The price of older bonds with lesser interest rates loses value. The cost for companies to rent money is more, and leads to less profits and a declining stock market.

* The US dollar is falling and will continue to fall farther - eventually much farther, to its intrinsic worth - zero.

* The sudden sales of bonds by foreign investors and the accompanying rise of interest rates could wreak havoc.

* Inflation is higher than the government reports. John Williams of Shadow Government Statistics (www.shadowstats.com/cgi-bin/sgs/data) gives the true data.

* Good jobs are disappearing. They are being outsourced. Even the jobs that we were told would be left for Americans, like computer programing, are being outsourced to India. Meanwhile, the lower paying jobs are being insourced by millions of illegal aliens. The middle class, which is so important to a healthy democracy, is being crushed.

* Consumer confidence is down.

* Credit Excesses are huge.

* There is dangerous leverage in the world's financial system. Many hedge funds invest in Collateralized Debt Obligations (CDOs) with the help of borrowed money. To buy a triple-A rated CDO note for $1000, it is common for a hedge fund to put down only $100 of its own money and borrow the other $900 from a bank to finance the purchase. Here is another example: Get $500 million from investors and buy some truly safe bonds with it. Use those bonds as collateral to borrow $5 billion. Buy some very risk heavy bonds with the $5 billion. If the bonds go up 1%, that is 10% profit to the investors. If the bonds go down 1%, that is 10% loss. So, bonds go down 10%… suddenly you hold $4.5 billion in risky bonds and $500 million in safe ones, and you owe $5 billion to the bank. The bank issues a margin call. You can't show that you still have the $5.5 billion in assets that the loan agreement stipulates, so the bank makes you sell the $4.5 billion in risky bonds (or buy back if you were short) and takes you $500 million is safe assets since you can't pay back the full $5 billion from sale of the high risk stuff. Investors are left with $0 when they assumed they were investing in fairly low risk, high rate of return stuff. The real cause is the inflated real estate market. The sub-prime bonds were supposed to be fairly safe because you could foreclose on the house and sell it for what you are owed. Unfortunately, they are having a hard time selling those foreclosures without mass losses. Expect huge problems with the CDO markets.

* To keep their currencies competitive with ours, so they can keep their goods inexpensive, many nations are increasing their money supply as much as or more than we are. This is creating inflation around the world, and asset bubbles around the world. There is a housing bubble in much of the world. This is not good, since these bubbles always burst.

* Consumer spending has been dependent on financing and "housing equity extraction".

* Big pension fund problems are brewing.

* The retirement of the Baby Boomer generation: The Baby Boomer generation - the largest and wealthiest demographic the US has ever known - is about to start retiring, going from making and investing to taking and divesting.

* There are military/political tensions, especially with Iran and North Korea.

* The price of energy, especially from oil and natural gas, may continue to accelerate. We may be approaching "Peak Oil" when the maximum amount of cheap oil can be pumped from the ground. China and India, which have a third of the world's population, are rapidly becoming industrialized, and starting to use more oil per capita. We are currently using far more oil than is being discovered. Few large oil fields have been discovered for several decades. Demand is increasing and supply is decreasing. Only a small amount of demand over supply can cause the price of oil to go up several times. "The effects of even a small drop in production can be devastating. For instance, during the 1970s oil shocks, shortfalls in production as small as 5% caused the price of oil to nearly quadruple. The same thing happened in California a few years ago with natural gas: a production drop of less than 5% caused prices to skyrocket by 400%" (from an article at www.lifeaftertheoilcrash.net). For more information, consult Twilight In The Desert by Matt Simmons. Also, Big Oil in the US only controls 10% of the world's oil. They do not set the price of oil.

The Independent
By Daniel Howden
June 14, 2007

World oil supplies are set to run out faster than expected, warn scientists. Scientists challenge major review of global reserves and warn that supplies will start to run out in four years' time.

Scientists have criticized a major review of the world's remaining oil reserves, warning that the end of oil is coming sooner than governments and oil companies are prepared to admit. BP's Statistical Review of World Energy, published yesterday, appears to show that the world still has enough "proven" reserves to provide 40 years of consumption at current rates. The assessment, based on officially reported figures, has once again pushed back the estimate of when the world will run dry. However, scientists led by the London-based Oil Depletion Analysis Centre, say that global production of oil is set to peak in the next four years before entering a steepening decline which will have massive consequences for the world economy and the way that we live our lives.

Colin Campbell, the head of the depletion center, said: "It's quite a simple theory and one that any beer drinker understands. The glass starts full and ends empty and the faster you drink it the quicker it's gone." Dr Campbell, is a former chief geologist and vice-president at a string of oil majors including BP, Shell, Fina, Exxon and ChevronTexaco. He explains that the peak of regular oil - the cheap and easy to extract stuff - has already come and gone in 2005. Even when you factor in the more difficult to extract heavy oil, deep sea reserves, polar regions and liquid taken from gas, the peak will come as soon as 2011, he says.

In recent years the once-considerable gap between demand and supply has narrowed. Last year that gap all but disappeared. The consequences of a shortfall would be immense. If consumption begins to exceed production by even the smallest amount, the price of oil could soar above $100 a barrel. A global recession would follow.

One thing most oil analysts agree on is that depletion of oil fields follows a predictable bell curve. This has not changed since the Shell geologist M King Hubbert made a mathematical model in 1956 to predict what would happen to US petroleum production. The Hubbert Curveshows that at the beginning production from any oil field rises sharply, then reaches a plateau before falling into a terminal decline. His prediction that US production would peak in 1969 was ridiculed by those who claimed it could increase indefinitely. In the event it peaked in 1970 and has been in decline ever since.

In the 1970s Chris Skrebowski was a long-term planner for BP. Today he edits the Petroleum Review and is one of a growing number of industry insiders converting to peak theory. "I was extremely sceptical to start with," he now admits. "We have enough capacity coming online for the next two-and-a-half years. After that the situation deteriorates."

What no one, not even BP, disagrees with is that demand is surging. The rapid growth of China and India matched with the developed world's dependence on oil, mean that a lot more oil will have to come from somewhere. BP's review shows that world demand for oil has grown faster in the past five years than in the second half of the 1990s. Today we consume an average of 85 million barrels daily. According to the most conservative estimates from the International Energy Agency that figure will rise to 113 million barrels by 2030.

Two-thirds of the world's oil reserves lie in the Middle East and increasing demand will have to be met with massive increases in supply from this region. A survey of the four countries with the biggest reported reserves - Saudi Arabia, Iran, Iraq and Kuwait - reveals major concerns. In Kuwait last year, a journalist found documents suggesting the country's real reserves were half of what was reported. Iran this year became the first major oil producer to introduce oil rationing - an indication of the administration's view on which way oil reserves are going. Sadad al-Huseini knows more about Saudi Arabia's oil reserves than perhaps anyone else. He retired as chief executive of the kingdom's oil corporation two years ago, and his view on how much Saudi production can be increased is sobering. "The problem is that you go from 79 million barrels a day in 2002 to 84.5 million in 2004. You're leaping by two to three million [barrels a day]" each year, he told The New York Times. "That's like a whole new Saudi Arabia every couple of years. It can't be done indefinitely."

The importance of black gold: A reduction of as little as 10 to 15 per cent could cripple oil-dependent industrial economies. In the 1970s, a reduction of just 5 per cent caused a price increase of more than 400 per cent. Most farming equipment is either built in oil-powered plants or uses diesel as fuel. Nearly all pesticides and many fertilizers are made from oil. Most plastics, used in everything from computers and mobile phones to pipelines, clothing and carpets, are made from oil-based substances. Manufacturing requires huge amounts of fossil fuels. The construction of a single car in the US requires, on average, at least 20 barrels of oil. Most renewable energy equipment requires large amounts of oil to produce. Metal production - particularly aluminium - cosmetics, hair dye, ink and many common painkillers all rely on oil.

* Globalization: It does give us better prices on manufactured goods, but it also is driving up prices for commodities, and is lowering the price of labor, since we are competing with cheaper labor. is causing the price of labor in this country to go down. Jobs, manufacturing and services are being exported. More things being made outside, and we have to buy them, which causes the trade deficit to increase. That is not good. It means that we are losing wealth. We are selling off bits of our national wealth every day. Immigration is also causing the loss of jobs and the price of labor to go down. The middle and lower classes are getting squeezed.

Puru Saxena: A gradual transfer of wealth and power is currently underway. Thanks to globalization and economic reforms, the great wealth divide between the industrialized nations and the "emerging" economies is contracting. Over the coming decades, I anticipate this process to accelerate. In other words, I believe the future will bring rising consumption and a higher standard of living in today's impoverished countries (China, India, Brazil and other "third world" countries), whereas we are likely to witness the reverse in the US and parts of Western Europe.

Evidence of Globalization: Toyota became bigger than GM and the for the first time in 100 years the European stock markets are bigger than US.

The Housing Bubble

More American have their wealth in housing than in the stock market or banks. When housing is going up, they feel safe. They feel wealthy and spend more. This is called the wealth effect. One common rule of thumb is that a $1 increase in wealth generates 3 to 5 cents of extra spending, but some research suggests the "wealth effect" from housing is bigger over time. When the price of housing goes down, they reduce spending, which contracts the economy.

Since 2001, we have been in a nation-wide, and almost world-wide housing mania/bubble.

Subprime borrowers are going to be out of the market. People who paid too much are going to be out of the market, people who used their houses as a personal bank are going to be out of the market, and people who can't afford the prices now are out of the market. The pool of buyers are growing smaller and smaller.

Subprime mortgages, for people who do not qualify for the conventional mortgages, now account for 18 percent to 24 percent of all mortgages, up from 5 percent in 1995, Wall Street analysts estimate.

Dan Denning reported in April 2005 that "to keep the party going the last two years, banks have loaned money to people who have no business buying a house. These subprime borrowers have been the secret prop beneath the housing boom. And it's easy to spot who they are: They finance their purchase with an adjustable-rate mortgage (ARM). The interest rate and the monthly payment are lower than those on a 30-year fixed-rate mortgage. So a lot of people can qualify for an ARM who wouldn't qualify for the fixed rate. In 2001, only about one buyer in 10 needed an ARM to qualify for a loan. Last year, more than one mortgage out of three was an ARM. The subprime market - the bad-credit-risk market - has exploded! In hot markets today, up to half of all buyers use ARMs. Translation: Half of all buyers in those 'hot markets' are buying houses they can't afford - even at these low interest rates! They are making a very dumb bet that interest rates are going to go down even more. When interest rates spike up, their monthly payments are going to soar. A 2% rise could hit them with a 40% increase in their monthly payment. But wait. It gets even worse. Their monthly payment will jump like crazy at the very same time their house goes down in value. Do you think they're going to tough it out and still make those payments? Don't count on it. Most of them won't be able to. Look for a huge, huge wave of defaults. They'll load up the furniture, give the lender the keys, and drive away. What's more, they'll do it by the millions, bringing down the world's biggest financial institutions and crashing the stock market while they're at it."

The multitrillion-dollar home lending institutions - Fannie Mae and Freddie Mac - are a house of cards. Accounting tricks and outright lies were hiding a cancer. Fat paychecks and bonuses flowed to executives who hit their goals by manipulating earnings. Before they were exposed, these frauds and charlatans extended their tentacles into three out of every five American homes. Like drug dealers hanging around a schoolyard, they not only pushed easy credit at the customers, but got hooked on their own junk. Fannie and Freddie borrowed insanely everywhere from Beijing to Berlin to keep the game going and then turned right around and loaned the funds to bad credit risks. Thanks to financial manipulations, Americans have less equity and the banks own a higher percentage of the housing stock than ever before in history. Urged on by the credit junkies, they refinanced and borrowed all the equity out of their homes. The amount of mortgage debt has doubled since 1995. But our incomes - our ability to pay - have gone up by a fraction of that amount. For 40 years, home prices rose a little bit more than inflation every year - only about 1% more. That's how things used to work. But prices suddenly took off in 1995 - soared 35 points above inflation since then - and now they're far beyond the incomes of the buyers.

That's what easy credit can do. How easy? Americans owe $7 trillion on their homes - twice as much as 10 years ago. It's painfully clear a lot of that $7 trillion will never be paid back, and the biggest lenders on the planet are going down.

Mr. Denning gave us seven ways we will know the crisis has hit:

1. The pool of qualifying homebuyers will shrink 40% if interest rates notch up just a fraction. You'll see the effects fast as houses sit on the market and selling prices fall way below asking prices.

2. Even borrowers who still qualify will be able to buy "less house." The couple who can borrow $195,000 today will be able to borrow only $159,000. Home prices will buckle under the pressure.

3. Soaring interest rates will push up monthly payments on ARMs by 50%. Unable to pay, homeowners will default. More downward pressure on home prices.

4. Seeing their homes fall in value, consumers will pull back on spending - and they'll pull back hard. Studies show they cut back twice as much for a dollar loss in home values as they do for the same loss in the stock market. After the dot-com bust, people went on spending. They won't this time.

5. Corporate profits will plummet along with consumer spending. But you won't have to wait. Investors will see what's coming and dump stocks long before the spending figures and earnings reports come out.

6. The wave of defaults will hit all lenders hard, but it will sink Fannie Mae and Freddie Mac. Unable to service trillions in obligations, they'll go under.

7. Realizing the party is over, every investor in the world will try to get out at once. Every investment tied to interest rates will sink like a stone. Houses and bonds will lead the way down. Stocks will follow really fast.

Mortgage Rate Rise Pushes U.S. Housing, Economy to "Blood Bath"
By Kathleen M. Howley for Bloomberg
June 20, 2007 

The jump in 30-year mortgage rates by more than a half a percentage point to 6.74 percent in the past five weeks is putting a crimp on borrowers with the best credit just as a crackdown in subprime lending standards limits the pool of qualified buyers. The national median home price is poised for its first annual decline since the Great Depression, and the supply of unsold homes is at a record 4.2 million, according to the National Association of Realtors. (Rabbi Loren's comment: That's around 2.8% of all housing, an all time high). 

"It's a blood bath," said Mark Kiesel, executive vice president of Newport Beach, California-based Pacific Investment Management Co., the manager of $668 billion in bond funds. "We're talking about a two to three year downturn that will take a whole host of characters with it, from job creation to consumer confidence. Eventually it will take the stock market and corporate profit." 

Confidence among U.S. homebuilders fell in June to the lowest since February 1991, according to the National Association of Home Builders/Wells Fargo index released this week. Housing starts declined in May for the first time in four months, the Commerce Department reported yesterday. New-home sales will decline 33 percent from 2005's peak to the end of this year, according to the Realtors' group, exceeding the 25 percent three-year drop in 1991 that helped spark a recession. 

"It's not just a housing recession anymore, it looks more and more like an economic recession," said Nouriel Roubini, a Clinton administration Treasury Department director and economic adviser who now runs Roubini Global Economics in New York.

The investment banks, insurance companies, pension funds and asset-management firms that hold some of the U.S.'s $6 trillion of mortgage-backed securities have yet to suffer the full effect of subprime loans gone bad, said David Viniar, Goldman's chief financial officer. "I continue to believe that we haven't seen the bottom in the subprime market," Viniar said on a June 14 conference call with reporters. "There will be more pain felt by people as that works through the system." "There isn't a recovery about to happen," said Ara Hovnanian, chief executive officer of Hovnanian Enterprises Inc., the Red Bank, New Jersey-based homebuilder. The company's stock tumbled 42 percent this year through yesterday. 

The share of people taking out all types of adjustable-rate home loans averaged 29 percent during the past three years, compared with the 17 percent average of the prior three years, according to data compiled by Mclean, Virginia-based Freddie Mac.

Higher fixed mortgage rates and stricter lending standards mean some of those borrowers won't be able to refinance into fixed-rate loans. Many of them have seen their home's value drop even as their interest rates adjust higher.

"When all these people see their mortgage payment and it's up 40 or 50 percent, they're going to say, ‘We can't stay in this house,' Pimco's Kiesel said. "And there are millions of people in this situation."

The average U.S. rate for a 30-year fixed mortgage was 6.74 percent last week, up from 6.15 percent at the beginning of May, according to Freddie Mac, the second-largest source of money for home loans. That adds $116 a month to the payment for a $300,000 loan and about $42,000 over the life of the mortgage.

The recent increase in mortgage rates is the biggest spike since 2004. The change means buyers can afford 8 percent less house than they could five weeks ago, Kiesel said. "Prices are going lower," he said.  The housing sector will push the U.S. economy into recession unless the Federal Reserve cuts its benchmark rate at the first surge in unemployment, said Kiesel, who expects the Fed to reduce rates.

In addition to their primary mortgages, homeowners had $913.7 billion of debt in home equity loans in 2005, more than double the $445.1 billion in 2001, according to a paper by former Federal Reserve Chairman Alan Greenspan and James Kennedy on equity extraction issued by the Fed three months ago. About a third of that money, extracted as home values surged 53 percent from 2000 to 2005, was used to buy cars and other consumer goods, according to the paper. The interest rate on those loans doubled to 8.25 percent in 2006 from 4 percent in 2003.

Homebuyers who got an adjustable-rate mortgage, a so-called ARM, in 2004 have seen their rate climb by about 40 percent. That's enough to add $288 to the monthly payment for a $300,000 mortgage.

The median U.S. price for a previously owned home fell 1.4 percent in the first quarter from a year earlier, the third consecutive decline, according to the National Association of Realtors. Measured annually, the national median hasn't dropped since the Great Depression in the 1930s, according to Lawrence Yun, an economist with the trade group.

The share of mortgages entering foreclosure rose to 0.58 percent in the first quarter, the highest on record, from 0.54 percent in the final three months of 2006, the Mortgage Bankers Association said in a report last week. Subprime loans going into default rose to a five-year high of 2.43 percent, up from 2 percent, and late payments from borrowers with poor credit histories rose to almost 13.8 percent, the highest since 2002. Prime loans entering foreclosure increased to 0.25 percent, the highest in a survey that goes back to 1972. That's a sign that even the most creditworthy borrowers are being squeezed, Roubini said. "We have a lot of people, even prime borrowers, who are at the edge because they either bought with no equity, they have an ARM that's seen a rate spike, or they used their house like an ATM and turned their equity into cash," Roubini said. "Many of those people are under water today, and if they have to sell, it's going to drag down values in their neighborhood."

What caused the housing bubble?

* The Federal Funds rate were kept too low for too long. This made mortgage money cheap. This made it possible to buy more expensive houses. This drove the price of housing up.

* Traditional lending standards were disregarded. It used to be 20% down on a 30 year fixed rate, with much documentation. Anyone could get an adjustable rate loan for 100% of the value of the home (or more!) with no documentation of their income. This is a recipe for disaster.

* About 20 percent of all mortgages are adjustable rate, and will be resetting from 2007 to 2012. Some estimate that as many as half of the ARMs (10 percent of all homes) won't be able to pay the new rates, and will go into foreclosure. That will cause millions to lose their houses, which will come back on the market, depressing the price of the rest of the homes. I expect prices to go down 40% to 50%. Banks, and owners of Mortgage Backed Securities and Collateralized Debt Obligations, are going to lose huge amounts of money.

* The growth of Mortgaged Back Securities and Collateralized Debt Obligations meant that these risky mortgages could be sold to others. The mortgage brokers and lends wouldn't be stuck with them. Plus, the lenders got rewarded with a fee or commission for each deal!

* Appraisers were pressured to get the right number. Many compromised. This raised the price of housing for everyone.

* Fraudulent cash-back-at-closing deals that inflated prices. Appraisers inflated values to make room in the loan for the fraudulent cash-back deals.

* Speculators rushed in and lenders gave loans to speculators. In some hot markets during this housing bubble, 40% of the buyers were speculators who never intended to live in the home or condo. They only wanted to flip the house and make a quick buck. This created artificial demand and a serious overbuilding of houses. Now they are selling, leading to a tremendous oversupply of housing.

* More and more Americans bought second homes. In a bad economy, many will have to sell, driving up supply and lowering demand.

* Politicians watched it all happen, and ignored it - maybe because higher prices means higher property taxes.

* The Housing Bubble started in 2001 (in some places it was inflating significantly before that). It reached its peak in some markets around April 2005. It is just peaking in some markets now. The bursting of Japan's housing bubble lasted 15 years. For an informative study of the bursting of housing bubbles, see  wikipedia.org/wiki/Japanese_asset_price_bubble. We probably won't reach bottom until after 2009.

* Real estate busts tend to be worse than bear markets for stocks, in terms of their duration and macroeconomic impacts. Thomas Helbling did an in depth study of housing bubbles for the Bank of International Settlement. He concluded that the median price decline in a real estate bust is 27.3 percent and the median duration is 4 years, which would take the current episode out to 2009 (www.bis.org/publ/bppdf/bispap21d.pdf).

* Conjecture: Since the duration of the current bubble and magnitude of its price increases were the largest in U.S. history, the unraveling period is likely to be longer and the magnitude of price decline likely to be larger than historical norms, which would imply a larger than 27.3 percent nationwide median price decline and recovery after 2012.

Advice For Buying A House

* Your PITI (Principle, Interest, Taxes and Insurance) should be between 25% to 30% of your gross income, and your total debt should never exceed 40%.

* Your house is worth what the market says it is, not the price you paid; not what your neighbor sold it for close to the high point of the bubble; not what you want or what you think you deserve.

* When the cost of renting is below the cost of buying a home with a standard mortgage with 20% down at a fixed rate, it makes more sense to rent. Traditionally, homes sell for 100-120 times rent on comparable homes.

* Don't buy a house unless you plan on being there for 5 years.

* In a real estate market that is heading lower, do not buy a second house before selling your first. You do not want to get stuck with your older house or with 2 mortgages.

Fatal Economic Mistakes That May Lead To The Collapse Of The Economy

* Things go with things. Religion, morality, economics and politics are all related. Moral and spiritual decay in our society is the root cause of our pending financial crises. Corrupt lenders loaned out too much, doing it for the commission, not caring if the people they sold the loan to will be paid back. Consumers will borrow too much, not caring if they pay the loan back.

* Going off of the gold standard.

* Creation of worthless money.

* Increase of money supply.

* Keeping interest rates too low for too long

* Big government spending programs.

* Government debt.

* Government guarantees of pensions and banks and insurances and retirements and Government Sponsored Enterprises.

* Government interference in the business cycle. This doesn't allow the system to cleanse itself. It allows risk to increase and makes the bust worse. Stability creates instability.

* Allowing bank reserves to go too low.

* The explosive rise of derivatives (last estimated by the BIS at more than $400 Trillion and expanding rapidly. Derivatives were up an astounding 40% in 2006!). Derivatives are like insurance. With so much expanding so rapidly and insured by so few, we are facing a situation where the parties who are suppose to insure the contract can't, leading to a chain reaction of other derivative failures, much like a set a dominos falling.

* Going from a manufacturing based economy, to a financial and service based economy, to a speculation based economy.

* Going from a one man who works, and the woman stays at home to raise the family, to both husband and wife needing to work to stay afloat. The family suffers.

* Allowing the housing market to become a bubble. Federal Reserve allowed too much money and credit to be created. It flowed into stocks. Then into real estate. It slashed interests to 1%. More could qualify for housing. More people bided on houses, driving prices up. ARMs drove prices up. Neg-Am mortgages drove prices up. No documentation loans drove prices up. Helocs, refis and equity extraction drove prices up.

* Richard Daughty, May 2006: Beware! Beware of a massive and massively expensive government, paid for by debt, financed by the Federal Reserve and the banks creating all that new credit so that someone could borrow it and use the money to buy government bonds, stocks and houses, and leveraging to borrow every scrap of equity that ever appeared in anything, including houses, stocks, bonds, receivables and other things.

MY OUTLOOK FOR THE NEXT FIVE YEARS

We are close to or at an economic apogee. We are like bullet shot into the air that is close to reaching its high point, before it stops and heads back down. We are already close or into a recession. It will get worse. Job losses will mount. Government spending will increase. Government increasing the money supply will continue, leading to higher and higher rates of inflation. Housing prices will accelerate downward until 2012 or beyond. Credit will tighten, homes will be harder to finance and there will be fewer and fewer buyers. Assets which have been inflated (stocks, bonds, real estate) will go down. Stock markets will lose value in real buying power (even though the price of stocks can be going up!). Hedge funds will go bankrupt. The dollar will continue to drop. Gold and silver will keep going up. The price of basic commodities and the necessities or life will keep going up. Energy will keep going up. The standard of living in the US will continue to decline. We will continue to grow poorer as a nation.

RECOMMENDATIONS

Because of the following reasons, I think the best investment over the next five years will be gold and silver bullion coins, along with unhedged gold and silver companies, and gold and silver mutual funds. Maybe oil and gas mutual funds too.

* Gold and the US dollar have acted as almost exact opposites. The dollar is backed on the perceived strength of the US economy. When the dollar goes up, gold goes down. A falling dollar will help propel gold and silver higher.

* Inflation rates are worse than the Government's reported figures.

* Government spending is out of control and there is little regard for bringing budget deficits into balance.

* Money is being created way out of proportion. Enough money was created in a recent one month period to buy all the gold and silver stocks in the world!

* The price of gold is still relatively low. In 1980, gold hit $850 (silver hit $50). In today's inflating dollars, we would have to hit $2,200 to reach that. Gold could hit $3,000 to $5,000 per ounce.

* In the United States, there are very few investors in gold.

* The size of the gold and silver markets are small compared to of the existing asset bubbles. All the gold and silver mining companies in the world are worth less than one stock - General Electric. On January 31, 2006 Bill Bonner wrote: "Even if the price of gold went to $1,000, all the gold in the world would still represent only 1.4% of global financial assets. When times get tough and people begin to worry, typically they want to hold more gold. In 1934 and 1982, for example, investors worried that the whole financial system might come crashing down. They bid up the price of gold to a point where it was worth more than 20% of global financial assets."

In a article dated June 6, 2007 and titled, The Tiny Size Of The Gold Market by Jason Hommel of the silverstockreport.com, Mr. Hommel informs us that money in U.S. banks, M3, is growing at a rate of about 12% per year, or more. So, in the last 12 months, it grew by about $1.3 trillion dollars, which is $1,300 billion dollars. The world gold market grew this year at a rate of about 1.5%, as the world's mines produced about 2500 tonnes, and it has been estimated that there is about 155,000 tonnes of gold in the world. 2500 tonnes (80 million ounces) of annual world gold production worth only $54 billion dollars at $675 per ounce. So, the U.S. is actually creating new paper money at a rate 24 times as much as new gold. And of course, this is hardly a fair comparison. We should compare total world paper money creation rates, to world gold mining rates. My well researched guess is that the U.S. dollar is only about 1/4 of the world total increase of paper money. (It is widely admitted that other nations are now printing up money even faster than the U.S.!) So, let's multiply by a factor of 4. Thus, the world is creating new money at about a rate nearly 100 times faster than the world's value of new gold. Investors, the world over, may have about $40 trillion worth of investments to allocate and spend on gold. What if 5% of that went into gold? That's $2 trillion dollars, or $2,000 billion. What will happen when that much money is going to move into gold, when the world's annual gold production is a mere $54 billion? Rabbi Loren's answer: gold will go higher - a lot higher!

* Asian, Indian and Arab investors are increasing their gold buying. The biggest savers in the world, Asians, believe in gold and silver. On June 7, 2007, the World Gold Council reported that growth in China, the Middle East, and India has resulted in demand for gold rising 31 percent from last year. "This 31 percent increase is due to consumer demand in China, India, and the Middle East for gold coins and gold jewelry. These driving factors already in force have most analysts forecasting higher gold prices," according to Lear Financial -  major US gold coin company (africa.com/news/944549.htm).

* Communist China is finally liberalizing its gold market. China has more than a billion inhabitants - and that gold is seeped in its culture.

* Mine production is declining due to falling price and increased costs. In 2006 there was a 7% decline in the production of gold from the number one producer, South Africa. There was a 4 % global decline in gold. This diminishes the annual supply which should make prices go up.

* Many of the large gold mining companies have either eliminated all hedges, or have dramatically cut selling forward programs, thus substantially decreasing the supply of gold.

* In 1980, the Dow/Gold Ratio (the cost of an ounce of gold to buy one share each of the 30 Dow Industrial stocks) was 1 to 1. It went over 40 to 1, and now it's back down to 20 to 1. It could return to 4 to 1, 2 to 1, or even 1 to 1. Around October of 2005, Peter Schiff, of Euro Pacific Capital, wrote: "Twice during the last century the Dow lost over 90% of its value relative to gold. If such declines could occur in an America with a strong industrial economy, ample domestic savings, and a favorable balance of payments, imagine what could happen today. History clearly demonstrates the danger inherent in over-paying for stocks, both relatively to their intrinsic values and the price of gold. Those who bought into the new era nonsense of the 1990's will fare no better than those who judgments were similarly impaired during the 1920's and the 1960's. My guess is that in the years ahead the Dow will once again retest its gold-price lows. If we can put in a solid, long-term triple bottom at approximately 1 to 1, (which might be Dow 4,000, gold $4,000 per ounce) stocks would likely be a great buy. Until then the smart money is increasingly moving to gold."

* The silver to gold ratio: The Lord in His wisdom created silver and gold in approximately a 17 to one ratio. In much of recent history, a person could exchange one ounce of gold for about 15 ounces of silver. A couple of years ago, the ratio of gold to silver was 80 to one. Right now the ratio is down to 50 to one. With one ounce of gold you can buy 50 ounces of silver. That tells me that silver is cheap. It is undervalued. I expect the ratio to go back to 15 to one, or lower, because for the first time in human history there is less silver on Earth than gold! Silver is a great conductor of electricity, and it has been used in electrical applications. Silver responds to light, and it has been used in photography. Silver kills bacteria, and it has been used in medical applications. Over the past 30 to 40 years we have used up most of the silver that has been mined in the past several hundred years! There are about five billion ounces of gold on Earth, but right now there is less than one billion ounces of available silver left!

* In addition, there is a huge short position on silver on Comex, which is the main place that silver is publicly bought and sold in the United States. I am hearing that silver is in very short supply, and I wouldn't be surprised if the price of silver increased dramatically.

* A quote from an article written by Richard Daughty in January 2007 sums up the case for gold. "A secular bullish perfect storm trend for precious metals continues. Rapidly escalating global investor demand, easier participation by investors via ETFs, conversion of Middle East petroleum dollars to gold, rising new demand from Asia, possible central bank buying partially offsetting central bank selling, conversion from dollars to gold by large U.S. dollar denominated foreign exchange reserves, declining gold production, increased political and NGO interference to bring new sources on line, rapidly escalating costs to produce, delays and shortages of equipment and manpower, previous two-decade bear-market-induced shortage of intellectual capital for miners, safe-haven buying to hedge strong, reckless, competitive dilution of under-backed fiat paper currencies, probably continued de-hedging and continued troubling global political and religious tensions are just some of the factors contributing to the long-term bullish winds now blowing."

Here's the plan: get out of debt, have several months of very liquid assets like cash available (maybe something like a Money Market fund based on Treasury Bills), then start investing in some precious metals themselves, and finally some precious metal mutual funds or unhedged stocks. Maybe some oil or gas stocks, or oil or gas mutual funds.

Store your money in gold and silver: It makes sense to store your wealth in real money rather than in paper money that can decrease in value. A falling dollar will help propel gold and silver higher. It makes sense to store your money in gold and silver.

You might want to buy gold or silver using cash. Under 10,000 dollars is not reportable. Get several prices before you buy. If you do buy gold or silver, don't tell many people about it, and keep it private. Store it in a safe place - a safety deposit box in a bank, or some other safe location.

Abbott's Corporation, 33700 Woodward in Birmingham, 248-644-8565 is a good local dealer in gold and silver.

Tulving (www.tulving.com) is a good dealer with good prices that sells gold and silver.

Affordable Jewelry and Precious Metals has a website that will tell you the current prices for gold and silver (www.ajpm.com/htbin/gold.cgi).

USAA has a very good gold fund, and that is the one the synagogue has invested in. It is called the Precious Metals and Minerals Fund (USAGX). You can get information about them at www.usaa.com or by calling 800-531-8448. The Tocqueville Gold Fund is also a good gold fund (TGLDX). You can get information about them at www.tocqueville.com or by calling 800-697-3863.

How to check the prices of gold and silver: 

http://www.kitco.com 

WAYS TO INVEST IN SILVER 

Physical Silver 

One ounce rounds: these are one ounce of silver, minted by private mints. The premium is about 7% over the spot price.

American Silver Eagles: One ounce pure silver coins minted by the US Mint. The premium over the spot price of silver is 10% or more. 

10 ounce bars: these are minted by private mints. The premium is about 7% over the spot price. They are convenient to count and store. 

100 ounce bars: they weigh about 6.8 pounds, and are about half the size of a brick. The premium is about 7% over the spot price. Johnson-Matthey and Engelhard are the most popular. 

1000 ounce bars: available through Comex. They weigh 68 pounds, about the size of a loaf of bread. 

90% silver coins: These are silver dimes, quarters and half-dollars from 1964 and earlier. They were in circulation. They are worn. They are 90% silver. A bag with $1000 face value has about 715 ounces of silver. There is a low premium and spread between buying and selling. 

Silver stocks: Individual stocks are volatile, and so you need to be prepared for ups and downs. Warning: there are more risks in shares of silver and gold mining companies than in owning actual gold and silver. Risks: nationalization; permits can be delayed or denied; mine sites can be picketed. There are cave-ins and water in mines; there is the shortage of skilled mineworkers and geologists. Mining companies will dilute the value of their shares with new offerings. They may incurs hedging losses. They may lose value by a weak dollar or a strong local currency. The risks are greater, and therefor the rewards tend to be greater.

When buying gold and silver, normally you can't pay by credit card. If they accept a personal check, they will often wait until it clears the bank before releasing the gold and silver to you. Normally you pay by cash or certified check.

There is a "spread" when buying and selling gold and silver. When selling your gold and silver, you get the "spot price" - the price that the metal is currently trading for. When you buy, you pay a premium - maybe 4 to 5% for gold, and maybe 7% or higher for silver. This spread covers the cost of those doing the transaction.

Having others store gold or silver for you:

The Central Fund of Canada (CEF) invests in gold and silver and basically stores it for you. You buy it like you buy a stock.

Sprott Physical Gold Bullion Trust (PHYS)

I do not recommend Streettracks Gold (GLD) or iShares Silver Trust (SLV).

How much should you invest in gold and silver?

It wasn't too long ago that financial advisors encouraged investors to place 10 or 15 percent of their assets into gold. Gold should be 20% or 25% of your portfolio. As things get worse, maybe even a higher percent should be directed there.

Expect volatility in gold and silver. They are small markets, and can go up and down a lot, and quickly. There is leverage in gold stocks compared to gold. The ratio is 3 or 4 to one. More risk, more reward. Gold companies can go broke, while the price of gold should never go to zero. Also, if a gold mining company is producing gold at 500 dollars per ounce, and selling it at 650, it is making 150 dollars per ounce. If the price of gold doubles to 1300, the profits of the gold mining company don't double. They now make 750 per ounce! That is 5 times the profit. The price of the stock soars.

Gold and silver and gold and silver stocks are volatile (especially the stocks) and so you need to be prepared for ups and downs. If you can't tolerate a quick plunge of 30 to 40%, you shouldn't be gold and silver stocks. Gold and silver could initially go down in an economic crisis, so you need to be prepared to ride it out.

Recommended Reading

Books:

Financial Reckoning Day and Empire of Debt, both by Bonner and Wiggins.

Crash Proof 2.0 by Peter Schiff

Websites:

The discussion forum at: www.gold-eagle.com/cgi-bin/gn/get/forum.html

Articles at www.gold-eagle.com/

Articles at: www.goldseek.com/

Articles at http://dollarcollapse.com/

Interview at http://www.kingworldnews.com/

Ted Butler's articles on silver: www.butlerresearch.com/archive_free.html

Jim Sinclair: www.jsmineset.com/s/Home.asp

Audio Commentaries on the Internet:

Financial Sense Newshour with Jim Puplava. A new show comes out on Saturdays. www.netcastdaily.com/fsnewshour.htm

Peter Schiff's weekly radio show at www.europac.net/radioshow_archives.asp

King World News www.kingworldnews.com/kingworldnews/King_World_News.html

Final Comments

There is nothing wrong with having some money, but don't set your heart on getting rich, since human economic systems are inherently unstable. Do not weary yourself to gain wealth, cease from your consideration of it. When you set your eyes on it, it is gone. For wealth certainly makes itself wings like an eagle that flies toward the heavens (Proverbs 23:4-5). In this fallen, unstable world, wealth is insubstantial and can disappear very quickly. You set your eyes on wealth and it is gone. It makes itself wings and flies away like an eagle - fast, high, and for a long time! This is true for individuals, corporations and nations.

If God blesses you, and you are a wealthy Believer, you are to be extra generous: Those who are rich in this present world ought not to be conceited or fix their hope on the uncertainty of riches, but on God who richly supplies us with all things to enjoy. They are to do good, be rich in good works, be generous and ready to share, storing up for themselves the treasure of a good foundation for the future, so that they may take hold of that which is life indeed (1 Timothy 6:17-19).

If you are a Messianic Jew or a true Christian and you are wealthy, remember that you are a steward - it's really the Lord's money, and He wants you to be generous with it to those who are in need. Do good things that will serve the Kingdom of God, and help others, so that your life is characterized by good works.

Let your attitude be that recommend by Rabbi Paul to Timothy: Godliness is a means of great gain, when accompanied by contentment. For we have brought nothing into the world, so we cannot take anything out of it. And if we have food and covering, with these we will be content. But those who want to get rich fall into temptation and a snare and many foolish and harmful desires, which plunge men into ruin and destruction. For the love of money (not money itself, but the love of money) is the root of all sorts of evil, and some by longing for it have wandered away from the faith, and pierced themselves with many a pang (1 Timothy 6:6-10). If you are a child of God, making lots of money and wanting to get rich is not your priority. You are here to serve God and to accomplish His purposes for your life. Make godliness and service to the Lord your highest priority. Learn to be content in this life, and you will be a rich man or woman throughout eternity, where the true riches are found.

Use your money to help others: Cast your bread on the surface of many waters, for you will find it after many days (Ecclesiastes 11:1) Help your own. Don't charge them usurious interest (see Leviticus 25:35-43). Set up an African-American Free Loan Association, helping individuals out up with us to 6000 dollars of an interest-free loan.

It's OK to have some money. It's good to leave something to your children. If you want to increase your wealth, work hard at an honest job, improve yourself, have a financial goal, be careful with your spending, avoid luxuries, don't take on too much debt, avoid co-signing loans, save your money, invest wisely, don't become greedy, or make wealth your life's pursuit, be patient, and generally your wealth will increase. If it does, be generous with it. But even if you do everything right, there are no guarantees, since human economic systems are inherently unstable, and wealth certainly makes itself wings like an eagle that flies toward the heavens.

Final Caution: All opinions expressed are subject to change without notice. These opinions can be wrong and this advice can prove to be unprofitable. Gold and silver can go up or down in value. Gold and silver investments are not necessarily a medium appropriate for every individual. You must do your own due diligence and make your own investment decisions!

Rabbi Loren Jacobs   Congregation Shema Yisrael
P.O. Box 804, Southfield MI 48037
248-593-5150   Shema777@aol.com   www.shema.com