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Q. I'm saving money for an emergency fund and my retirement in a brokerage account. But, the stock market volatility is scaring me. Can you explain what's going on and what I should be doing? I want to be a "good steward" of God's resources.
I don't blame you for wanting to be a good steward. Yeshua plainly told us,
"One who is faithful in a very little is also faithful in much, and one who is dishonest in a very little is also dishonest in much. If then you have not been faithful in the unrighteous wealth, who will entrust to you the true riches? And if you have not been faithful in that which is another's, who will give you that which is your own? No servant can serve two masters, for either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve God and money" (Luke 16:10-13, ESV).
The Unjust Steward
Luke 16:10-13 is the tail end of the Parable of the Unjust Steward. I quoted the entirety of this passage because it tells us so much. It reveals:
1. If we are faithful in little things God will entrust to us greater responsibilities.
2. We are expected to do a good job even with "unrighteous" wealth.
3. We don't own anything. God owns everything.
4. Money, rather than God, can become our "master."
Pharisees believed Riches Meant Blessings
Concerning the last point, MacArthur says, "Many of the Pharisees taught that devotion to money and devotion to God were perfectly compatible. This went hand-in-hand with the commonly-held notion that earthly riches signified divine blessing. Rich people were therefore regarded as God's favorites. While not condemning wealth per se, Christ denounced both love of wealth and devotion to mammon" (MacArthur Study Bible).
We should be alert to MacArthur's notes when we encounter prosperity preachers at TBN or other television stations and listen to those who preach that believers are entitled to a wealthy lifestyle. Clearly, devotion to God and devotion to money are NOT compatible.
A Con Game
As far as the stock market is concerned we are definitely dealing with "unrighteous" wealth! The Federal Reserve and the ECB (European Central Banks) have all of us involved in their "confidence" game - or a Con Game.
BIS warning of Great Depression
On June 25, 2007 the UK Telegraph posted an article that should have served as a dire warning to all investors. The article was entitled: "BIS Warns of Great Depression Dangers from Credit Spree." Just so we clearly understand, the BIS, or Bank for International Settlements, is the bank of the European Central Bankers - a bank of banks.
Flapper Parties&Debt Binges
It is an eye-opener to realize that in the 1920s Americans were involved in flapper parties and credit sprees. They bought interest-only home loans and played on-margin in the stock market. This was a set-up according to some.
In other words, to gain control over and to buy-up valuable American assets, the Federal Reserve "pulled the plug" and suddenly tightened credit. In other words, people were no longer allowed to buy interest-only loans, and they were no longer allowed to play the stock market on-margin. Loans were called in and debtors were told to pay up or sell their assets for pennies on the dollar.
The crisis in confidence started when a major Austrian bank went belly-up. Suddenly, people understood that their money was at risk in the banking system. They all tried to get their money out at once. In the United States a "banking holiday" was declared to stop the hemorrhaging of cash out of banks.
Serving up our Homes on a Debt-Platter
Today we have a similar crisis, except that it is an electronic "bank run." How many years had we seen home loan, home equity, and credit card advertisements from Di Tech, Countrywide, and other loan companies on television and in magazines? We had been saturated with commercials telling us to serve up our homes on a debt platter! In the process we all became debt junkies and consumer clones!
As a result of an American orgy of home buying, taking out equity loans, and consumerism fed by credit cards at the local shopping mall, our commercial bankers such as Goldman Sachs and Bear Stearns packaged our shaky debt and sold it overseas to mutual funds and hedge funds. They "passed the buck" to foreigners! Even our credit rating agencies failed to downgrade our bad debt. They spread our shaky debt worldwide! No wonder foreigners wanted to get out of all dollar holdings! No wonder they became angry with us.
Perhaps we even need to rethink our feelings of anger at China's frequent defective merchandise (like the pet food scare). After all, America sold fraudulent CDOs (Collatoralized Debt Obligations) to worldwide markets.
BNP Paribas&Bear Stearns Funds
Today, France's largest bank, BNP Paribas, halted withdrawals from three of its investment funds due to risky, American mortgage debt. This follows Bear Sterns halting withdrawals on some of its funds. Investors are the losers - shut out of the game of stock-market musical chairs in these closed mutual funds whose assets have been frozen.
ECB Provides $150 Billion in Liquidity
In response, the ECB provided over $130 billion in liquidity to its banking system, and the Federal Reserve followed suit. (In other words, they printed "funny money" to ease concerns by Europeans who wish to get their money out of the banking system).
Where will risky U.S. Debt appear Next?
People worldwide are concerned about where our bad U.S. mortgage debt will show up next. Which global funds hold our risky mortgages? Which funds carry our credit-card debt? Which funds hold treasury debt and other forms of U.S. government debt? According to an article in the Wall Street Journal, even some of our money funds may be at risk! (Richardson, Karen&David Reilly, 8/9/2007, WSJ: "Money Funds May Hold Subprime, Too.").
While there are similarities to the panic which unfolded after the Great Depression's Austrian banking failure, there are differences, too.
Electronic News&Computerized Liquidity
Nowadays we have instant electronic news which was unavailable in the 1920s. Fears can be calmed as quickly as they start. Also, the Federal Reserve and the European Central Banks can provide instant liquidity. Computers such as we have today didn't exist during the Great Depression. Liquidity was based mostly on cash transactions - not on computerized debt-entries made by governments worldwide.
Hyperinflation more Likely
As a result, we are more likely to go into a hyperinflationary crisis rather than a deflationary one - following a deflationary credit seizure!
We are not financial advisers. But, we can focus on the Biblical admonition to get out of debt. …"the borrower becomes the lender's slave" (Prov. 22:7). We also advise you to do your homework and pay attention to your financial advisor's suggestions. But make sure that you know more than he does about your own particular needs. We have many friends who lost a lot of savings, and in one case, all of their savings - because they just handed money to a broker or advisor without knowing what he was doing with their money.
You're responsible for You!
Now is the time to pay down our credit card debt and to become extremely conservative. Be careful with the money God has entrusted to us. This is the time to, "Make sure that your character is free from the love of money, being content with what you have. For He Himself has said, 'I will never desert you, nor will I ever forsake you'" (Heb. 13:5, NASB).
"Behold, I am sending you out as sheep in the midst of wolves, so be wise as serpents and innocent as doves" (Matt. 10:16, ESV).
Prechter, Robert R. 2003. Conquer the crash: you can survive and prosper in a deflationary depression. West Sussex, England: John Wiley&Sons.
Schift, Peter D. 2007. Crash proof: how to profit from the coming economic collapse. Hoboken, N.J.: John Wiley&Sons.
Ed. note: We wrote this before Bear Stearns collapsed. The Bible always guides us with eternal truths. It never fails.
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