How to Prevail in Times of Economic Crisis

By Joshua Davis

2 Corinthians 2:14 Now thanks be to God who always leads us in triumph in Christ, and through us diffuses the fragrance of His knowledge in every place.
The media has a knack for seeing everything that is wrong in the world and then reporting it to the rest of us, much like the ten spies did in Numbers 13. Twelve Israelites had spied out their promised land and saw both the fruit of the land and the giants. Ten of the spies gave a negative report and turned all of Israel back from their inheritance. However, two of the spies, Joshua and Caleb, saw both the fruit of the land and the challenges but stated, Let us go up at once and take possession, for we are well able to overcome it (Numbers 13:30). We are facing many challenges throughout the world today which could cause mens hearts to fail them (Luke 21:26). As believers, we need to believe the report of the Lord. It is important in the times we live in to always have a victorious

mindset knowing that the Lord is always leading us into triumph in Christ. No matter how bad it seems to be getting, the earth is the Lords and everything in it (Psalm 24:1).

Contradicting Prophecies about the Economy

There have been a lot of seemingly contradicting prophetic words concerning the economy in the last few months. Some renowned prophetic voices saying not to fear, that the Lord is going to deliver us from all economic troubles and recession. Others are saying that 2013 will be a tough economic year and 2014 will be much worse. In the face of these apparent contradictions, who or what should we believe? Again, I believe that we should always see the victory and believe the good report of the Lord. However, it is wisdom to realize that there is a process in order to get to victory. It is true that Joshua and Caleb saw the victory, but that does not mean that they overlooked the challenges. In fact, when God did give them the Promised Land, they had to

face the giants in the land and fight for many years in order to prevail. In other words, just because the Lord promised them that the victory was theirs didnt mean that they didnt have to do the actual fighting. If this were the case, God wouldnt have commanded Joshua to be strong and courageous three times in a span of three verses (Joshua 1:6-9). Is our economy showing signs of long-term trouble? Yes! Does God have a good plan for our economy? Yes! Is it going to happen overnight? No! The Lords deliverance is always a process. If we can see that process and walk both in faith and patience (Hebrews 6:12) then we have great opportunities ahead along with many challenges.

Verifying a Vision

All true prophetic vision will eventually be confirmed by technical indicators -- which will confirm the timing.
We at Investing with Insight believe we are in a Joseph season. The Lord has prepared many Josephs through a long and painful season to rise up and be

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deliverers for many. The Lord is shaking all of the kingdoms of this world, including every financial kingdom, until only His kingdom stands. What many people are seeing as the demise of the financial world, we see as an opportunity to excel and take over. We are called to be both overcomers (Revelation 3) and more than conquerors (Romans 8). Rick Joyner, pastor of Morningstar Ministries, has stated many times over the last few months that we are heading into the best of times and the worst of times. We at Investing with Insight agree. It will be the worst of times for the world as economies falter, natural disasters occur and plagues come upon the earth. It will be the best of times for those who make the Lord their refuge and put their trust in Him. Because you have made the Lord, who is my refuge, even the Most High, your dwelling place, no evil shall befall you, nor shall any plague come near your dwelling (Psalm 91:9-10). So the bottom line is this: Yes, the economy is struggling and, we believe, is going to get worse. However, understanding what is coming and when will also enable you to position yourself to take advantage of what seems like a bleak situation.
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An Overview of a Troubled Economy

The U.S. stock market has traditionally been an indicator of the health of the U.S. economy as a whole. As you can see from Figure 1, the beginning of January 2008 marked a steep decline in the Dow from 13,800 down to 6,500. Now the Dow is essentially trading upwards between trend lines of 12,500 to 13,700. We have seen the Dow shoot up 400 points in one day only to be followed by a sharp decline shortly after. The stock market is now struggling to find clear direction. Why has the market experienced an upturn, but then followed by signs of nervousness and indecision? Lets take a look at some of the fundamental issues facing the U.S. economy right now: Figure 1:DowJonesIndustrialAverage

1) Excessive Amounts of Debt This is not only the number one fundamental problem, it is the fundamental problem. The U.S. government is carrying unsustainable amounts of debt at $16.4 trillion and growing at $1.65 billion per day.1 Americas total debt, including federal/state/local government, business and household debt is a whopping $53 trillion and growing (See Figure 2). Lenders are restricting the distribution of finances to those who have jobs or dont need the money. Public debt is increasing and private debt is declining. The average American consumer is finding it difficult to continue to borrow.

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D O W JO N E S I N D U S T RY AV ER A G E AS O F M ARC H 2 8 , 2 0 0 8
DJIA Daily

14,500 14,000 13,500 13,000 12,500 12,000 11,500

Volume

MILLIONS

600 400 200 0

MAY JUN JUL AUG SEP OCT NOV DEC 08 FEB MAR

http://www.brillig.com/debt_clock/

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Figure 2: AmericanDebtvs.Income
BILLIONS OF DOLL ARS (IN 2007 DOLL ARS) 55,500 50,000 45,500 40,000 35,500 30,000 25,500 20,000 15,000 10,000 5,000 0
1957 1962 1967 1972

Grandfather Economic Report http://mwhodges.home.att.net/

Total American Debt = $53 Trillion (federal/state/local govt

+ federal debt to trust funds

+ business + household +

domestic financial sectors

National Income in 2007

dollars - orig. method

1977 1982 1987 1992 1997 2002 2007

Eventually, consumer and even government spending will have to decrease (sooner or later, the bills will need to be paid). The problem is, less spending will most likely result in a major economic slowdown and depressed stock and real estate markets. While the reasons for why this is true are numerous, this makes intuitive sense: the value of something goes up only if people are willing to buy it. When you have no buyers, the value of what you are selling decreases. This is the problem with the housing market right now. In this years Shepherds Rod, a prophetic outlook for the year, Bob Jones stated, The council given to Gods

people is to continue to be removed from heavy debt and be in a position to take advantage of the shaking and transfer of wealth when the time is appropriate.2 The greatest investment you can make this year is to simply pay down excessive debts. By doing so, you will position yourself for Gods provision that lies ahead. 2) Inflation Inflation is the rise in the general nominal level of prices over time. In other words, inflation is the answer to the question why does it cost you more to buy a gallon of milk today vs. this point last year. What leads to high inflation? Usually a

growth in the countrys money supply, i.e., how much money the government prints and puts into circulation. How do you pay for something you cannot afford? You use your credit card. How does the government pay for something they cannot afford? They fire up the printing press and create more dollars. The problem is, the more there is of something, the less valuable it is (see below). So the more dollars circulating, the less valuable a dollar is worth. This is why it costs more dollars to buy the same gallon of milk today than it did last year. This also plays a role in the rise in the price of commodities like gas and gold, which are all priced in U.S. dollars. 3) A Weakening Dollar As more U.S. dollars enter into circulation, they become worth less until, eventually, they become worthless.3 In 2007, the dollar lost 7.5% of its value against a group of 26 currencies, according to a Federal Reserve tradeweighted index. The dollar now stands at its lowest point since 1973 when the Fed created the index. A weak dollar generally is reflected by a bear or down market for stocks.

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http://www.whitedoveministries.org/content/ArchivesItem_11_368_v?PHPSESSID=8c40084878600dcfb992f6da223cd47 http://online.wsj.com/public/article/SB119923198037560935.html

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4) Sub-Prime Mortgage Crisis The sub-prime mortgage crisis is a great example of how our debt driven economy can wreak havoc in the financial markets. A subprime mortgage is a loan offered to borrowers with poor (sub-prime) credit history. In the midst of the unprecedented real estate boom of the 1990s and early 2000s, politicians decided to make it easy for anyone to get mortgages even people who, in retrospect, should not have received them. Many of these sub-prime mortgages were ARMs (adjustable rate mortgages), which means that the interest rate on mortgages were adjusted every time interest rates changed. In late 2006, interest rates increased. Unfortunately, this meant that people who held ARMs had to pay correspondingly higher monthly payments on their mortgages. As a result, they began to default on their loans on a massive scale, beginning in 2007 to today. However, it is not just the mortgage holders who were affected. People who had been defaulting on their mortgages were forced to liquidate their homes at

below-market costs. This in turn decreased the home values of all the adjacent houses in the neighborhood, effectively destroying much of the equity that people had built up over the years. This has been especially difficult for many older people, who were relying on the equity in their homes to fund their retirement. In addition, the financial companies (Countrywide, Bear Stearns, etc.) who held the defaulted loans, have also paid a heavy price. They have written off billions in losses. These once respected companies have had to close their doors or be bought out. Another victim was Bear Stearns, an old and very respectable Wall Street firm, who saw their stock value fall from $150 per share to $2 per share, and who had to recently sell themselves to J.P. Morgan simply to survive a massive shock to the financial markets worldwide. The sub-prime crisis is still not over.4 There may be as many as 2 million sub-prime mortgages scheduled to reset by the end of 2013. The negative effect of the subprime fallout is still

threatening the real estate and the economic market. For a more in-depth discussion of the sub-prime crisis, see the Investing with Insight special two page report on the subprime crisis called Feature in New Man Magazine, found in the Resources section of the Investing with Insight website.

Outlook for 2013

The troubling thought is that the fundamental problems affecting the U.S. economy probably have not been fully uncovered. Considering that what we know is already bad enough, why hasnt the stock market reacted worse than it already has? There are a couple of reasons. When it appears that the stock market is ready to fall, the Federal Reserve (Fed) steps in and lowers interest rates to stimulate the economy. Lower interest rates make credit more available and the spending spree continues on while a correction is averted. However, this is only a temporary solution. At some point, the Fed will be forced to raise interest rates (they cant go much lower). When this happens, the stock market will have to begin its long-delayed correction.

http://fintrend.com/ftf/Articles/FED_Bails_out_Borrowers.asp

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Secondly, the government has instituted an economic stimulus package, which is meant to put more money into the hands of consumers to stimulate economic activity. Instead of depending on business and new industry to provide jobs and income, the government is handing out free cash in an effort to stimulate spending. However, like the Fed rate cuts, this is only a temporary fix and does not address the fundamental problems of our dependency upon debt. This helps to explain in part why we are seeing so much uncertainty in the stock market. Commodities such as gold and silver usually have a pretty good run when the Fed steps in to artificially stimulate the economy and boost the Dow. This is a trend we can probably expect throughout this year. And once the economy begins its major correction, we can expect the prices of gold, silver and other commodities to dip and then soar. In 2007, Bobby Conner prophesied a hop, skip and a jump within the stock market which is exactly what we saw. The volatility index (VIX) saw its most volatile year since its inception in 2004. Likewise, this year

Figure 3: VIXY VolatilityIndex

VO L AT I L I T Y I N D E X AS O F M AR C H 31, 2 0 0 8
VIX Daily

40 35 30

25
20

15
10

5
04 05
06

07

08

we expect increased volatility as the general upward trend is broken by fears of a breakdown in the whole financial system. We expect volatility to increase in 2013 with several peaks of volatility. For the year we expect the Dow to trade lower in real dollars, but the Fed can devalue the dollar so that it takes more dollars to buy a share of stock. So we can expect more of this tug of war in the stock market to continue throughout this year. Eventually, however, the debt creation train will have to stop, and we will have to face the proverbial music. The long-term trend looks like a
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continued devaluation of the dollar and ever increasing commodity prices.

Conclusion
If you believe, as we do, that the economy is aiming for a down-swing, what can you do to position yourself to protect yourself from this situation and even prosper from it? We hope that the succeeding articles in this series will give you some constructive ideas that will help you towards these ends.

The most important advice we can give is this: By faith Noah, when warned about things not yet seen, in holy fear built an ark to save his family Heb. 11:7

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