For ye know how that afterward, when he would have inherited the blessing, he was rejected: for he found no place of repentance, though he sought it carefully with tears. - Hebrews 12:17

I have spent a week struggling against writing this article - I knew where it must take me, and I fought against the trip.  But I have only one gift - Stating the Obvious - and now duty makes me exercise it.

Know first that it gives me only sorrow and deep grief to contemplate the terrible events of September 11.  The loss of anyone we love, unique and forever irreplaceable, stifles presumption.  The loss of thousands at a stroke defies words.  Humility and compassion demand a decent silence before we speak.  The crime is so enormous, the blow so awful, who can comment? But we cannot forever stand by the graveside.  The living must go on, with all humility gleaning what wisdom they can from events.  We ought to consider the aftermath in at least three dimensions: spiritual, economic, and political.

HE MISSED THE OPPORTUNITY

On September 11, 2001 George Bush missed the greatest opportunity offered to any American politician in the last sixty years.  That day he might have appeared on television and said to the American people, "Today America has suffered a terrible catastrophe.  The All-sovereign God of the universe removed his protecting hand from us, and allowed our enemies to strike our nation.  There is no help in heaven and earth but from him, therefore let us afflict our souls and turn to him in repentance, confessing our sins, and he will heal us and forgive.  I therefore proclaim the next seven days a national week of prayer and fasting in repentance for our national sins." George Bush didn't do that.  Neither did anybody else who had a national forum of any size.  Those few who dared to hint that America's own sins might lie behind this chastisement were cursed and reviled for their "hate speech."  Rather than turn to the Lord of Nations, the only true God, Father, Son, and Holy Ghost, the Lord Jesus Christ, America turned to the "god of a thousand faces" in their "houses of worship."  Blather by the boatload foamed through the airwaves, stifling rational thought and repentance.

In an orgy of self-righteousness, America suffered collective national amnesia.  Now no evil, real or imagined, which the American government might have done to these terrorists could possibly justify the murders they committed.  These killers must be ruthlessly hunted out and punished.  But neither can any good come of covering our own national sins with self-righteous outrage.  Whenever we are chastised, personally or nationally, we ought first to examine ourselves to see where our own sin might lie.

Promptly, however, Americans forgot about Baghdad, Belgrade, Dresden, and Hamburg.  They forgot the United States invented total war 140 years ago, overturning the laws of warfare Christendom had laboriously built over two millennia.  Forgotten were the 1,800 Cruise missiles the US has launched into the Balkans and Central Asia in the past 10 years.  Forgotten are the 1.4 million Muslims who have perished from US intervention in their countries since 1970.  Forgotten is the American government as it appears, not to us who are people of good will, but to those who have received its rough attentions over the last century.  Forgotten, too, are the forty million victims of the American holocaust, abortion.  Forgotten our cold materialism, our idolatrous devotion to money (Mammon) and power (Ba'al). Forgotten our own uncleanness, our exaltation of pornography, fornication, adultery, and homosexuality.  Forgotten our arrogance.  All that lay in mute oblivion.  Forgotten was the God who has from our first days blessed and protected us in tender mercy.  Few were the voices with courage to say, "America, your only hope lies in the Gospel, and repentance."  Fewer still the ears that heard.

BAD THEOLOGY IN A TIME OF CRISIS

My friend Pastor John Weaver told me about a sermon that he heard preached at the funeral of a boy who had died in one of the blasts.  The preacher said, "God didn't want it, but he couldn't stop it."  However it may anger anyone who hears it, the truth is still the truth.  As John correctly observed, the God that does not ultimately control all events is also powerless to save.

Make no mistake here.  Sin caused the carnage in New York and Washington, and God is never the author of evil.  Still, he controls all events, and orders even evil events in a sinful world for our good.  "Even the wrath of man shall praise thee."  Anyone who denies America's own sin puts a bar to repentance.

The prophet Habbakuk lamented the sin of Israel and cried to God:  How long will you allow them to go unpunished? God then revealed to him that he would indeed punish Israel, by sending the wicked Chaldeans to carry them off into captivity.  What!  Habbakuk gagged.  Can God be righteous if he uses the less righteous to punish the more righteous.  Yes, was the only reply the prophet heard.  The just live by faith, not human merit.  Are any of you less deserving of God's wrath than these sinners?  (Luke 13:1-5) How can you be justified by your own crippled righteousness?  No, the just shall live by faith.

IS AMERICA A CHRISTIAN NATION

While America is not in the formal sense a covenanted Christian nation, it certainly is a Christian nation historically and generally. No less an authority than the United States Supreme Court (practically the forerunners of deity these days) formally declared it a Christian nation in Holy Trinity Church vs. United States, 143 U.S. 471 (1892). After mentioning various circumstances, the court added, "These and many other matters which might be noticed, add a volume of unofficial declarations to the mass of organic utterances that this is a Christian nation."

But whether you agree that American is a Christian nation or not, the Lord of Nations still rules and chastises all nations and peoples, as the prophet Jonah, for example, makes clear.  Deuteronomy 28 lays out God's blessings and curses on Israel, and, by inference, any Christian nation that refuses to obey him:

Confusion and rebuke (vv. 20, 29)

Pestilence (21, 27, 35, 61-62)

Drought (24)

Invasion, defeat before your enemies, and fear of them (25, 49, 57, 65-66)

Frustration of all plans (30, 38-42)

Spoilation  (30-34)

Madness  (34)

Exile to slavery and idolatry (36, 63, and 65)

Foreign domination by immigrants (43-44)

Despair (65-67)

But the only hope is the Gospel of the Lord Jesus Christ.  All other shifts are merely the tears of Esau.  And don't fool yourself that it is all those other bad old Americans that have brought this chastisement on us.  Look in the mirror, Christian.  Judgement begins at the house of the Lord.  If this nation is to return to God in repentance, only his Church can lead the way. Our duty, then, is plain.  We have to beseech God night and day to grant our country and ourselves repentance.  That means you and I have to fast and pray, in hope that God in wrath will remember mercy.

None of us is the President.  None of us individually has the power to punish these terrorists or protect our nation, but we are not without power. We have an ever-open door to the mercy seat of God, and surely he will not refuse to hear us.

AN ECONOMIC NIGHTMARE

Numerous commentators who had foolishly kept on ignoring the evidence and predicting an economic upturn took the opportunity of the World Trade Center attack to jump out of their sinking boat.  We ought to remember that long before that event the economy and the stock market were already sinking. The chief factor determining our economic future is money, the source of all economic weather.  There, the future is already sure:  inflation.  Adam Hamilton wrote a most excellent article, "The Inflation Tsunami," that appeared on Le Metropole Café (http://209.41.12.102/cgi-local/shoptmc.pl/SID=086372/page=http://www.lemetropolecafe.com or Zeal Research at http://209.41.12.102/cgi-local/shoptmc.pl/SID=086372/page=http://www.zealllc.com/subscribe.htm. Make an effort to read this article.  It's really splendid).  His numbers were devastating.

If you will check the September, 2000 Moneychanger you will find an article about the Financial Vulnerabilities Project of the Council on Foreign Relations.  The CFR had called together its experts to address recurrent financial crises.  My conclusion was that against financial crisis the government and financial establishment have only two answers:  blarney and liquidity.  Blarney is all the chirpy propaganda broadcast to soothe the stampeding public in times of crisis.  Liquidity is pumping money into the economy.

Adam Hamilton drew the same conclusions, but added horrifying examples from the last three years.  At every crisis - Long Term Capital Management's collapse, Y2K, the slumping stock market, and now 9-11 - Comrade Greenspan has pumped money into the economy as never before.  He must now be the envy of banana republics around the world.  Since the end of last year MZM money supply (totally liquid money that can be spent immediately) has been on a rising curve that now nearly reaches 20% (last year to this year).

Measured at an annualized rate - projecting present increases to a yearly rate -- during the week following 9/11/01 Greenspan increased MZM by 168%. That is not a misprint.  He created $172 billion dollars in seven days. Mr. Hamilton comments, "For comparison purposes, realise that the entire M1 money supply of the USA in 1966 was less than $176 billion.  While it took the US government and eventually the Fed, after it usurped the monetary helm in 1913, almost 200 years to inflate the narrow money supply . to $172 billion, the Alan Greenspan Fed was so utterly terrified of financial collapse following the WTC collapse that it injected $172 billion into the US financial system in one week!"

The Fed's action leads to two reliable forecasts.  First, the Fed and the government will react to future crises in exactly the same way, with increased inflation.  Besides interest rates (which produce essentially the same result by a different route) they have no other tool  As Hilton T. likes to tell me, "When all you have is a hammer, everything looks like a nail."  Second, there is very large price inflation in our future, and the value of the US dollar must fall in proportion to the inflation.  Therefore, all dollar denominated assets will suffer.

No, I have not missed the discussion about war being good for the economy. That may happen in the short run, but war always impoverishes a nation in the long run.  Remember, too, that the foundation for a crashing dollar and $800 gold was laid in Viet Nam.  The "war"  we are facing today promises to be half as much fun as Viet Nam and twice as expensive.

(If you are interested in defense stocks or other investments that might profit from war, I suggest you subscribe to Richard Maybury's excellent Early Warning Report, (Henry Madison Research, Box 84908, Phoenix, Arizona 85071; (800) 509-5400.  Normally $200/year, he has been making a special offer of a free Briefing Package to bring you up to speed on his thinking and  a subscription for $99.  I confirmed this price with Mr. Maybury, so tell the operator you are a Moneychanger subscriber.  For years Mr. Maybury has been following what he calls "Chaostan," the constellation of hostile countries spawned by US foreign policy, and the effects on economy and society.  His newsletter is an invaluable resource, although I don't uniformly agree with his conclusions.)

THE STOCK MARKET

Against the background of guaranteed inflation, let's look at the stock market.  Bear in mind that heavy inflation is not good for stocks.  During the German hyperinflation (1919-23) nominal stock prices rose rapidly but in real terms stocks steadily lost value.  (A "hyperinflation," by the way, is defined technically as an average 50% monthly increase in prices.  However, 20 - 25% will also wreck an economy quite nicely, thank you.) Nor will a war pull things out of the fire.  Some companies may win, but many will lose, even close, due to inflation, an inflation like you've never seen before.

Before 9/11/01 the stock market was already cascading downward into a bear market (confirmed by Dow Theory signals and other indicators).  How much can we expect the Dow to decline before the bear market is over?  Here's a lesson from history:

1929-32, down 89%

1937-42, down 53%

1946-49, down 24%

1966-74, down 45%.

That's an average drop of 52.75%.  In round numbers, that takes the Dow back to 6,000 at a minimum, if it just meets the average as it corrects from the greatest stock market bubble in history..  With stocks still selling at historically high overvaluations (the S&P at 27%, versus an average PE of 14.5, for example), how much faith can you put in the optimists who promise that "the bottom has probably been seen."  Not likely.

Ever suspicious, I kept hearing broadcasters claim that the 14.3% the Dow dropped the first week it was open after 9-11 was the "worst since the 1940s."  I went back and checked.  Actually in 1929 the high close occurred 9/3/29 at 381.17.  However, as my base date I used the last close before the crash week, 298.27 on Saturday, Oct. 26, 1929.  The lowest close occurred on Tuesday, 10/29/29 at 230.07, down 23.6%, but the week closed on Thursday, 10/31/29 at 273.51, down only 8.5%.  So the crash of 9/17/01 - 9/21/01 was worse than 1929's crash week.

Following 1929's progress, I found that the post crash low occurred on 11/13/29 at 198.69, down 33.5%.  From there it climbed for the next six months as follows:  one month from 10/26/29 base date, -21.3%; 2 months, -19.4%; 3 months, -13.3%; 4 months, -12.1%; 5 months, 5.3%, and 6 months, -9%.  In the seventh month the Dow was down 26.2%, and continued to slide into June 1934 when it bottomed at 41 [sic].

I offer these dismal numbers only as a warning.  After the 1929 crash the stock market still found a huge crowd of cheerleaders, but it sank down anyway.  Once the deflation sank its teeth into the US economy, it wouldn't turn loose until World War II started nearly ten years later. That brings up another warning.  "Gurus" (most earning their living working for Wall Street) keep telling the hoi polloi to "buy and hold."  Folks who took their advice in 1929 got even all right - twenty-five years later, in 1954, and only in nominal, not inflation-adjusted, terms.

THE US DOLLAR

The US dollar index was already on the skids before 9/11/01.  Having topped at 121.02 in July, it had already peeked below 113, then rallied back up to 115.5.  As you might expect, September 11's aftermath took it down to a low of 111.61 on 9/19/901.  Since then it has rallied back up to 114.5.  the trend is still firmly down, although it has in the last day or so rallied above its 50 day moving average.

THE NEW NORM

After the attacks the government took pains to make known here and abroad that the Plunge Protection Team (its team of government, business, and banking experts assembled years ago to manipulate markets) would be on the job to bail out markets.  You ought to view this in conjunction with Greenspan's actions of the past few years plus years of manipulating currencies and bonds, and conclude that from now on the federal government will openly and unashamedly manipulate markets - as if they weren't already - as if the Fed itself weren't one gigantic plot to manipulate markets since 1913.

Government manipulation will never make markets more stable.  It can never make markets rise or fall against the established trend.  Yes, for a short time they may manage a counter-trend rally, but in the end government manipulation will only make markets more volatile and prolong any downturn. Manipulation may send markets further down than they otherwise might go (stocks, 1929-1942) or higher (gold & silver, 1980), but the manipulation can never change the underlying economic trend.  That will work itself out to completion.  In the meantime, however, the government/Fed can impoverish quite a few of us.  But I digress:  look for increased volatility in all markets, but especially interest rates, stocks, and precious metals.  Since volatility increases risk, you ought to avoid open-ended speculative commitments like shorting stocks or commodity futures, unless you do it for a living.  They'll take all your money and never even say thanks. Economist Paul Krugman in the 9/30/01 New York Times Magazine, "The Fear Economy", unintentionally spotlighted the failure of government ability to manipulate markets.  (http://209.41.12.102/cgi-local/shoptmc.pl/SID=086372/page=http://www.nytimes.com/2001/09/30/magazine/30ECONOMY.html.  I don't often recommend you read an article, but here's one you'd profit from.)  Krugman muses on the question, how will the 9-11 tragedy affect the economy.  He admits that the governments and central banks have only one tool, liquidity, wielded by manipulating the interest rate (monetary policy, the central bank's job) and fiscal policy (government spending).  Whoops, he also admits that these wonder weapons in the wonder world where depression has been banished forever might not always work too well.  He examines Japan's case where, ten years after a stock market collapse, a zero interest rate and enough government spending to pave Africa and part of South America have failed to life the economy out of recession.  Ahh, the true believer! Mr. Krugman, none deterred, remains convinced the same weapons will work here in the US, as long as we do more of the same, faster. So there's your future:  more government meddling in the economy, much higher inflation, and housecleaning time in stocks and currencies.  Not much comfort there, unless you own gold and silver.  And never mind the derivatives bubble and the debt bomb.

ENTER POLITICS

Judging from the last month, politics post-911 won't be pretty for lovers of liberty.  I can't decide whether the wave of super-patriotism we've seen is genuine, or whether it's a mile wide and a quarter inch deep. However, the change has spawned some truly awesome mutations of stupidity. Take Afghanistan.  They're the Scots of Asia, fighting everybody who crosses the border and each other when there run out of foreigners to kill.  Their favourite pastimes are killing and killing.  The last time foreigners conquered the country was in 1227.  Genghis Kahn, known for his gentle fighting methods, conquered it after seven years of fighting.  The Afghans whipped the British twice in the 19th century, and the Russians once in the 20th.  This is the country we are attacking, landlocked thousands of miles from the US behind untrustworthy allies (Pakistan and the USSR - whoops! - the Commonwealth of Independent States).  Conventional war here will be impossible - as I said, half the fun of Viet Nam at twice the price. I was astonished, however, by one thing.  The events of 9-11 have proven in spades the foresight of scholar and military thinker Martin van Creveld. (Refer to the 11/00 Moneychanger article about his latest book.)  In the late 1980s he published The Transformation of War, the most important book on war since von Clausewitz' 19th century classic.  Van Creveld argued there that atomic weapons had made conventional war unthinkable.  Moreover, national armies had become so huge, expensive, and dependent on technology that nations could no longer afford them.  Future wars would be "Low Intensity Conflicts" (LIC) fought between guerillas and conventional forces. In those face-offs, huge dinosaur national armies would have a distinct disadvantage.

Van Creveld followed Transformation in 1999 with The Decline and Fall of the State.  There he argued that the nature of the modern state since about 1650 has changed.  Where earlier states were tied to some human personality, modern states had become corporations - imaginary juridical entities with perpetual life and no conscience.  The result was the rise of a permanent bureaucracy and an all-powerful state.  However, van Creveld argued, that corporate state is at or past its peak.  Trends indicate that power was passing from the state to other bodies - regional, ethnic, religious, business - as the state increasingly becomes incapable of providing for and protecting its own.  The course of this enormous social change is likely to bring a better life for some, but waves of strife and bloodshed for others. Then there was President Bush on TV, talking about declaring war on - whom, exactly?  War is a state of hostilities between sovereign nations.  What nation had attacked the US?  Not a nation, but a non-state terrorist organization.  Yes, a private, non-governmental organization had launched a terrorist strike that had succeeded in halting the whole US economy for a number of days.  Having heard him speak, van Creveld was, I'm sure, immeasurably grieved to see his forecast coming true.  Nonetheless, the issue that will pervade American politics for years to come will be, How can the government keep us from being killed at home?

You can count on this:  Americans will renounce all sorts of ancient rights and liberties for any promise of security.  However, that won't help them much.  How do you stop an enemy coming from everywhere at once? Obviously, the days of hijacking airliners have passed.  Any passenger who would sit in his seat when a hijacking begins today is non compos mentis. Anybody who can count will say, "It's 70 of us against 4 of them, and certain death anyway."  However, that doesn't address the thousands of other avenues of terrorist attack, especially through nuclear, chemical, and biological warfare.  Studying about biological warfare a few nights ago literally made me work to get a grip on myself.  (Next month we'll have a special offer for a manual on bioterrorism.  We just couldn't get it in this month's issue, but look for it next month).

How all of this will play out in the American population of 2001, post-Viet Nam, post-Watergate, post-Clinton, I don't know.  On the one hand I see the potential tyranny, on the other the potential resistance for liberty.

OUR STRATEGY

Certainly I don't have all the answers.  I can, however, tell you what I have done and am doing.

My chief protection is distance.  The terrorist who strikes out here will be too stupid to strike a match.  We live two hours from any major metropolitan area, not quite at the end of the road, but you can see it from here.  Sure, I'm aware that might not be enough distance, and that distance isn't always a cure.  The folks who fled to the quiet South Pacific from war-torn Europe in 1939 got a bad surprise in 1943.  We have taken, and are taking, the precautions one ought to take in our fragile modern world, stocking food, water, medicine, and supplies.  Maybe we can't be self-sufficient, but we don't have to be helpless.  Families survive better than individuals.  I tell you with all gratitude to God, these green Tennessee hills and hollers looked even more beautiful on September 12th than they had on September 11th.  I am in dead earnest when I advise you to consider moving out into the country.

Second, apply distance to your finances.  Put distance between you and those vehicles that are likely to suffer.  That means stay out of stocks, avoid debt, take few risks.  Don't let the volatile ups and down in markets shake your resolve.  Keep your eyes on the long haul. What looks safe today may disappear tomorrow.  Ask what may profit from this turmoil.  For me, that points to gold and silver.  For those afraid to commit yourself 100% to metals, you can try US government Treasury bills (800-722-2678, US Treasury Direct), but watch out for a collapsing US dollar.

Finally, "What time I am afraid, I will put my trust in [God]."  (Psalm 56). In this fallen world, nothing else can cure our worries.  "Put your trust in the Lord, and be doing good:  dwell in the land, and verily thou shalt be fed." (Psalm 37).  That is the promise of his eternal mercy, and his mercy never fails.

-- F. Sanders

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