The Status Quo system is failing. Its collapse will be messy. Starting to call things what they really are is a necessary first step to working with this reality.
Longtime correspondent Harun I. has offered a refreshing resolution for 2014: let’s start calling things what they actually are, rather than continue using officially sanctioned half-truths and misdirections. Language defines the context, meaning and agenda–in other words, everything. If we continue using Orwellian language, we get an Orwellian world of officially sanctioned deceptions passing as reality.
Here are Harun’s suggestions should we accept the value of Calling Things What They Really Are. This may well be one of the most insightful explanations of our financial system you will ever read:
Bank Deposit: An unsecured personal loan. The bank can do whatever it wishes with the money. The money may not be returned (ironically, people pay for this “service”).
Fractional Reserve Banking (Lending): Leverage. A bank has only a fraction of what it owes to its depositors. In a 10% fractional reserve system, the bank is only required to have ten cents of every dollar in its vaults.
The IMF is suggesting a 10% default by European banks. In a 10% reserve system, this is a reversal. Effectively, one person is going to get their money back and nine others are not. This may reset the banking system but the economic consequences due to the loss of purchasing power at such a scale will be significant.
Bank Bailout: The bank has lost its depositors money and thence government forces the public to borrow money they have a) already earned, b) from the very banks that supposedly have no money, and c) do so at interest (which must be borrowed). Effectively it is a failure and therefore a default.
Bank Bail-in: Every dollar placed at a bank is a dollar it owes to someone (liability). When the bank has lost all or a portion of its depositors’ money, it cannot return what it owes. Rather than forcing the people that are owed money by the bank to borrow money to put back in their accounts, the bank merely points out that it doesn’t have the money. This is a default.
Default = Default.
Money: Has no other purpose than to allow people to trade things they have worked to make or services they have performed. Holding on to it may allow one to trade for more or less of a particular good or service in the future. Money is a promise but not a guarantee that it will be exchangeable for something in the future. It is credit and debt.
Without a tangible good or service to trade money is worthless. If I have made a fine overcoat and you, with your skills in carpentry, have made an exquisite chair, we can trade these things directly. In this case money is worthless. It does not work the other way around. Goods and services do not become worthless in the absence of money. My coat will still have value even if I choose to wear it to keep warm. Your chair will have value even if you just choose to sit in it.
This is a critical distinction — and it has been completely lost on just about everyone. We have become completely divorced from the goods and services we make and provide and the money we use to trade these goods and services. At the core of this divorce is Fractional or zero Reserve Banking.
Let’s propose that you and I traded our goods and we deposited our goods in a bank. The bank immediately pledges my chair and your coat to ten other people. Some time later I engage in a redecoration of my home and want my chair. Winter comes and you want your coat. Immediately there is a problem. The bank owes our goods to ten other people. The only way for them to resolve this situation is to either get everyone to accept a fraction of the coat and chair, which of course isn’t very practical, reduce their liability by giving one person the chair and one person the coat and the other ten people get nothing (bail in), or get you and I to bail them out by producing eleven more chairs and coats (10 plus interest).
You see, if in the definitions of bailout and bail in we simply substitute the word money with the words goods and services, the situation loses its ambiguity. When we understand internally what money represents, then we understand what the term Bank backstops really mean. A bank can only be backstopped, bailed out or bailed in, by labor because that is the only thing that “money” represents.
If we understand the definition of money then when we discuss the Federal Reserve’s leverage, e.g. 72 to 1, we immediately understand that for each unit of labor performed 72 are owed. If for each hour of labor 72 is owed, how is this ever make that up? The clever person would pipe up and say, I’ll just work for 72 hours straight. But for each of those 72 hours he has worked he now owes 72. When we understand this, we understand that it is an event horizon.
We then understand that every bit of QE (quantitative easing) is a pledge of labor someone must perform at some point in time and that the rate of performance required is impossible.
If we now understand money and leverage and are to propose debt forgiveness then we must embrace rather than bemoan austerity because austerity is the necessary result of 10 other people not getting a chair to sit in or a warm coat for the winter.
With these concepts firmly in tow we begin to see that all of this hand wringing over paying off the $17 trillion in debt is, at best, a fools errand. Yes, in public politicians try to sooth us by appearing concerned. But behind closed doors, the Fed, Treasury, the Congress and the Executive, are all trying to figure out how we are going to borrow more so that over the next doubling period (about 10 years) debt will expand to a necessary $34 trillion.
Some additional clarification may be needed to explain leverage and work. At 72 to 1 the other option is to create 72 units in the time it takes to make one. In other words, if it took you and I one month to create our goods, we must create 72 coats and chairs in that one month. Broken down into hours, if we worked at full capacity 8 hours per day to create one coat and chair, we must do enough work in that 8 hours to create 72 coats and chairs.
Ultimately, work is nothing more than an exchange of energy, and the equation for any exchange of energy is quantifiable and finite (the equation must always balance). If we measured labor output in calories instead of money, the deception disappears. People may not be willing to expend 10 calories for 1. We would also understand that 1 calorie cannot create 10.
These concepts (thermodynamics) are esoteric to the point a 5th grader would have trouble understanding. But what is easily understandable is that if we all did the same work everyday but got less food because of an increase of incoming workers, yes, we would all have food – and we would all soon become malnourished or starved.
How would people react if the Fed said that for every loaf of bread it takes out of the system 72 loafs of bread will disappear?
We must also understand that a lever transmits torque, it does not create more torque.
It is at this point of awareness that it becomes clear that to balance the equation, it is unavoidable that people are not going to get most or all of what they have been promised (austerity). It is at this point that the sober realization arises that we have to dramatically change our expectation of the future.
Credit: Allows trade of something for a promise. Regardless of whatever expectation that may exist, something has been traded or given for no service performed or product yet created. Simply, something has been traded for nothing.
Federal Reserve System: A group of secretly privately owned banks (which, logically were among those who lost all of their depositors money and most certainly compose the primary dealers), that control the global money supply by making more or less credit/money available. It is also supposed to regulate banks within its system.
Even if this system functioned as designed rather than what it has morphed into, it still reads: a subsidiary formed but not funded by member banks and sanctioned by government to lend money to corporations and member banks (to themselves) against strong collateral (which no other bank would touch). Meaning the assets they own are good, but nobody wants them (i.e. the assets are worthless). In essence, this gets those great and wonderful assets off corporation’s and member bank’s books at full value.
Today this subsidiary of the member banks (the banks that own the Fed), loans money to its parent banks to buy all sorts of debt (mostly government debt), then goes about removing that debt (asset) from its parent bank’s balance sheet by buying it from them at full price, regardless of what it would have fetched in the market place.
At the most cursory glance, one begins to see how this farcically incestuous relationship would open the door to cronyism, political capture, monetary dominance, and serious abuses of public trust. Whether there is an awakening on the part of of the public is irrelevant. This system is failing. Its collapse will be messy.
There is no need to fret over debt or the monetary system, or the Feds economic and monetary “models”. There is no need to grouse about their manipulations. These things are destined to fail and are already doing so. What we will do in the aftermath of their complete failure, however, is probably of utmost importance.”
Growth: Heavily manipulated statistics that reflect the increasing dominance of crony/State capitalism, passed off as “growth” in the real, lived-in economy. Those crony cartels that are receiving the Federal Reserve’s “free money” from quantitative easing (QE) are “growing,” and everything that isn’t receiving the Fed’s “free money” is stagnating.
I am sure you can add your own list of “calling things what they really are.”
For the past 12 hours, the so-called PM2.5 level (or China’s new pollution threshold) has been above the “serious” level. Bear in mind this is the newly adjusted-upwards threshold that already far exceeds the WHO’s health-threatening levels.
- BEIJING WARNS RESIDENTS TO AVOID OUTDOOR ACTIVITIES ON SMOG
- BEIJING MONITORING CENTER REPORTS `SERIOUS’ AIR POLLUTION TODAY
Levels are officially “beyond index” today (with a peak at 613 so far compred to 500 “hazardous”) and the streets are empty!
City’s air quality index reading near Tiananmen Square, putting it in category defined as “serious” pollution.
City warns residents to avoid outdoor activities
Reading of PM2.5 pollution near Tiananmen Square was 583 micrograms per cubic meter as of 6 a.m., with average reading in past 24 hours at 338, according to city’s air-monitoring website
NOTE: World Health Organization recommends 24-hour PM2.5 exposure of no more than 25
The widely followed @BeijingAir twitter account confirms just how bad it is on the ground. For those confused “Beyond Index” is a friendlier way of saying “Off The Charts”
Beijing’s pollution beyond index at 600. Looks like no one wants to venture out in this. pic.twitter.com/jCbceuPH27
— Neela Eyunni (@neelaeyunni) January 15, 2014
Americans have never had less economic freedom than they do right now. The 2014 Index of Economic Freedom has just been released, and it turns out that the level of economic freedom in the United States has now fallen for seven consecutive years. But of course none of us need a report or a survey to tell us that. All we have to do is open our eyes and look around. At this point our entire society is completely dominated by control freaks and bureaucrats. Our economy is literally being suffocated to death by millions of laws, rules and regulations and each year brings a fresh tsunami of red tape. As you will see below, the U.S. government issued more than 80,000 pages of brand new rules and regulations last year on top of what we already had. Even if we didn’t have all of the other monumental economic problems that we are currently facing, all of this bureaucracy alone would be enough to kill our economy.
Yes, every society needs a few basic rules. We would have total chaos if we did not have any laws at all. But in general, when there is more economic freedom there tends to be more economic prosperity. In fact, the greatest period of economic growth in U.S. history was during a time when the federal government was much smaller, there was no Federal Reserve and there was no income tax. Most Americans do not know this.
Those that founded this nation intended for it to be a place where freedom was maximized and government intrusion into our lives was minimized.
If they were still alive today, they would be absolutely horrified. We are literally drowning in red tape.
The photo posted below was shared by U.S. Senator Mike Lee on his Facebook page. Study it carefully…
The following is what he had to say about this photo…
“Behold my display of the 2013 Federal Register. It contains over 80,000 pages of new rules, regulations, and notices all written and passed by unelected bureaucrats. The small stack of papers on top of the display are the laws passed by elected members of Congress and signed into law by the president.”
I didn’t even see the small stack of paper at the top of the cabinet until I read his explanation. Most of the time everyone is so focused on what Congress is doing, but the truth is that the real oppression is happening behind the scenes as unelected federal bureaucrats pump out millions upon millions of useless regulations that are systematically killing our economic freedom.
On Tuesday, an article about the 2014 Index of Economic Freedom was published by the Wall Street Journal. As I mentioned above, the United States has fallen for seven years in a row…
World economic freedom has reached record levels, according to the 2014 Index of Economic Freedom, released Tuesday by the Heritage Foundation and The Wall Street Journal. But after seven straight years of decline, the U.S. has dropped out of the top 10 most economically free countries.
That same article mentioned some of the reasons why the United States is falling…
It’s not hard to see why the U.S. is losing ground. Even marginal tax rates exceeding 43% cannot finance runaway government spending, which has caused the national debt to skyrocket. The Obama administration continues to shackle entire sectors of the economy with regulation, including health care, finance and energy. The intervention impedes both personal freedom and national prosperity.
And of course the results are predictable. Our economy has been steadily declining for many years, and that decline appears to be ready to start picking up speed once again. The following is an excerpt from a recent article by Dave in Denver…
In the latest retail sales report for December, auto sales were nailed – down 1.8%. The only reason overall retail sales from November to December showed a slight “gain” that November’s number was revised lower. Electronics fell off of a cliff. The housing market is about to get crushed. Feedback I’m getting from my Seeking Alpha articles and blog posts on housing from housing market professionals all around the country tells me that the housing market hit a wall at the end of 2013, as I have been forecasting.
What he said about the housing market is definitely true. In recent months, mortgage originations have been falling like a rock. Just check out this chart.
And as I wrote about the other day, there has been absolutely no employment recovery since the end of the last recession. In fact,1,687,000 fewer Americans have jobs today compared to exactly six years ago even though the population has grown significantly since then.
Unfortunately, these are not just “cyclical problems”. Long ago we abandoned the fundamental principles that once made our economy great, and now we are paying a tremendous price for that.
Posted below is a story that has been circulating all over the Internet for quite some time. It is a fake story. Once again, let me repeat that. This is a fake story. But I think that it does a great job of illustrating what is happening to America as we march toward full-fledged socialism…
An economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that Obama’s socialism worked and that no one would be poor and no one would be rich, a great equalizer.
The professor then said, “OK, we will have an experiment in this class on Obama’s plan”.. All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A…. (substituting grades for dollars – something closer to home and more readily understood by all).
After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.
The second test average was a D! No one was happy. When the 3rd test rolled around, the average was an F. As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.
To their great surprise, ALL FAILED and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed. Could not be any simpler than that.
But of course it would be disingenuous to pin all of the blame for this just on Obama. The truth is that our nation has continued to march toward socialism no matter who has been in the White House and no matter who has been in control of Congress. So if you want to place some of the blame on a “Bush” or a “Clinton” or a “Boehner” or a “Pelosi” please feel free.
And the American people are getting sick and tired of this one party system that has two heads. According to a recent Gallup survey, only29 percent of all Americans consider themselves to be Democrats right now. And the news was even worse for Republicans. According to that survey, only 24 percent of all Americans consider themselves to be Republicans at this point.
A staggering 45 percent of all Americans now consider themselves to be Independents. Deep down, most Americans know that something is seriously wrong with our nation and that they are being lied to be our politicians and the mainstream media.
Unfortunately, there is very little agreement about how to fix things because Americans do not have a set of shared values that we all agree on anymore.
Stars and Stripes
January 13, 2014
Japan looks to join India, US in naval exercise
By Erik Slavin Stars and Stripes
YOKOSUKA NAVAL BASE, Japan: The Japanese Self-Defense Force wants to join an annual sea drill held by the United States and India later this year, according to Indian media reports.
The request to participate in the Malabar exercise came during a four-day visit to New Delhi last week by Japanese Defense Minister Itsunori Onodera, and just one month after Japan and India held their first-ever bilateral exercise in the Bay of Bengal.
Japan and India both saw tensions rise last year over separate territorial disputes with China.
“During the meeting with [Indian defense minister] AK Antony, I asked for the participation of the Japanese Maritime Self-Defense Forces in the naval war games,” Onodera said recently, according to The Times of India.
Neither India nor the United States…
View original post 298 more words
Joseph S. Nye asks whether war between China and the US is as inevitable as many believe World War I to have been. – Project Syndicate
CAMBRIDGE – This year marks the hundredth anniversary of a transformative event of modern history. World War I killed some 20 million people and ground up a generation of Europe’s youth. It also fundamentally changed the international order in Europe and beyond.
Indeed, WWI destroyed not only lives, but also three empires in Europe – those of Germany, Austria-Hungary, and Russia – and, with the collapse of Ottoman rule, a fourth on its fringe. Until the Great War, the global balance of power was centered in Europe; after it, the United States and Japan emerged as great powers. The war also ushered in the Bolshevik Revolution of 1917, prepared the way for fascism, and intensified and broadened the ideological battles that wracked the twentieth century.
How could such a catastrophe happen? Shortly after the war broke out, when German Chancellor Theobald von Bethmann-Hollweg was asked to explain what happened, he answered, “Oh, if I only knew!” Perhaps in the interest of self-exoneration, he came to regard the war as inevitable. Similarly, the British Foreign Minister, Sir Edward Grey, argued that he had “come to think that no human individual could have prevented it.”
The question we face today is whether it could happen again. Margaret MacMillan, author of the interesting new book The War that Ended Peace, argues that, “it is tempting – and sobering – to compare today’s relationship between China and the US with that between Germany and Britain a century ago.” After drawing a similar comparison, The Economist concludes that “the most troubling similarity between 1914 and now is complacency.” And some political scientists, such as John Mearsheimer of the University of Chicago, have argued that, “to put it bluntly: China cannot rise peacefully.”
But historical analogies, though sometimes useful for precautionary purposes, become dangerous when they convey a sense of historical inevitability. WWI was not inevitable. It was made more probable by Germany’s rising power and the fear that this created in Great Britain. But it was also made more probable by Germany’s fearful response to Russia’s rising power, as well as myriad other factors, including human errors. But the gap in overall power between the US and China today is greater than that between Germany and Britain in 1914.
Drawing contemporary lessons from 1914 requires dispelling the many myths have been created about WWI. For example, the claim that it was a deliberate preventive war by Germany is belied by the evidence showing that key elites did not believe this. Nor was WWI a purely accidental war, as others maintain: Austria went to war deliberately, to fend off the threat of rising Slavic nationalism. There were miscalculations over the war’s length and depth, but that is not the same as an accidental war.
It is also said that the war was caused by an uncontrolled arms race in Europe. But the naval arms race was over by 1912, and Britain had won. While there was concern in Europe about the growing strength of armies, the view that the war was precipitated directly by the arms race is facile.
Today’s world is different from the world of 1914 in several important ways. One is that nuclear weapons give political leaders the equivalent of a crystal ball that shows what their world would look like after escalation. Perhaps if the Emperor, the Kaiser, and the Czar had had a crystal ball showing their empires destroyed and their thrones lost in 1918, they would have been more prudent in 1914. Certainly, the crystal-ball effect had a strong influence on US and Soviet leaders during the Cuban missile crisis. It would likely have a similar influence on US and Chinese leaders today.
Another difference is that the ideology of war is much weaker nowadays. In 1914, war really was thought to be inevitable, a fatalistic view reinforced by the Social Darwinist argument that war should be welcomed, because it would “clear the air” like a good summer storm. As Winston Churchill wrote in The World Crisis:
“There was a strange temper in the air. Unsatisfied by material prosperity, the nations turned fiercely toward strife, internal or external. National passions, unduly exalted in the decline of religion, burned beneath the surface of nearly every land with fierce, if shrouded, fires. Almost one might think the world wished to suffer. Certainly men were everywhere eager to dare.”
To be sure, nationalism is growing in China today, while the US launched two wars after the September 11, 2001, attacks. But neither country is bellicose or complacent about a limited war. China aspires to play a larger role in its region, and the US has regional allies to whose defense it is committed. Miscalculations are always possible, but the risk can be minimized by the right policy choices. Indeed, on many issues – for example, energy, climate change, and financial stability – China and the US have strong incentives to cooperate.
Moreover, whereas Germany in 1914 was pressing hard on Britain’s heels (and had surpassed it in terms of industrial strength), the US remains decades ahead of China in overall military, economic, and soft-power resources. Too adventuresome a policy would jeopardize China’s gains at home and abroad.
In other words, the US has more time to manage its relations with a rising power than Britain did a century ago. Too much fear can be self-fulfilling. Whether the US and China will manage their relationship well is another question. But how they do so will be dictated by human choice, not some ironclad historical law.
Among the lessons to be learned from the events of 1914 is to be wary of analysts wielding historical analogies, particularly if they have a whiff of inevitability. War is never inevitable, though the belief that it is can become one of its causes.
The market just hit a fresh all time high today which means another major default must be just around the horizon. Sure enough, the FT reported moments ago that a Puerto Rico default “appears increasingly likely” and is why creditors are meeting with lawyers and bankruptcy specialists (most likely Miller Buckfire, fresh from its recent league table success with the Detroit bankruptcy) on Thursday in New York. The FT cited a restructuring advisor, supposedly desperate to sign the engagement letter with creditors and to force the bankruptcy, who said that “the numbers are untenable” and “to issue new debt the yield would have to rise and where they can’t raise new money they will have to stop paying.”
The untenability of PR’s cash flows results from a “debt service burden that requires paying between $3.4bn and $3.8bn each year for the next four years. As doubts grow about the ability of the commonwealth to service that debt, the cost of doing so will inevitably rise.”
For Puerto Rico bonds, such an outcome would not be exactly a surprise, most recently trading at 61:
The rest of the story is largely known:
If Puerto Rico is forced to take that step, the effects will ripple through the entire $4tn municipal bond market. Because the debt is generally triple tax free, in a world of zero interest rates demand is high and it is distributed widely, including in funds that imply they have no exposure to Puerto Rico.
But yields have gone up nevertheless – and prices down – suggesting the markets are increasingly nervous about prospects for repayment. Estimates on how much of that debt is insured range from 25 per cent to 50 per cent of total issuance.
“Everyone thinks they can get out in time,” the restructuring adviser said.
Puerto Rico cannot really raise taxes much more, since the debt per capita is more than $14,000, while income per capita is almost $17,000, a ratio – at 83 per cent – that makes California, Illinois or New York – each at 6 per cent – models of prudence. Meanwhile, at 14 per cent, the unemployment rate is twice the national average.
What would make a Puerto Rico default more interesting is that as in the case of GM, political infighting would promptly take precedence over superpriority and waterfall payments. According to the FT, “any radical step, which the local government denies considering, would involve significant legal wrangling. Congress could step in and create an insolvency regime, lawyers say, since it has comprehensive jurisdiction, but that too would give rise to partisan fighting. The Democrats would say that pension claims have priority while the Republicans would uphold the priority of payments to bondholders, citing the constitutional sanctity of contracts.”
Of course, since in the US a bond contract now is only worth the number of offsetting votes it would cost, nobody really knows what will happen. And so, we sit back and watch, as yet another muni quake appears set to hit the US, in the process obviously sending the S&P to higher, record highs.
In the meantime, keep an eye on bond insurers AGO and MBI which have taken on water in today’s session precisely due to concerns over what a Puerto Rico default would do to their equity.
Bankers disagree on housing bubble 2:59
The average price of a Canadian home increased 10.4 per cent to $389,119 in December, compared to the same month in 2012.
The Canadian Real Estate Association (CREA) released data Wednesday showing that a total of 457,893 homes changed hands in Canada last year, an increase of about 0.8 per cent from 2012’s level.
“Absent further mortgage rule changes,” CREA’s chief economist Gregory Klump said, “sales in 2014 may surpass the annual total for 2013 if demand holds steady near current levels as strengthening economic and better job growth offset the impact of further expected marginal mortgage interest rate increases.”
As has been the case for some time now, CREA says the large jump in prices was largely due to what was happening in Canada’s most active and expensive markets.
Sales activity in December 2012 in Toronto and Vancouver was abnormally low, which dropped the national average at that time.
“Removing Greater Vancouver and Greater Toronto from national average price calculations cuts the year-over-year increase to 4.6 per cent,” CREA said.
CREA says the average price can be misleading, as it can be too easily influenced by individual factors.
The realtor group says its MLS Home Price Index “provides a better gauge of price trends because it is not affected by changes in the mix of sales activity the way that average price is.”
That index shows home prices rose 4.31 per cent over the past 12 months. Gains were seen in all housing types.
The index was led by an 8.7 per cent gain in Calgary and a 6.3 per cent gain in Toronto.
Vancouver’s market index posted a second straight increase of 2.13 per cent after declines for much of the time between late 2012 and late 2013.
Between lack of cash flows, insurmountable liabilities, an untenable pension funding, even insider fraud, we thought we had seen all the various reasons for filing for Chapter 11 bankruptcy protection. And then along came the Catholic Diocese of Stockton which announced that it would join its host city and seek bankruptcy protection “in the wake of the church’s sexual-abuse scandal.” As WSJ reported, Bishop Stephen E. Blaire said in a news release Monday that the diocese would seek bankruptcy protection Wednesday, explaining that reorganization was the only option for dealing with mounting legal costs related to abuse by priests. The bishop said the diocese has spent $14 million in legal settlements and judgments over the past 20 years dealing with abuse allegations, and doesn’t have funds available to settle pending lawsuits or address future allegations. The punchline: “Very simply, we are in this situation because of those priests in our diocese who perpetrated grave, evil acts of child sexual abuse.”
In the Stockton diocesan bankruptcy, the parties will likely agree on a figure that the diocese would pay, in addition to potentially pulling in funds from insurers. However, the diocese says it holds “relatively little property and assets.” Other holdings, including schools, parishes and several parcels of land, are incorporated separately.
And so the Stockton Catholics became the 10th US Diocese after Milwaukee; San Diego; Spokane, Wash.; Davenport, Iowa; Portland, Ore.; Tucson, Ariz.; Fairbanks, Alaska; Wilmington, Del.; and Gallup, N.M. to file bankruptcy. In addition, the Christian Brothers Institute, which operates Catholic schools and orphanages, also filed because of sexual abuse liabilities.
The Chapter 11 filing would halt pending litigation against the diocese and likely would ultimately allow it to discharge liabilities stemming from sexual-abuse allegations by setting up a trust to compensate victims. The diocese said it hopes to arrive at a resolution with victims and insurers through the process.
Joelle Casteix, western regional director of the Survivors Network of those Abused by Priests, called the bankruptcy “problematic on a lot of different levels,” noting that it would let the diocese avoid future civil cases.
However, while the local catholics’ financial woes may be put on temporary hold, their civil troubles are only starting:
Separately, a grand jury Monday indicted a former priest with the diocese, Michael Eugene Kelly, and a warrant for his arrest has been issued. Calaveras County authorities are seeking Mr. Kelly’s extradition from Ireland to face charges of three counts of lewd and lascivious conduct on a child, and one count of oral copulation with a child. Mr. Kelly faces 14 years in prison if convicted.
Not surprisingly, the Catholic church which itself is embroiled in numerous financial scandals recently, was unable to come to the Diocese’s rescue even though it has already paid out an estimated $2.2 billion to cover settlements, therapy for victims, support for offenders, attorney fees and other costs, according to a report by the U.S. Conference of Catholic Bishops.
And with this filing, we are fairly confident we have seen every possible bankruptcy filing reason.
Exclusive: Mont Pelerin Society Revealed As Home To Leading Pushers Of Climate Science Denial | DeSmogBlog
THERE’S a popular talking point coming from climate change denialists that all people who accept the science and the need to act on it are somehow blinded by faith.
In Australia, climate science contrarian columnists can barely touch their keyboards without typing out the words “global warming faith” or explaining how human-caused global warming is some sort of “new religion”.
This “climate religion” narrative often goes hand-in-hand with another favourite denialist talking point where climate scientists are only doing what they do because there’s a dollar in it.
Presumably the laws of physics, the melting ice sheets, the increasing risk of bushfires, the hottest decades on record and the acidifying oceans are also waiting for their cash.
Maurice Newman, the man hand-picked by Australian Prime Minister Tony Abbott to be the government’s top business advisor, loves both of these debating points.
Newman has described climate scientists as being a “global warming priesthood” and belonging to a new “religion”. In a second opinion column in two weeks in The Australian, Newman repeats his cynicism over the IPCC and climate scientists, describing them as a “cartel” that “will deny all contrary evidence”. Newman even repeats the myth that in the 1970s scientists were certain the world was heading for global cooling, when in fact, as this study shows, a healthy majority of scientific papers were predicting the opposite.
Yet Newman has a deep belief system of his own, having long been associated with a form of “classic liberalism” – a particular world view which advocates small government and low regulation of the activities of businesses.
Not only that, but he is a member of a global society of influential business people, academics and think tank associates known as the Mont Pelerin Society who share the same broad ideology.
The Mont Pelerin Society
The Mont Pelerin Society was established in 1947 by free market economist and philosopher Friedrich von Hayek.
Maurice Newman, a Mont Pelerin member since 1976, has long been an admirer of the work of Hayek and fellow free market economist Milton Friedman, a past president of the Mont Pelerin Society.
Newman was responsible for bringing Friedman to Australia in the mid-1970s, at a time when Newman was helping to set up the Centre for Independent Studies – a Sydney-based free market think tank.
Mont Pelerin’s website explains that while all members don’t agree on everything, “they see danger in the expansion of government, not least in state welfare, in the power of trade unions and business monopoly, and in the continuing threat and reality of inflation.”
The Society, which holds a meeting annually in different parts of the world, also explains how its members see their society “as an effort to interpret in modern terms the fundamental principles of economic society as expressed by those classical economists, political scientists, and philosophers who have inspired many in Europe, America and throughout the Western World.”
To become a member, individuals have to be nominated by a current member and then seek endorsement by the membership committee before being endorsed.
DeSmogBlog has obtained a full list of the society’s members that includes senior representatives of many of the world’s foremost “free market” think tanks actively pushing back on proposed policy solutions to tackle climate change.
The list, from 2010, includes almost 500 people from 52 countries, with the bulk of members coming from the United States and the United Kingdom. The 70-page list includes private contact details. DeSmogBlog has decided to publish only extracts with contact details redacted.
Among the notable members is Charles Koch (list excerpt here), the US oil billionaire who has been a Mont Pelerin Society member since 1970.
Charles and his brother David have used their charitable foundations to funnel tens of millions of dollars into free market think tanks which fight environmental protection and deny the dangers of human-caused climate change.
In Australia, Mont Pelerin Society members include John Roskam (list excerpt here), executive director of the Institute of Public Affairs; Greg Lindsay (list excerpt here) , executive director of the Centre for Independent Studies; and mining magnate Ron Manners, executive director of the pro-mining think tank the Mannkal Economic Education Foundation.
All three organisations have actively pushed climate science scepticism and denial or heavily understated the risks of continuing to burn record amounts of fossil fuels.
Lindsay is a former president of the Mont Pelerin Society. In his 2008 “Presidential Address,” published in a Mont Pelerin newsletter, Lindsay claimed that climate change research had become an “industry” which lacked integrity.
His conspiracy theory was that scientists “have a vested interest in supporting the theory, so that the funding drip becomes a torrent.”
Lindsay also used the popular denial talking point that people who accepted the science of climate change were blinded by belief.
He said: “As many critics have pointed out, their belief in the theory, in too many instances, borders on the superstitious and mystical. The fact that so many minds are closed to any doubt strongly suggests that we are dealing with a new species of the kind of religious dogma which the Enlightenment developed to counter.”
The argument put by Lindsay back in 2008 is identical to that put by Tony Abbott’s chief business advisor Maurice Newman in recent columns, the latest only a few weeks ago.
Mont Pelerin in the United States
The US cohort of Mont Pelerin members includes many senior staff associated with “free market” think tanks that have manufactured doubt about the science of human-caused climate change or the need to act quickly.
Alongside Charles Koch, DeSmogBlog’s document shows that Mont Pelerin Society members include senior staff, directors and associates from groups his family foundations have helped to fund. These include the Cato Institute, Heritage Foundation, the Acton Institute, the Reason Foundation and the American Enterprise Institute.
Other members include Wall Street Journal editor and columnist Mary O’Grady and John O’Sullivan, a columnist with the conservative National Review.
The UK and Mont Pelerin
Members of UK free market think tanks including The Adam Smith Institute, CIVITAS and the Institute of Economic Affairs have also gained membership with the Mont Pelerin Society.
Long-standing climate science sceptic Julian Morris is also listed as a member.
Another UK member is Linda Whetstone, the daughter of Antony Fisher who founded the influential UK neo-liberal think tank, the Institute of Economic Affairs.
Antony Fisher established the Atlas Economic Research Foundation – a vast network of about 400 think tanks around the world that share the ideals of limiting the power of government. Alejandro Chafuen, the current president of Atlas, is also listed as a 2010 Mont Pelerin Society member.
The Mont Pelerin Society got its name from the location of the very first meeting in Switzerland, and members continue to have ample chance to network in their annual meetings.
In recent years, members have travelled to the Galapagos Islands, Prague (former Czech president Vaclav Klaus is a member), New York, Morocco, Tokyo, Sydney, Buenos Aires and Stockholm.
The opportunity for this powerful and influential group to share ideas is obvious.
In 2010, when members held a meeting in Australia, Perth-based mining magnate and member Ron Manners extended an invitation to those making the long trip down under.
A 2010 Mont Pelerin Society newsletter obtained by DeSmogBlog explained how Manners, whose think tank has hosted climate science denier Christopher Monckton, had organised a “fascinating tour” of mining and energy sites including a day tour of the remote Pilbara region described as the “ground zero” of the mining boom.
It should come as no surprise that the Mont Pelerin Society has more than its fair share of climate science deniers within its ranks.
Research has shown that belief in free market ideology is a predictor of the rejection of climate change science. This link was also revealed in Merchants of Doubt, a book by science historians Erik Conway and Naomi Oreskes.
About four out of every five climate denial books ever published, according to one study, have links to conservative and free market think tanks either through the authors or the publishers.
When it comes to efforts to block meaningful policy to tackle climate change, it seems free market groups and societies extolling their version of “freedom” are in fact a “ground zero” for climate science denial.