The Resourceful Bear Blog

Mark R. Crovelli reviews the book 'Render Unto Ceasar'
Mark R. Crovelli, of the Austrian Economists persuasion, in Mises article entitled What Belongs to Caesar? reviews the Charles J. Chaput book 'Render Unto Ceasar' and writes: "We must necessarily denounce the tax-funded, coercive state as the single most egregious violator of human dignity and the most dangerous enemy of human life and civilization. This is true, moreover, of each and every state that gains its revenue through taxation — including so-called "liberal democracies."

"The simple yet profound truth that these insights point to is that all states are nothing more than groups of highly organized and extremely effective bandits, since they do not, and in practice never can (as A. John Simmons, Murray Rothbard, Lysander Spooner, and Robert Paul Wolff have amply demonstrated), actually garner the consent of every person, or even a fraction of the people, over which they claim the authority to "rule." Archbishop Chaput himself comes close to recognizing that force is indeed the core ethic of the state when he writes, "Politics involves the exercise of power" (p. 217)."

"This sets up a serious problem for those who, like Archbishop Chaput, are committed to the idea that every single person on the face of the Earth is endowed by God or nature with undeniable and equal dignity. For, in the face of the cold, hard fact that states necessarily rule by force and coercion, any world occupied by states will thus be a world in which some men are supposedly entitled to more dignity than others."

"In a world governed by states, there exist two categorically distinct groups of men: the self-proclaimed rulers and the hapless subjects, who are entitled to a lesser degree of dignity. For the ruling caste, in a world of states, possesses not only the right to determine their own fate in this world but also the fate of their citizen-slaves. The subjugated castes, on the other hand, possess neither of these rights; on the contrary, they possess only the right to abide by the decrees and whims of their self-proclaimed rulers, or suffer merciless penalties. This was the choice given to St. Thomas More, whom Archbishop Chaput cites approvingly, when he was given the option of accommodating his supposed ruler — or death. This is hardly a choice that comports with the idea of equal dignity of all men."

"The fallback position of Catholic social teaching, when confronted with these sobering facts about the state as a necessarily coercive institution, has been to affirm that there exists a difference between so-called "proper" or "legitimate" authority and wrongfully employed authority. Thus, Archbishop Chaput claims that Paul's Letter to the Romans."

is a call for proper obedience, not mindless submission. The key line in these verses from Paul's letter is 'For there is no authority except from God, and those that exist have been instituted by God.' Christians obey secular rulers not because of anything inherent to the rulers. Rather, when rulers properly use their power, they draw their authority from God. (p. 205)

The problem with this sort of argument is that it is almost stupefyingly question begging".

"It would be one thing to assert that God has bestowed different gifts on people, and that some men are blessed by God with the gift of leadership, while others are not; it is quite another thing, however, to deduce from this that some men are given the right by God to impress their will on their less-fortunate neighbors, take a portion of their neighbors' income by threatening to jail or kill them if they refuse to obey, and impress their neighbors into military service, jury duty, or any other service for that matter."

"Furthermore, the idea that some rulers are "legitimate," while others are not would leave unanswered the most critical political question of all. As Robert Paul Wolff puts it, "We must demonstrate by an a priori argument that there can be forms of human community in which some men have a moral right to rule."

"It is not enough to assert that some men rule by the authority of God Himself, and not provide any argument or criteria by which to judge so-called "legitimate authority," or any criteria by which we might be able to determine which of the over six billion people on this planet have been singled out by God Himself to rule over the rest of us without our consent."

My Bible based rebuttal to Mark R. Crovelli
My rebuttal comes from Bible scripture and Bible scripture alone ... "Where the Bible speaks I speak, and where the Bible is silent I am silent". Therefore I encourage Mr. Crovelli and all interested to read: 'There Be Only One Law' and God's Vessels.

Mr. Crovelli continues
"Are we not better off assuming, with the Declaration of Independence, that all men are created equal in the eyes of God, endowed with exactly the same amount of dignity and exactly the same rights, rather than trying to deduce special rights of coercion and subjugation for certain privileged castes?"

More Bible based rebuttal to Mr. Crovelli
Again my rebuttal comes from Bible scripture and Bible scriptue along ... I encourage Mr Crovelli to read and others to consider 'America's Founding Fathers Were For Liberty, Independence And Freedom'

My summary statement
I am a Christian, that is One Of Him, The Lord. I believe that 'Grace And Truth came by Jesus Christ', and that He established me in 'The Present Truth'. I live by 'The Faith of The Son of God' and that alone. I look forward to the Day when he will award me the 'Crown Of Life'.

I. Introduction
The Liquidation Thesis holds forth two principles: One, irredeemable debt and unfunded retiree benefits, must be liquidated, that is done away with. Two, government services and payments as well as service sector jobs, of all types, being unsustainable, will be done away with as well.

The current Debt Bubble, seen in the chart of the ratio of household and business debt to GDP, courtesy of Steven Kee's Oz Debtwatch April 15, 2008, shows how debt was liquidated by the 1929 to 1932 depression, and will have to be done so once again, by an even greater world wide depression.

Chart courtesy of Reggie Middleton shows that current housing prices will have to fall 75% to arrive at the long rate trendline.

Vulture Capitalism works on both greed, and desire for liquidity at any cost, to destroy both capital and debt.

Elaine Meinel Supkis in article Financial black holes in reference to Will Hutton's Guardian.co.uk The Observer article As we suffer, City speculators are moving in for the kill relates how Vulture Capitalism works on greed: "The insurance companies and pension funds are being drained of all wealth by the hedge funds. They are on the hook and can't get off without bleeding to death. The hedge fund pirates tell these victims that if they disengage this process, they will all die. Note how the drainage of wealth is around $13 trillion. Amazing! This 'market' is gigantic. And it is, lo and behold, part of the hideous Derivatives Beast I keep trying to describe. All the elements of this creature are set up in such a way that if the wealth is drained out of all systems, the Beast suddenly becomes terribly visible! It doesn't take all that much to drain all the wealth out of anything. Namely, all we have to do is put everything into hock".

Vulture capitalism works on the desire for liquidity at any cost as well, to destroy both capital and debt. In 'Godfather 2' type fashion, investment bankers "come to the aid" of stricken corporations and municipalities, only to provide financialization services that pick apart the victim organizations and secure corporate resources to the disadvantage of stock holders and the community at large, with the result eventually being, that the investment bankers getting the corporation's assets at zero value.

States rely on income and sales taxes to pay for schools, health care and criminal justice; these public services are going to be rapidly and drastcaly reduced.

Municipalities are going to send out blight bills to property owners who fail to maintain their properties, whether they be foreclosed homeowners or banks, savings and loans or credit unions.

Abandoned and blighted buildings are going to be bulldozed, and their lots stoned or grassed over; nicer properties are going to be secured with theft proof doors, and security alarms.

As property values fall, municipalities are going to reduce property tax bills, and in some cases write the tax bill to nearly zero in cities such as Detroit and Cleveland where properties have negative value.

Public education spending, which has been pased on property taxes, can no longer pay the $12,000 to $25,000 per student, and the $60,000 teachers salaries; public education will be drastically reconstituted with superfluous curriculum, such as foreign language eliminated; and junior high and senior high students will be spending a large part of their day at home, as schools operate on part time basis.

Other municipalities are choosing to actually raise proprety taxes, which puts the squeeze on companies burdened by the economic downturn; and these businesses choose to cease operations.

And many municipalities are imposing new or higher service fees.

Municipalities have been promising government workers more in salaries and pension benefits than cannot possibly be met. Unfunded liabilities have been mounting for years; the ticking time bomb is going to go off; cities are going to be force into bankruptcy.

The bubble of financial service jobs, retail jobs, and food service jobs, created by Alan Greenspan credit liquidity, are going to evaporate.

And, commerical lending provided by IX, COF, IX, GE, CIT, BKCC, GCA, ADVNB, NEWS, WRLD, "simply will not be available at any cost". And "letters of credit" will not be renewed by money center banks such as Bank of America and Citigroup; the "credit crunch" will morph to become "credit gridlock". The outcome will be two fold: first, a company's stock values will immediately fall as news is made public that its credit lines are cut; and secondly, "liquidation" -- companies lacking liquidity will be shutting down literally overnight, in "Bear Stearns fashion"; declaring bankruptcy; and selling any assets for pennies on the dollar.

Faced with falling sales, and unvailable credit, retailers will abandond leases, and the commercial real sector already battered by long gone real-estate agents, lawyers, builders, contractors, mortgage brokers, insurance companies, furniture stores and all the rest, will "freeze up" leaving the strip mall and shopping center owners to "board up".

Condo projects under development, and those recently built will go back to the regional and commercial banks, as Regions Financial, RF, as would be investors back out of deals; these will board up the properties in mass, before they themselves go into bankruptcy; gleeming condo towers will stand as tombs to a bygone era.

Student lenders will go out of existance, and those remaining will not be able to meet the demand for student loans.

Declining enrollment and soaring costs, will force Colleges and Universities to reduce curriculum offerings, and to lay off in mass; small high schools will shutter and students bussed long distance to larger ones; neighborhoods that have provided student rental housing will turn into sparsly populated "bohemian gettos". REITS that engage in the management of student housing communities near university campuses will become awesome ghost towns.

An ever growing portion of credit card debt, like Target, TGT, Walmart, WMT, American Express, AMX, Discover Financial Services, DFS, Master Card, MA, and Visa, V, and bank card debt like that of Citigroup, C, is going to have to be liquidated -- simply written off as consumers are soon going to be walking away from that debt; rising unemployment will send retailer's profits down and down, dividends will be cut to the bone, more and more banks and retailers will be going into bankruptcy.

Banks, investment bankers and commercial lenders all will "self liquidate" -- they will do this by selling new shares to raise ongoing capital and by changing their dividend from cash to stock; these endeavors dilute share holder value, and lower the company's stock value; and only temporarily replenish capital written off as bad debt, without ever totally discharging the debt in their portfolio.

As banks both large and small run out of cash they will lower their dividends, this will result in rapid "stock marketplace liquidation"; watch for the high yield dividend achievers ETF, PEY, to rapidly fall in value.

The next steps for banks will be what is truly required -- "total liquidation" of the themselves and the debt that is in their portfolio -- writing it all off; and over time this will indeed happen.

The senior healthcare housing REITS, will shutter their doors as Medicare and Medicaid will not be able to pay the $3,000 a month for long term elder care.

The number of vacant homes will soar from the current level of 2.9 percent of U.S. homes -- 2.28 million homes.

Some homeowners will be exempt from the liquidation process for months and possibly years, especially those in Florida where mold, mice and bugs can be a problem: banks may let let the owners stay in them to keep health hazards low, so as to avoid having to bulldoze down vermin infected and rotting properties!

The golden age of learning is over. Educational software providers such as Renaissance Learning, RLRN, will fold as there will simply not be buying deman for their services. And educational providers such as Devry, DV, will soon be dramatically laying off.

What little is left of US manufacturing is being liquidated as production facilities are quickly being transferred overseas to promote the Milton Friedman neoliberal free trade paradigm; for example Kyocera Mita is moving its printer-copier plant to China and La-Z-Boy and Whirlpool is moving to Mexico. According to the Bureau of Labor Statistics, total manufacturing employment in the United States was down to 15.3 million in 2007 from 15.6 million in 2006 and 18.9 million in 2000; the relocation of manufacturing to low cost plants overseas is what enable profits to rise and the S&P to grow 65% in the last five years.

Sourcing manufacturing globally to emerging nations under free trade agreements is causing the liquidation of manufacturing capability not only in the US but in Australia and New Zealand as well. Julian D. W. Phillips writes that global manufacturing is moving to Asia with China in the lead. And Ambrose Evans-Pritchard writes that construction is booming in the Middle Eastern oil producing contries as the Gulf shore from Dubai to Kuwait is one long arc of construction cranes.

II. Financial Service Sector Jobs And Public Private Debt Have Risen Dramatically
The Bonddad Blog in its April 1, 2008 (no April Fool's Joke here) article, The Financialization of the US Economy, presents some startling information:

Over at the Huffington Post, Kevin Phillips has a great piece that shows the length, width and depth of finance in the US economy. Consider the following:

Over the last five years, financial services has reached a swollen 20-21% of U.S. GDP -- the largest sector of the private economy.

Manufacturing led financial services by 2:1 back in the 1970s, but by 2006 beaten goods production had shrunk to just 12% of GDP.

During Greenspan's 1987-2005 tenure, the sum of public and private debt in the United States quadrupled from just over $10 trillion to $43 trillion.

One of the main topics I have written about over the last few years is the incredible amount of debt build-up that has occurred in the US economy. Whether it's the over $9 trillion total of US government debt (roughly 64% of US GDP) or the mammoth increase in household debt (which is almost as much as total US GDP and over 130% of disposable income at the national level) we're literally swimming in red ink in this country.

The main problem I have with this development is a basic fact of debt: you have to pay it back.

III. Charts of Economic Reports Show A Recession Is Underway
The recession will become a depression, when the soon coming Financial Emergency strickes.

Philadelphia Fed Survey Of Manufacturing

Durable Goods Orders

Real Disposable Income

Non Farm Payrolls

Real Retail And Food Service Sales

IV. Charts Show How Terrifically Indebted Americans Are
Total Household Debt As A Percentage Of GDP

Household Debt As A Percentage Of Disposable Personal Income

V. The Principle And Paradigm of The Liquidation Thesis
The Liquidation Thesis is the principle that pulic and private debt in no way, shape, or form is going to be paid back, it will have to be liquidated, and is going to be liquidated; and furthermore, the financial service jobs, retail jobs, and food service jobs created by Alan Greenspan credit liquidity, are going to eliminated.

Application of the Liquidation Thesis means that Government services of all types, and at all level, federal, state and municipality, are going to be liquidated; and by necessity, payments like SSI disability, social security, housing vouchers, Section 8 assistance, Medicaid and Medicare assistance of all types, liquidated -- done away with.

Look at the two debt charts above, and their 2010 projections. Given the recession that has arrived, the 2010 projections are low: there is no way governement assistance to the poor, elderly and infirm can be sustained through the coming recession; and the coming Financial Emergency, that is a Systemic Risk Event, is going to make a sharp break -- a sharp cut off in government assistance mandatory.

I've consistently written that the Federal Reserve is nationalizing the financial sector debt, through Framework Agreements, of lowering the Central Bank interest rate, and through facilities of TAF, TSLF, and PDCF; here there is a privitization of profits, and socialization of risk and losses, onto the tax paying public.

Yes, the debts of highly levered investment bankers, and insolvent banks, are being transferred rapidly to the Federal Reserve, whose balance sheet now consists of 34% junk.

The result being, that a run on the US Treasuries has commenced, and also a run on the US Dollar has commenced; both are only a trickle now, but will become a brook, then a stream, and then a raging torrent; one will soon see the 30 year US Treasury, $USB, and the US Dollar, $USD, on Stockcharts.com gap lower, day upon day.

Said agian for empahasis, a Financial Emergency, a systemic risk event is coming soon, most likely due to further write downs of debt, by the rating agenices, S&P, Fitch, and Moodys, or due to the stock market capital depletion of the bond insurors, MBIA, MBI, Ambac, ABK, PMI Group, PMI, or due to issues surrounding credit default swaps, CDS, or fails of Treasury repos, or commercial credit not being available to meet the tremendous tidal wave of corporate refinancing that needs to be done this year that has been accumlating since 2001.

The Financial Emergency will be the catalyst for the liquidation process of job elimination, and termination of goverment payments and assistance.

The soon coming run on the US Treasuries, and US Dollar will be a de facto liquification -- extinguishment of the US Federal Government Debt.

For many companies currently taking out bankruptcy, "it’s no longer reorganization or even liquidation for these companies. In many cases, it’s evaporation. In most cases, the collapses stemmed from a combination of factors: flawed business strategies, a souring economy and banks’ unwillingness to issue cheap loans. Several of the retailers that filed for Chapter 11 bankruptcy protection over the last eight months, like the furniture sellers Bombay, Levitz and Domain, have begun to wind down — closing stores, laying off workers and liquidating merchandise. In September 2007, Bombay filed for bankruptcy protection. The highest bid for the company came from liquidation firms, who quickly dismembered the 33-year-old chain. Bombay, which once employed 3,608, now has 20 employees left.

When the Financial Emergency comes, homeowners will be walking away far, far, far beyond the level that Mike Mish Sheldon forsees in his article Walking Away, The Next Mortgage Crisis.

I've documented through many articles that a pyramid shaped society has emerged, and is becomming more so all the time: the liquidation process, will make the pyramid complete, with a ruling oligarchy of state corporate elite guarded by Dyncorp, stakeholders appointed to oversee natural resources, a North American Competitiveness Council, NACC, Framework Agreement guiding Finance, Commerce and Trade, and a society secured by military from Canada and Mexico overseen by NORTHCOM, under the principles of the Security and Prosperity of North America, the SPP, in a manner similar to the federalization of law enforcement that has taken place in northern Mexico cities such as Ciudad Juarez to counter the Sinaloa cartel and Juarez drug cartels.

The French Government is taking steps to reduce public spending; but these are rather tepid; the soon coming Financial Emergency, systemic risk event, is going to be global in effect, and will make the Nicolas Sarkozy austereity proposals, seem mild, compared to what is going to take place in France.

Having grown up in America, and lived a middle class lifestyle, I say that the coming dislocations caused by the Financial Emergency, and resulting depression are going to be "feel worse" to Americans who have been addicted to Greenspan and Bernake credit and liquidity, than to Nicolas Sarosky or Romano Prodi socialism.

Bible prophecy in Revelation Chapter Thirteen fortells that as economic conditions worsen, the False Prophet, who also acts as Seignior, meaning investment banker who takes a cut, will introduce a seigniorage system, which is based upon the "mark" which comes from the Greek word charagma meaning "etching in", or "tattoo upon", or "stamp", or "badge of servitude", which enables one to conduct economic activity, and which authorizes one to receive economic benefits; the mark will be required in order to buy or sell.

VI. Charts
The Jack Chan chart of the Treasuries ETF, TLT, shows a fall through a massive pennant and ascending wedge pattern; he gave his sell signal on the Treasuries in early April 2008.

Chart of the Blackrock municipal bonds, BTA, shows a corresponding -- sympathetic fall as well.

Chart of Templeton Emerging Markets Income, TEI shows the lollipop hanging man candlestick.

VII. Some Localities Are All Ready Liquidation Zones
Rash Of Retail Closings Spreads Across America

The Las Vegas Economic Downturn Has Started

Trouble In Paradise: Property Values Plummet At Lake Las Vegsa

Foreclosures On Marco Island Florida Growing

Chart Shows California Foreclosures Are Rising Sharply with Riverside and especially
San Bernadino counties having the worst troubles

Abandoned And Blighted Homes Demolished In Rust Belt Buffalo New York

Gilbert Arizona Foreclosures Up 1,275%: Hundreds Loose Home; 85296 Hit The Hardest

San Francisco Area City, Half Moon Bay May Be Forced To Dissolve

California housing disaster: Home prices down 26% statewide, falling $3000 A WEEK. Prices off 31% in Sacramento and 39% in Santa Barbara.

Mortgage Company Executive Jumps To His Death

VIII. Articles Written By Others On The Topic Of Debt Liquidation
Antal E. Fekete writes that "Irredeemable debt is now causing capital destruction". And he adds: " ... conclusion is that the unwieldy size of the debt structure excludes the possibility of a normal correction: a major liquidation would dwarf the calamities of the Great Depression. The twilight of irredeemable debt is upon us. The sign is that banks are reluctant to take the promissory notes of one another. Significantly, this also includes overnight drafts. The banks know there is bad debt at large, and they don't want to be victimized by taking in some inadvertently. What the banks don't yet know, but will soon learn, is that all irredeemable debt is bad debt, and there is no way to rid the system of poison through administering more. The present crisis is just the first sign of that denouement. More is on the way."

Keywords
liquidation-thesis, "liquidation thesis", liquidationthesis