Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: Bankruptcy

What Does “Collapse” Look Like? See Venezuela.

This article was published by The McAlvany Intelligence Advisor on Wednesday, October 19, 2016:

State flag of Venezuela.

State flag of Venezuela.

The term “economic collapse” has been bandied about for so long by so many that the phrase has largely lost its meaning. Michael Snyder has been able to make a living from his blog, “The Economic Collapse,” and there’s even a feeble attempt to define the term by contributors to Wikipedia:

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Frederic Bastiat Wouldn’t Approve of Social Security

This article was published by The McAlvany Intelligence Advisor on Wednesday, October 12, 2016:  

Frédéric Bastiat

Frédéric Bastiat

Frederic Bastiat was a “classical liberal” who lived briefly in the first half of the 19th century in France. But his legacy, including his development of the fallacy of the broken window through his Parable of the Broken Window continues to resonate today. He is perhaps best known for his definition of “legal plunder”:

But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.

When it was enforced at the point of a pistol by a government bureaucrat, Bastiat opposed it:

I do not dispute [politicians’] right to invent social combinations, to advertise them, to advocate them, and to try them upon themselves, at their own expense and risk. But I do dispute their right to impose these plans upon us by law – by force – and to compel us to pay for them with our taxes.

There’s little doubt, then, that Bastiat would support the philosophy of The Bastiat Society, founded a dozen years ago:

Capitalism is the only economic system to produce widespread peace and prosperity. But if those in the private sector do not understand the intellectual and cultural institutions that make entrepreneurship and peaceful trade possible, what chance do they have to withstand a steady series of attacks from those who desire to bring capitalism and personal freedom to an end?

One of the battles that freedom lost was Social Security. Enacted as part of FDR’s Great Society, it remains a fixture that appears to be immovable. Today the only conversation heard is how to keep it from going bankrupt.

All manner of “fixes” are proposed. Obama’s National Commission on Fiscal Responsibility and Reform came up with ten fixes while The Motley Fool proposed 15:

  1. Cut benefits across the board right now;
  2. Change the COLA;
  3. Raise the earnings cap;
  4. Allow beneficiaries to invest in the stock market;
  5. Do nothing and cut benefits when the [trust fund] is depleted;
  6. Do nothing and enact payroll tax hikes when the [trust fund] is depleted;
  7. Offer a buyout [to the wealthy, removing them from the program];
  8. Link life expectancies to benefit levels;
  9. Means-test [to qualify] for benefits;
  10. Raise the full retirement age;
  11. Use the Estate Tax to cover Social Security [shortfalls];
  12. Freeze the purchasing power of benefits [i.e., eliminate COLA altogether];
  13. Freeze the … benefits on a sliding scale;
  14. Transfer [some] costs to [the] government [now]; and/or
  15. Increase the payroll tax on everyone right now.

Social Security has the peculiar characteristics similar to Bernie Madoff’s Ponzi scheme: eventually it is exposed and it ends in bankruptcy. The difference is that Social Security is enforced by people with guns and badges: everyone must be covered and forced to support everyone else, or else.

No one questions the math: the program’s “trust fund” is slowly being liquidated to cover the annual shortfalls between revenues and benefits. Thanks to the Baby Boomers, the liquidation is increasing more rapidly: those Boomers have developed the nasty habit of living longer, far beyond the original mortality tables predicted back in the mid-1930s. There’s also the declining birth rate, which is reducing the number of new entrants into the system whose taxes are needed to support it.

It’s the ideology: freedom versus force. So-called conservatives want to fix it, as do liberals. Conservatives, when pressed, question the intergenerational conflict that requires young people to contribute to a plan paying benefits to seniors. They question the use of resources: tax and spend now, or save and invest for later. Conservatives even argue over who should control the money. They never question its morality.

Liberals think it’s a proper function of government, going along with the Supreme Court’s decision in Helvering v. Davis that the program is constitutional, the Tenth Amendment notwithstanding.

As economist Herb Stein noted: “If something cannot go on forever, it will stop.” With Social Security it will continue as long as it can be patched up with temporary fixes. Eventually the mathematics and the bond market will end it.

Former Goldman Sachs Head Avoids Trial, Gets Slap on the Wrist Instead

This article appeared online at TheNewAmerican.com on Friday, October 7, 2016: 

Then Senator Jon Corzine (D-NJ)

Jon Corzine

Five years ago this summer, former New Jersey Governer Jon Corzine’s high-risk futures and options trading company, MF Global, began having liquidity problems, thanks to risky trades that he had made with company money. When those trades began going sour the firm’s lenders starting issuing margin calls. When he couldn’t meet them, instead of admitting he’d erred by liquidating the failed trades and taking his losses, he simply called up the company’s treasurer and ordered her to raid customers’ accounts to meet the demands.

It’s one thing to risk one’s own money. It’s another thing entirely to push that risk onto unsuspecting and uninformed customers. Even worse, it’s wrong to lie that he never intended to do it.

Now Corzine will pay a small fine and move on.

The details of the final days of MF Global were spelled out by the New York Times last Thursday:

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With Brazil’s Primary Cancer Excised, Can the Country heal?

This article was published by The McAlvany Intelligence Advisor on Friday, September 16, 2016:  

Português: Logomarca da Petrobras.

If one assumes that collectivism in any form is like a cancer (eating away its host’s vital organs until the host dies), then Cancer Treatment Centers of America’s strategy is apropos to Brazil:

At CTCA our cancer experts use state-of-the-art technologies to treat cancer … we help you maintain the strength and stamina to continue treatment and get back to life.

Deltan Dallagriol used state-of-the-art technology to treat the Lula cancer that has been infecting Brazil for decades: he created a flowchart of all the criminals tied into the Petrobras scandal showing Lula at the center, and then presented it on public television on Wednesday. Said Dallagriol:

Lula was the commander of the scheme. Lula was the conductor of this big orchestra formed to loot the resources of Petrobras and other public organs. Lula was the common and necessary link between [his] party and the government scheme….


Lula was the big boss of the Petrobras corruption scheme. Lula was on top of the power pyramid. Lula appointed several senior executives at Petrobras so that they could raise funds for political parties in the governing coalition….


Without Lula’s decision power, it would be impossible for this scheme to exist.

Lula hasn’t been arrested yet, but for all intents and purposes the magic is gone. The emperor has been exposed and is naked, and any chance for a comeback in the 2018 elections by Brazil’s former president has evaporated.

Aside from the inherent corruption attendant to any form of government, especially unlimited government, the temptation to tap into Petrobras was simply overwhelming. The numbers were too large, and access to them was too easy, for Lula not to take advantage.

Petrobras first announced huge oil finds in 2006 and then again in 2011, which would require massive billions to develop. Petrobras itself set aside $150 billion to start the development. Contracts were to be let. Opportunities for fraud were ubiquitous.

By setting up operatives inside Petrobras, Lula arranged to funnel hundreds of millions from overpriced contracts arranged by company executives with equally hungry developers into Lula’s Workers Party. Part of the scam was uncovered when it was learned that Lula was paying $12,000 a month to politicians in exchange for their votes. The Mensalao scandal nearly ended Lula’s administration.

Examples abound. One will suffice: OAS. OAS is (or was) a gigantic construction company employing 100,000 people at its peak. It enjoyed special treatment from Lula and in appreciation it purchased and renovated a private residence for Lula and his wife, Marisa, to enjoy on holiday.

Today OAS is a shell of its former self. Once the deal was exposed, the company’s funding sources dried up. It was forced to declare bankruptcy for nine of its units, suspend dividends, and sell off valuable properties.

Of course, Lula declares himself to be innocent. After all, he didn’t own the property!

“Operation Car Wash” exposed the pay-to-play scheme: funds from overpriced contracts were funneled through Petrobras employees to corporate executives and politicians, with the bulk of the funds going to support Lula’s communist Workers Party. The funds were so large that recipients couldn’t hide them in local banks without being detected so they tried to launder money through the accounts of an electronic components manufacturer. When the owner uncovered the scheme, he called the police in 2008. Through plea bargains with those charged, the whole plan slowly began to be revealed. Initially, four large criminal rings were uncovered, but the total soon expanded. Some of the funds were moved offshore through a bank transfer agency located in a building operated by a car wash company, hence the name “Operation Car Wash.”

It was just a matter of time before the entire scheme was exposed. Hundreds of warrants were issued and dozens were jailed, including top executives of some of Brazil’s largest construction companies.

Lula is going to have his hands full. Not only is he facing these charges, he was just indicted by a court in Brasilia for obstruction of justice stemming from his involvement in trying to silence a Petrobras executive from testifying against him in the Petrobras scandal. Other charges are still to come, according to Marcos Troyjo, a former Brazilian diplomat. Said Troyjo:

That means [that] the Workers Party, which may have thought it would move comfortably into the opposition after Dilma [Rousseff’s] impeachment, will confront extreme challenges.


It’s certainly the beginning of the end to Lula’s presidential aspirations for 2018.

Back to CTCA: once the Lula cancer is excised, is the patient strong enough and healthy enough to recover? Is the patient, like a young man – sturdy, strong, resilient, going to be able to recover following an extended period of rehab? Or is Brazil more like an older person – already weakened through years of abuse and neglect – whose chances of recovery are marginal, and the reappearance of cancer more likely in just a few years?

With Lula gone, will Brazil recover? Or will another cancer, perhaps even more vicious than the one just removed, invade the weakened patient?


Cancer Treatment Centers of America

Reuters: Brazil’s Lula charged as ‘top boss’ of Petrobras graft scheme

BBC:   Brazil ex-president Lula and wife face charges in corruption scandal

Bio of Lula

The Wall Street Journal: Brazil Prosecutors File Charges Against Ex-President da Silva and His Wife

Washington Post: Former Brazilian president Lula charged in massive corruption scandal

Zacks: Petrobras and Oil Discoveries

Forbes: Brazil’s Petrobras Says Its Discoveries Developing Faster Than Gulf Of Mexico

History of Operation Car Wash

The Wall Street Journal: OAS files for bankruptcy

The Mensalao Scandal

Brazil’s Former President Charged in Petrobras Scandal

This article appeared online at TheNewAmerican.com on Thursday, September 15, 2016:  

Luiz Inácio Lula da Silva, 35th President of t...

Luiz Inácio Lula da Silva – Lula

Luiz Inácio Lula da Silva, popularly known simply as Lula, was formally and publicly charged by federal prosecutor Deltan Dallagriol with heading up a massive money-laundering and political-kickback scheme dating back to at least 2005. Lula and his wife, Marisa Leticia, were charged in a public presentation Wednesday carried live on Brazil’s main news stations, with flow charts showing the network of politicians, corporate executives, and Petrobras employees being linked directly or indirectly to Lula.

Said Dallagriol:

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The Global Recession Claims its First Victim: Hanjin Shipping

This article was published by The McAlvany Intelligence Advisor on Friday, September 9, 2016:  

English: Hanjin container ship

One of Hanjin’s container ships looking for a place to unload.

When the question about a tree falling in the forest is asked, it’s usually posed as a philosophical one: “If a tree falls in a forest and no one is around to hear it, does it make a sound?” The question is never asked: “What if someone is around who doesn’t want to hear it?”

That appears to explain the kept media’s deafness over the state of the global economy. Even when the Wall Street Journal reported on the bankruptcy of Hanjin Shipping, the world’s seventh largest container shipping company, not one word was spent on asking why. Instead

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Hanjin Bankruptcy: a Harbinger for the Global Economy?

This article appeared online at TheNewAmerican.com on Thursday, September 8, 2016:  

English: A Delmas operated Container ship NICO...

South Korea’s Hanjin Shipping was the world’s seventh-largest container shipping company, moving (until last week) 100 million tons of cargo on its 200 cargo ships from manufacturers to retailers across the globe. Last week, following years of losses as the global economy has slowed, Hanjin declared bankruptcy. That move stranded 90 of those ships as off-loading companies refused to unload them over concerns that they wouldn’t be paid.

Even an offer of $90 million from what’s left of Hanjin (including $36 million from the personal assets of its chairman) fell far short of the necessary $543 million estimated to unload all of its ships that are now circling ports around the world.

Concerns are mounting that

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The Coming Puerto Rican Bailout

This article appeared online at TheNewAmerican.com on Monday, August 29, 2016:  

On or before September 1, President Obama will complete the eight appointments to the oversight board created when he signed PROMESA (Puerto Rico Oversight, Management and Economic Stability Act) into law on June 30. Those already on the board include Republican Senators Orrin Hatch and Marco Rubio, Democrat Senator Bill Nelson and Congresswoman Nydia Velázquez.

In theory the board will have the power to override the island’s government, delay litigation, fire government workers, and “suggest” other ways the island can begin to recover from its present economic implosion. It has been described as a “de facto” Chapter 9 bankruptcy. In practice it is likely that,

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Vulture Funds Expecting to Profit Handsomely from Puerto Rico’s Problems

This article was published by The McAlvany Intelligence Advisor on Monday, August 29, 2016:  

English: Map of Peuto Rico, with inset showing...

Map of Peuto Rico, with inset showing it’s position in relation to American continents.

George W. Plunkitt was not the world’s first dishonest politician, but he might have been one of the first ones to be honest about his dishonesty. Plunkitt was a Tammany Hall pol who served in the New York State Assembly and then in the New York State Senate around the turn of the 20th century. He called what he did – and what made him wealthy – “honest graft.” He defined “dishonest graft” as efforts to work solely for his own interests. “Honest graft,” on the other hand, was graft that worked for the interests of his own party.

He made his money by

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Comeuppance in the Oil Patch

This article was published by The McAlvany Intelligence Advisor on Wednesday, August 3, 2016:  

Looking down from Heaven, George Mitchell must be pleased with what’s going on below: oil inventories are growing to the point where offshore tankers and railroad tank cars are having to be used for storage, oil and gas prices are dropping along with the costs of all the other 6,000 consumer products made from petroleum, rig counts are increasing, production costs are dropping, and, best of all, OPEC’s influence is waning daily.

The Economist called Mitchell the father of fracking in its eulogy following his death in July, 2013. They referred to him as

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U.S. Oil Shale Producers Putting OPEC Into Financial Bind

This article appeared online at TheNewAmerican.com on Tuesday, August 2, 2016:  

This wasn’t supposed to happen. When OPEC decided in November 2014 to keep producing crude oil at or near maximum rates, it was following an unspoken strategy to force the U.S. oil shale industry to back off. That would allow prices to rise back to levels needed to fund the cartel’s military adventures and their welfare states.

Marginal producers in the United States did declare bankruptcy, while other producers stacked most of their oil rigs, cutting daily production in the country from 9.7 million barrels per day (mpd) to 8.5 mpd. This caused crude oil prices to rise from the low 30s to the mid 50s.

But then oil prices levelled off and began to decline,

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Undercover Video Confirms Hillary’s Strategy to Ban All Firearms

This article appeared online at TheNewAmerican.com on Tuesday, July 26, 2016:  

Rules for Radicals

The first 57 seconds of James O’Keefe’s latest undercover video interview, of a Clinton delegate from California, confirms what many have long suspected: Hillary Clinton’s real goal of complete and total confiscation of all firearms from every American citizen is being hidden behind benign and persuasive phrases such as “common sense gun control” and “protect our families,” etc.

It also reveals what happens when the “useful idiot” in the video learns that she has been exposed for what she is: a mouthpiece for the movement to disarm America and ultimately turn it into a totalitarian state.

Most importantly it reveals

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California’s Pension Plans Report Dismal Results, Increasing Shortfalls

This article appeared online at TheNewAmerican.com on Wednesday, July 20, 2016:  

Ted Eliopoulos, the chief investment officer of the country’s largest pension plan, the California Public Employees Retirement System (CalPERS), did the best he could with the bad news: “Positive performance in a year of turbulent financial markets is an accomplishment that we are proud of.” That “positive performance” was a measly 0.61-percent return from July 1, 2015 through June 30, 2016, on his $300 billion pension plan. That means that the fund is now about $100 billion short of meeting its future obligations.

But that $100 billion number greatly understates the real liability because it’s based on a pixie-dust assumption that the plan can earn an average

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Day of Reckoning for Chicago Taxpayers

This article was published by The McAlvany Intelligence Advisor on Monday, July 11, 2016:  

Chicago landsat image

Chicago landsat image

Chicago just experienced a great irony. Its bill for past extravagances run up by its corrupt politicians arrived over the July 4th weekend. It was of course then that Americans were celebrating Independence from British politicians seeking to impose taxes without representation.

With representation, Chicago taxpayers have allowed themselves to be saddled with taxes far exceeding those that triggered the American Revolution. The trouble is that the realization just hit home over that weekend.

The second half of 2016 property taxes was due on July 1st, and on Tuesday unhappy taxpayers were lined up outside the tax assessor’s door to complain. It was a little late. About two decades late.

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Rio 2016 Olympic Games Likely to Hasten Brazil’s Bankruptcy

This article was published by The McAlvany Intelligence Advisor on Monday, June 20, 2016:  

Rio de Janeiro 2016 Summer Olympics bid logo.

A postmortem on Rio 2016 is likely to show a loss. History might record a cataclysmic disaster. Seven years ago when the IOC awarded the 2016 summer Olympics to Brazil, the main concern was crime in the city of Rio de Janeiro. At the time IOC spokesman Mark Adams told the AP: “We have confidence in [Brazil’s] capacity to deliver a safe Games in seven years. Security is of course a very important aspect of any Olympic Games….”

At the time Rio was one of the top ten most crime-ridden cities in the world. But everything else seemed to bode well:

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Illinois Governor Vetoes Plan to Reduce Chicago’s Pension Contributions

This article appeared online at TheNewAmerican.com on Monday, May 30, 2016: 

Chicago’s pension contributions to its four dreadfully underfunded pension plans were supposed to double this year to $1.1 billion, up from $478 billion in 2015. But state legislators passed a bill (which had been bottled up for nearly a year) to cut that back to under $900 million. On Friday Illinois Governor Bruce Rauner (above) vetoed the bill, expressing in no uncertain terms that he was tired of politicians kicking the can down the road:

By deferring responsible funding decisions until 2021 and then extending the timeline for reaching responsible funding levels from 2040 to 2055, Chicago is borrowing against its taxpayers to the tune of $18.6 billion.


This practice has got to stop. If we continue, we’ve learned nothing from our past mistakes.

Those past “mistakes” have got Chicago Mayor Rahm Emanuel in a pickle.

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Meet Michael Madigan, AKA “the Real Governor of Illinois”

This article was published by The McAlvany Intelligence Advisor on Monday, May 30, 2016:  

Little happens legislatively in Illinois without the approval or acquiescence of House Speaker Michael Madigan (shaking hands with another corruptocrat, above). A Chicago pol, he has been speaker for 31 out of the last 33 years. When a bill arrives, it is shunted immediately to his Rules Committee, run by his second-in-command, Rep. Barbara Flynn Currie, also from Chicago, also a Democrat who was appointed Majority Leader of the House by Madigan.

If a bill ever sees the light of day (most don’t) it then is assigned to one of 50 committees, each of them chaired by a Madigan selectee.

A present example is SB 777, which

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Puerto Rico Bailout Deceptively Called “Restructuring”

This article appeared online at TheNewAmerican.com on Friday, May 20, 2016:  

Corcho Beach in Vieques island, Puerto Rico.

Corcho Beach in Vieques island, Puerto Rico.

Hidden behind the tentative agreement announced by House Speaker Paul Ryan on Thursday that would allow Puerto Rico some breathing room over its massive $73-billion national debt are the bailouts that are already in place.

The agreement is based on the bill by Rep. Rob Bishop (R-Utah) that creates another government bureaucracy to oversee the orderly “restructuring” (read: massive haircut for PR’s bondholders). When he presented his bill, Bishop said it would “give Puerto Rico access to a court-enforced debt restructuring in exchange for the imposition of a federal fiscal oversight board.”

Ryan said the agreement would allow the island territory to

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Puerto Rico to Default on $422M Payment Today; Likely Another $2B in July

This article appeared online at TheNewAmerican.com on Monday, May 2, 2016:  

Puerto Rico continued its “death spiral,” with its failure to make a $422 million interest payment on Monday on some of the island’s gigantic $73 billion debt. This comes on the heels of missed payments over the last year, and will be followed up by a $2 billion payment due on July 1, which it is also widely anticipated to miss. The payment is due from the island’s Government Development Bank (GDB), the main bond issuer and the island’s fiscal agent.

So far Governor Alejandro Garcia Padilla (above) has, as noted previously in The New American, been able to keep the lights on and the water running by moving money around on the island’s balance sheet, paying only those with the highest and most enforceable claims and dealing as best he can with those holding lower credits. It was Padilla who said his island was in a “death spiral” as far back as last July, because his 3.5 million inhabitants, half of whom live in poverty, didn’t have the money.

But for decades Padilla and his predecessors acted as if they did have it,

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Nothing is Likely to Change in Brazil

This article was published by The McAlvany Intelligence Advisor on Wednesday, April 20, 2016: 

One of Warren Buffett’s favorite expressions is “when the tide goes out, everyone will see who’s been swimming naked.”  In Brazil the tide went out at the start of the Great Recession and now the whole world can see who was swimming naked.

When President Lula was elected in 2002 the commodity boom was underway, and Brazil was enjoying the ride. Its major exports are soybeans, sugar, and iron ore, and under Lula Brazil’s GDP was running 10 percent a year. Lula implemented major expansions of the welfare state, including putting in place such generous pension plans that state workers could retire at age 54 for men and at age 52 for women at 90 percent of their final pay. The average Brazilian’s household income rose, and statists worldwide pointed to Brazil’s success story, naming it as one of the BRIC countries that would soon overtake the developed nations of the world, and doing it while expanding government spending.

But when Dilma Rousseff took over in 2011 the Great Recession was revealing the true nature of spending far beyond the ability of the economy to sustain it. In 2014 the government’s finances were in such dreadful shape that

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.