Friday, June 15, 2012

Weekend Links

Today's quote:   “More than any time in history mankind faces a crossroads. One path leads to despair and utter hopelessness, the other to total extinction. Let us pray that we have the wisdom to choose correctly.” — Woody Allen





1--Central banks ready to combat Greek market storm, Reuters

Central banks from major economies stand ready to take steps to stabilize financial markets by providing liquidity and preventing a credit squeeze if the outcome of Greek elections on Sunday causes tumultuous trading, G20 officials told Reuters.


A senior U.S. official cautioned that the Greek election will not provide "the definitive signal on what happens next" in the euro zone debt crisis.

But if severe market strains emerge after an unusual confluence of three elections this weekend - there are important polls in Egypt and France as well - central bankers are on standby to ensure enough cash is flowing through the financial system.

"The central banks are preparing for coordinated action to provide liquidity," said a senior G20 aide familiar with discussions among international financial diplomats. His statement was confirmed by several other G20 officials.

2--Why Housing Affordability Is a Mirage, WSJ

Home prices and mortgage rates have made monthly mortgage payments lower than at any time in the past decade. But housing isn’t any more affordable than it was five years ago, during the go-go lending days, after factoring in down payment requirements and other financing terms, according to a new paper.


The National Association of Realtors and other housing economists typically measure housing affordability by looking at home prices and mortgage rates. Prices of course have fallen to nearly 10-year lows nationally, while rates have never been lower. Freddie Mac on Thursday said rates stood at 3.71% this past week for the average 30-year fixed-rate mortgage.

But the total cost of homeownership, as a share of a borrower’s income, is the same today as it was during the height of the housing mania, according to the study by Andrew Davidson and Alexander Levin of mortgage consulting firm Andrew Davidson & Co.

The reason: borrowers have to put more money down to get a loan, and the exotic lending products that allowed borrowers to make low initial payments have gone away. That means while the absolute monthly payments are lower, the all-in costs of homeownership haven’t become more favorable.

Today, most lenders require minimum down payments of 20%, though loans with down payments of just 3.5% are still available through the Federal Housing Administration. During the peak of the housing boom, borrowers could bypass pesky down payments by taking out second mortgages or obtaining mortgage insurance.

“Home affordability needs to be considered in light of the full financing package,” said Mr. Davidson. “During the bubble the low all-in cost of mortgage financing allowed borrowers to purchase homes, even at inflated prices.”

3--Why Aren’t There More Homes for Sale?, WSJ

It’s no secret to anyone who has watched the real-estate market over the past year that the number of homes for sale has dropped sharply, especially in hard-hit markets such as Miami, Orlando and Phoenix.


Economists at CoreLogic have new evidence showing how big price declines are keeping many home sellers on the sidelines. They found that the supply of homes for sale declines as the rate of negative equity — or the share of borrowers who owe more than their homes are worth — rises.

Markets where more than half of all borrowers were underwater had enough inventory to last 4.7 months at the current rate of sales in April, below the national average of 6.5 months. Meanwhile, markets where fewer than 10% of borrowers were underwater had 8.3 months of supply.

“The presence of negative equity not only drives foreclosures, reduces the availability of purchase down payments and impedes refinances, but also restricts the ability of owners to list their homes for sale as the demand side of the market improves,” wrote Sam Khater, a senior economist at CoreLogic.

This helps explain not only big inventory drops in markets that are feared to have large numbers of potential foreclosures — the feared “shadow inventory” — but it also sheds light on why prices are rising at the bottom end of the market. Negative equity is more pervasive at the low end, which suffered bigger price declines, and so the supply is also tighter.

This “can’t sell” cohort of homeowners isn’t the only reason inventory is low. Many hard-hit markets have seen an influx of well-funded investors scooping up foreclosures that can be rented out, meaning inventory is being taken off the market, at least for now.

Meanwhile, banks have sharply slowed down their foreclosure processes after being caught fraudulently processing the paperwork required to take back those properties two years ago.

And even homeowners with equity may be unwilling to sell at today’s lower prices. This is particularly true of borrowers with less than 10% home equity, who may be depending on that cash to pay their real-estate agent and to fund a down payment and closing costs for their next home purchase.

4--Satyajit Das: "It's all about Germany", Naked Capitalism

Fund manager John Hussman summarised the idea of Euro-Zone bonds neatly (http://www.hussmanfunds.com/wmc/wmc120528.htm):“This is like 9 broke guys walking up to Warren Buffett and proposing that they all get together so each of them can issue “Warrenbonds.” About 90% of the group would agree on the wisdom of that idea, and Warren would be criticized as a “holdout” to the success of the plan”...

Germany’s attempt to balance the benefits of the single currency and the advantages of preserving the Euro-Zone against its traditional preference for fiscal and monetary conservatism has failed, leaving the nation with severe financial problems which will curtail future growth. The size of the exposure is large, both in relation to Germany’s GDP of around Euro 2.5 trillion and German household assets which are estimated at Euro 4.7 trillion.


German citizens will have to pay twice for the Euro. In the early 2000s, they paid through internal devaluation – reductions in real wages, unemployment and labour market reforms. Now, they will have to pay for the bailouts. Once the artificial boom ends, voters will discover they were betrayed by Germany’s pro-European political elite. There will be an electoral revolt and, as in the rest of Europe, a strong challenge from radical political forces with unpredictable consequences.

Germany’s history is one of monumental reverses and extremes. In his 1901 novel Buddenbrooks, about a well-to-do North Germany family whose fortunes are in decline, Thomas Mann anticipated the present situation: “I know that the outwards, visible and tangible signs and symbols of happiness and achievement often only appear when in reality everything is already starting to go downhill again.The outer signs take time to arrive – like the light of a star which shines most brightly when it is on the way to being extinguished, or maybe has already gone out”.

As Friedrich Nietzsche knew: “…hope is the worst of all evils, because it prolongs man’s torments.” Germany may not, as widely assumed, offer a safe haven in the European debt crisis....

Political will for integration is lacking. Germany is reluctant to become the ultimate guarantor of the Euro-Zone. Bundesbank President Jens Weidmann put the German position on Euro-Zone bonds bluntly: “You cannot give someone your credit card without having the means to control the spending.” He also appeared to indicate concern about further activism from the ECB: “The European Central Bank has reached the limit of its mandate, especially in the use of its non-conventional measures.” Most importantly, Mr. Weidman pointedly told Le Monde: “In the end, these [measures] are risks for taxpayers, most notably in France and Germany.....

But the largest single direct German exposure is the Bundesbank’s over Euro 700 billion current exposure under the TARGET2 (“Trans-European Automated Real-time Gross Settlement Express Transfer System”) to other central banks in the Euro-Zone.


Designed as a payment system to settle cross border funds flows, surplus countries, like Germany, have been forced to use TARGET2 to finance deficit countries. Before 2008, deficits were financed by banks and investors. Since the crisis commenced, TARGET2 has been used to meet the funding needs of peripheral countries without access to money markets to fund trade deficits and the capital flight out of their countries.

Germany is by far the largest creditor in TARGET2. The Netherlands, Finland and Luxembourg are the other creditors with all other Euro-Zone countries being net debtors within the system.

Germany is now caught in a trap. Irrespective of the resolution of the debt crisis, Germany will suffer significant losses on its exposure – it will be the biggest loser. As Elvis Presley once sang in Suspicious Minds: “We’re caught in a trap I can’t walk out because I love you EU too much baby”.

5--Debt crisis: ECB last hope as dam breaks in Spain, Telegraph


Spain's borrowing costs have surged to record highs and are perilously close to the point of no return, threatening a full-blown sovereign crisis unless the European Central Bank comes to the rescue.

"We're facing maximum tension. The situation is unsustainable over time," said the country's finance minister Luis de Guindos. Yields on 10-year Spanish bonds yields punched to almost 7pc, above levels that triggered ECB intervention to back stop Spain last November.


"The ECB needs to intervene very quickly or it is game over," said Nicholas Spiro from Spiro Sovereign Strategy. "There is a whiff of capitulation in the air."

The dramatic escalation comes just days after the eurozone agreed a €100bn rescue package for the Spanish state to recapitalise its crippled banks. "It is very worrying. Markets are behaving as if the eurozone is heading for break-up," said Jens Sondergaard from the Japanese bank Nomura. ....

Spanish premier Mariano Rajoy said in a private letter to EU leaders last week that the ECB is the only body with firepower and nimbleness able to contain the crisis at this point...

Professor Paul De Graue from the London School of Economics said the bank should go ahead anyway and "let the lawyers argue about it for the next ten years."


There are no such constraints on outright QE or money printing by the ECB, in extremis. Monetarists say the bank should buy the bonds of all EMU states to lift the entire region and prevent debt-deflation taking hold in the South.

Fresh data yesterday shows how desperate the crisis is becoming in Spain. The property crash is accelerating. House prices fell at a 12.6pc rate in the first quarter of this year, compared to 11.2pc the quarter before, and 7.4pc in the quarter before that. Prices have fallen 26pc from their peak.

"Fundamentals point to a further 25pc decline," said Standard & Poor's in a report on Thursday. It may take another four years to clear a glut of one million homes left from the building boom.

Mrs Merkel chided the country gently yesterday for letting a "property bubble" spin out of control in the boom years. Her words prompted a furious reaction from Madrid.

Foreign minister Jose Manuel Garcia-Margallo said Spain itself was the victim, flooded with cheap capital from northern European banks. "It is true that Spain and some other countries lived beyond their means but that was because banks from the core made lots of money investing here," he said.

6--Tsipras slams bailout, vows to stay in euro, Athens News

The Syriza leader promised on Thursday to rip up the conditions attached to the bailout memorandum but keep Greece in the eurozone after Sunday's election, which he said were a referendum on the "memorandum or Syriza".


"The memorandum of bankruptcy will belong to the past on Monday," Syriza leader Alexis Tspiras told his last Athens campaign rally before the election, held on Omonia Square.

Attacking New Democracy and Pasok, he claimed that the Greek people are abandoning leaving behind the two parties that were trying to "extort the Greek people and steal votes".

He said corruption, vested interests and disaster were at the core of these parties and that they had "looted Greece".

He dismissed fears that reneging on the accord with the European Union and International Monetary Fund would drive the country from the single currency, warning "speculators" not to bet on Greece's exit.

"We will vote on Sunday with our eyes on Spain," he said, referring to the 100bn euro recapitalisation package offered by the EU to prop up the battered Spanish banking system
7--Greece Votes on Sunday --Europe's Future Hangs in the Balance, Der Speigel
 
Already, depositors are rapidly moving their money out of Greece. Capital outflows are now well more than €500 million each day, with €10 billion having been pulled out of Greek banks since early May. Analysts have dubbed it a "bank jog," but should Syriza emerge victorious on Sunday, it could turn into a trot, or even an out-and-out sprint. An unnamed euro-zone official told Reuters that Brussels is concerned about such a scenario. "It's not even about a bank run on Monday morning after the elections," the source told the news agency. "People can now log on to Internet banking and make transfers on Sunday evening as well."


Still, even if all goes well in Greece on Sunday, Europe is far from out of the woods. Indeed, zero hour would appear to be approaching on several euro-zone fronts this summer, with both Spain and now Italy showing signs of having caught the euro bug. Not quite one week after Spain requested €100 billion from the euro backstop fund to prop up its banks, interest rates on the country's sovereign bonds have soared and ratings agencies have slashed the country's rating. On Thursday, rates on Spanish 10-year bonds hit an all-time euro-era high of 6.96 percent, just shy of the 7 percent mark which drove Greece, Ireland and Portugal to scream for emergency aid.

Italy too is finding itself at the mercy of the financial markets this week. With investors more unsettled than calmed by the handling of Spain's banking crisis, Rome on Thursday had to pay 6.13 percent interest on 10-year bonds. "The European banking system is paralyzed," Nicolas Veron, a senior fellow at the Bruegel think tank in Brussels, told the Associated Press. "So many banks hold massive amounts of Spanish and Italian government bonds that are losing value. We no longer have a functioning interbank (lending) market in the euro zone."

8--The US consumer finance mess, IFR

It won’t be the American consumer who powers the economy and financial markets. An examination of the Federal Reserve’s new tri-annual Survey of Consumer Finances shows the US didn’t just suffer a debt bubble – but an income drought.


The statistics are stark: in the three years through 2010 the median family saw its net worth fall by nearly 40%, wiping almost two decades of asset accumulation off of the books. The real source of concern was a 7.7% drop in real income in the period, leaving many families still struggling with intractable debts
There are two really important takeaways from the survey.


First, U.S. households, far from being a source of real pent-up demand, are sailing into their retirement years with very little wriggle room. Saving has been deferred, yet again, and consumption will have a very difficult time driving growth.

Second, and unsurprisingly, the poor and volatile performance of equities during the bubble years has drives savers away from the asset class, setting them up for another potential disappointment.

The root cause of the financial crisis, it seems clear from the data, was the interplay between stagnating family income and the easy availability of debt. The debt not only bankrolled consumption by heavy debtors, it – and this is an important point – encouraged consumption by those who had manageable or no debt at all.

That’s because the flow of debt through society helped to elevate asset prices, both in housing and in stocks and bonds, allowing many more people to play at being wealthy types who live off of their investments. What we saw from 2007 to 2010 was this: as the air came out of the debt bubble, the impact spread, hitting asset prices and income.

It is this interplay that is key, and it is ongoing. In fact the loss of notional wealth, which was mostly due to the fall in the value of housing, really should be thought of as the lifting of an illusion.


Americans thought that somehow their houses and stocks could go up and up and finance lifestyles their earned income could not. What’s more, a lot of the earned income – think about sectors like finance, construction and real estate – were artificially raised by the debt bubble.

The long stagnation

Wages and income in real terms have been stagnating for decades. Putting aside arguments about the justice of this, it presents a real problem for investors in an economy which relies on consumption for 70% of its activity. A loosening of lending standards allowed the economy to grow reasonably strongly until the crisis, but the math is now far less favorable.

Debt went down in absolute terms, according to the Fed study, but rose by the key comparison to net worth. For all families, the ratio of debt/net worth rose by 11% to 16.4%.

The good news was that the proportion of households where debt repayments account for more than 40% of family income – in other words those drowning in debt – fell.

That’s probably partly the result of borrowers defaulting on home loans. In aggregate, debt to family income levels continued to rise, despite falling interest rates and despite a huge wave of defaults.

The savings rate, as measured by the survey, also fell, raising questions about exactly how long retirement saving can be forestalled.


All in all it was a survey only a bond investor could love, pointing as it does to years of sub-par growth and little room for reflationary growth.

People’s faith in the stock market has been eroded by the bubble and bust pattern, as can be seen in the decline in the number of families with exposure to stocks, which declined to less than half from 52.3% in 2001. Direct ownership of stock declined by about 15% and ownership of stocks in a fund fell sharply – by almost a quarter to just 7.7%. Fewer people also own retirement accounts, presumably due to emergency liquidation and slow uptake among the young.

While it is hard to get excited about equities in this climate, I can’t help but worry that this kind of mass turning away from the asset class is a buying signal. It would be a terrible irony if investors learned the wrong lesson from the past 10 years. It may be true that investors rarely get a fair shake from financial markets, but it is also true that, correctly done, they represent the best game in town.

So, stay invested, cut costs but don’t count on a consumer renaissance to inflate us out of our problems.

9--Obama, Romney spell out right-wing economic programs in Ohio, WSWS

In his speech, Obama hypocritically sought to distance himself from the policies of tax cuts for the rich, corporate deregulation and austerity that he has single-mindedly pursued for three and a half years. He sought to palm these off as “Republican” policies, and their continuation a result of a “stalemate in Washington,” which would be broken by his reelection.


However, Obama’s attempt to present his agenda as significantly different from Romney’s was belied by the fact that he presented no program to put people back to work. He merely called on Congress to implement his “jobs to-do list,” which consists entirely of the corporate handouts and deregulation he criticized in his speech.

Obama repeated his call for trillions of dollars in deficit cutting, which he said would bring “domestic spending to its lowest level as a share of the economy in nearly 60 years.” This will not only mean the devastation of health care and other social programs upon which millions of people rely, but will also lead to the destruction of hundreds of thousands of additional government jobs.....

Obama boasted that he has “approved fewer regulations in the first three years of my presidency than my Republican predecessor did in his. And I’m implementing over 500 reforms to fix regulations that were costing folks [i.e., corporations] too much for no reason.”


Obama likewise sought to distance himself from his Republican opponent by claiming to support social programs. “In the decades after World War II, there was a general consensus that the market couldn’t solve all of our problems on its own; that we needed certain investments to give hardworking Americans skills they needed to get a good job ... that we needed consumer protections that made American products safe and American markets sound.”

Yet last month, Obama actually boasted that his administration was the first in postwar history to reduce the number of government jobs during a recession.

Obama went on to present himself as even more ruthless than Romney in slashing spending to reduce the deficit. He noted that his administration was advancing a “detailed proposal that would reduce our deficit by $4 trillion through shared sacrifice and shared responsibility.” He added that his plan would “reduce our yearly domestic spending to its lowest level as a share of the economy in nearly 60 years.”...

Obama’s absurd speech, which future generations will marvel at as an uncanny example of fraud, duplicity, sophistry, and cynicism, can only have triggered disgust among the millions of people who are beginning to see Obama for what he is: a puppet of the banks.


10--Fed report shows---Crisis has thrown back US families 20 years, WSWS

The financial crisis of the past four years has thrown American families back two decades, according to figures provided by the Federal Reserve Board in its triennial Survey of Consumer Finances.


The median net worth of US families—the combined value of homes, bank accounts and other assets, minus mortgages and other debts—fell 38.9 percent between 2007 and 2010, from $126,400 to $77,300, approximately the level recorded in 1992. Median income also fell over the three-year period, down 7.7 percent before taxes, adjusting for inflation....

Some of the findings are like the tips of so many icebergs: they give only the barest glimpse of the profound suffering and exploitation experienced by tens of millions of people struggling to survive:


•Nearly two-thirds of all young families—those headed by someone under 35—owed installment payments on education debt, up from 53 percent in 2007.

•The proportion of families making use of so-called payday loans rose from 2.4 percent in 2007 to 3.9 percent in 2010, an increase of 65 percent.

•More than 10 percent of families with a 401(k) or other retirement account in 2007 had been compelled to liquidate it by 2010.

•The value of small businesses fell by an average of 20.5 percent from 2007 to 2010, with the steepest fall in the West and Northeast.

•Families headed by someone 75 or older sharply increased their use of credit card borrowing and carried larger balances.

•The proportion of families that reported they had been able to save any money during the previous year fell from 56.4 percent in 2007 to 52 percent in 2010.

The headline number of the Fed report, and deservedly so, is the dramatic fall in median net worth. This is the byproduct of the housing collapse, which has devastated the principal asset of working class and middle class families.


The median value of a US home fell by 42 percent between 2007 and 2010, from $95,300 to $55,000. At the same time, the burden of mortgage debt actually rose, from 51.3 percent of median home value to 64.6 percent, and 11.6 percent of homeowners with mortgages were under water, owing more on their homes than their present value.

In terms of income groups, the bottom 25 percent of households experienced a decline of 100 percent in median net worth, from a miniscule $1,300 per household in 2007 to zero in 2010. The second and third quartiles of the population saw decreases of 40 to 50 percent, while median net worth for the top 10 percent fell by only 6.4 percent (and has risen considerably since the end of 2010)....

The report details the enormous efforts by working people to survive financially by making sacrifices and cutting back on expenditures. Fewer families are carrying credit cards....

In sum, these figures document a vast social retrogression, in which the financial position of the overwhelming majority of the American people is getting worse. This is not merely the result of impersonal economic processes, however. It is the direct consequence of decisions made in corporate boardrooms and in Washington that have exclusively benefited the super-rich at the expense of working people.


The Bush and Obama administrations and the Federal Reserve itself made countless trillions in public funds available to bail out the banks and billionaire investors, whose speculative manipulation drove the mortgage bubble and resulted in the greatest financial collapse since 1929. By comparison, only derisory sums were offered to hard-pressed homeowners faced with foreclosure, and not a penny has been allocated to directly create jobs for the tens of millions of unemployed.

The social crisis, which is today even deeper than in 2008, is a demonstration of two interconnected failures: the failure of capitalism as an economic system, and the failure of the two-party system, which is incapable of responding in any way to the growth of mass deprivation on a scale not seen since the 1930s.

11--Banks cut standing REO inventories by reducing new acquisitions by 50%, OC Housing News

Foreclosure Radar just released its report on May foreclosures. The change in bank’s behavior since the beginning of the year is becoming apparent. Lenders are determined to steadily reduce their standing REO inventory. At current liquidation rates, they will have cleared out the backlog of standing inventory by the middle of next year. Of course, this comes at a price. Lenders are not making headway on shadow inventory, and those who have been delinquent on their mortgages for a long time are going to get to squat even longer. Lenders are hoping these people will opt to short sell their properties. In all likelihood, since doing nothing gets them month after month of free housing, most will stay committed to squatting until foreclosure. 2012 will be the golden age of delinquent mortgage squatting. When the standing inventory of REO is purged this year, 2013 will be the year lenders finally expunge the Ponzis....

As we have all noticed, the reduction in REO inventory has not come about because lenders are selling more REO on the MLS. In fact, lenders have actually slowed the speed at which they sell properties they already own. Their REO processing went from a leisurely 7.5 months in May of 2011 to a sedate 8.7 months in May of 2012....

Filings ticked up in May, but they are still below last year’s levels. The slower pace of foreclosure filings drags out the processing time of shadow inventory. Lenders are barely treading water with regards to shadow inventory. By quickly foreclosing on new defaults, they aren’t adding to it, but by not foreclosing on old defaults, they are increasing the age of their delinquent loans and giving long-term squatters an enjoyable free ride (notice the recent upturn in aging)....

When will the MLS inventory return?


Nothing I see in the recent bank behavior suggests they are planning to put more properties on the MLS. The recent uptick in filings may be a start, but unless loan owners start opting for short sales or lenders become more motivated to clear out their existing REO inventory this year, I don’t see the MLS inventory returning any time soon. A recent report from CoreLogic suggested the lack of MLS inventory is due to the prevalence of negative equity. This is nonsense. We have had the same amount of negative equity for the last three years, and inventory only dried up this year. The real reason for the lack of MLS inventory is outlined above. Lenders simply aren’t buying more REO to replace the ones they are currently selling

12--Repos are at the heart of the European distress, repowatch

As financial markets convulse over the European Union once again, RepoWatch would like to remind its readers that at the heart of the problem lies the repurchase market.


Yes, some European countries spent too much money and now are burdened with too much debt. So let’s look at where they got that money.

They got it in part by selling bonds to banks, which then used the bonds as collateral to get cheap repo loans and other short-term debt for themselves. Then they used this new money to pay for the bonds and to make more loans, including on U.S. real estate.

This finance chain fueled prosperity in Europe for a decade, ever since the European Monetary Union was founded in 1999 with repos as a fundamental instrument of monetary policy.

It was easy for governments to borrow and easy for banks to build up substantial short-term debt – all on the assumption that the European Central Bank and the European Union would never let a country fail because the impact on banks and the financial markets would be catastrophic.

Now many lenders are jittery, threatening to flee or already gone. Sovereign debt values are falling. Banks are choking, and some are relying on central banks for survival. Financial armageddon looms ….


There’s something drearily familiar about all this. Homeowners in the U.S. and other countries borrowed too much money because they could, thanks to securitization and repos. American college students borrowed too much money because they could. European governments borrowed too much money because they could. Giant banks borrowed too much money because they could. And then one day they couldn’t.

13--An Atheist Manifesto, Sam Harris

Quote:  There is another possibility, of course, and it is both the most reasonable and least odious: The biblical God is a fiction. As Richard Dawkins has observed, we are all atheists with respect to Zeus and Thor. Only the atheist has realized that the biblical god is no different. Consequently, only the atheist is compassionate enough to take the profundity of the world’s suffering at face value. It is terrible that we all die and lose everything we love; it is doubly terrible that so many human beings suffer needlessly while alive. That so much of this suffering can be directly attributed to religion—to religious hatreds, religious wars, religious delusions and religious diversions of scarce resources—is what makes atheism a moral and intellectual necessity. It is a necessity, however, that places the atheist at the margins of society. The atheist, by merely being in touch with reality, appears shamefully out of touch with the fantasy life of his neighbors....


Somewhere in the world a man has abducted a little girl. Soon he will rape, torture and kill her. If an atrocity of this kind is not occurring at precisely this moment, it will happen in a few hours, or days at most. Such is the confidence we can draw from the statistical laws that govern the lives of 6 billion human beings. The same statistics also suggest that this girl s parents believe at this very moment that an all-powerful and all-loving God is watching over them and their family. Are they right to believe this? Is it good that they believe this?


No.

The entirety of atheism is contained in this response. Atheism is not a philosophy; it is not even a view of the world; it is simply a refusal to deny the obvious. Unfortunately, we live in a world in which the obvious is overlooked as a matter of principle. The obvious must be observed and re-observed and argued for. This is a thankless job. It carries with it an aura of petulance and insensitivity. It is, moreover, a job that the atheist does not want.

It is worth noting that no one ever needs to identify himself as a non-astrologer or a non-alchemist. Consequently, we do not have words for people who deny the validity of these pseudo-disciplines. Likewise, atheism is a term that should not even exist. Atheism is nothing more than the noises reasonable people make when in the presence of religious dogma. The atheist is merely a person who believes that the 260 million Americans (87% of the population) who claim to never doubt the existence of God should be obliged to present evidence for his existence and, indeed, for his benevolence, given the relentless destruction of innocent human beings we witness in the world each day. Only the atheist appreciates just how uncanny our situation is: Most of us believe in a God that is every bit as specious as the gods of Mount Olympus; no person, whatever his or her qualifications, can seek public office in the United States without pretending to be certain that such a God exists; and much of what passes for public policy in our country conforms to religious taboos and superstitions appropriate to a medieval theocracy. Our circumstance is abject, indefensible and terrifying. It would be hilarious if the stakes were not so high.....

More than 50% of Americans have a “negative” or “highly negative” view of people who do not believe in God; 70% think it important for presidential candidates to be “strongly religious.” Unreason is now ascendant in the United States—in our schools, in our courts and in each branch of the federal government. Only 28% of Americans believe in evolution; 68% believe in Satan. Ignorance in this degree, concentrated in both the head and belly of a lumbering superpower, is now a problem for the entire world...

The incompatibility of reason and faith has been a self-evident feature of human cognition and public discourse for centuries. Either a person has good reasons for what he strongly believes or he does not. People of all creeds naturally recognize the primacy of reasons and resort to reasoning and evidence wherever they possibly can. When rational inquiry supports the creed it is always championed; when it poses a threat, it is derided; sometimes in the same sentence. Only when the evidence for a religious doctrine is thin or nonexistent, or there is compelling evidence against it, do its adherents invoke “faith.” Otherwise, they simply cite the reasons for their beliefs (e.g. “the New Testament confirms Old Testament prophecy,” “I saw the face of Jesus in a window,” “We prayed, and our daughter’s cancer went into remission”). Such reasons are generally inadequate, but they are better than no reasons at all. Faith is nothing more than the license religious people give themselves to keep believing when reasons fail....

Auschwitz, the gulag and the killing fields are not examples of what happens when people become too critical of unjustified beliefs; to the contrary, these horrors testify to the dangers of not thinking critically enough about specific secular ideologies. Needless to say, a rational argument against religious faith is not an argument for the blind embrace of atheism as a dogma. The problem that the atheist exposes is none other than the problem of dogma itself—of which every religion has more than its fair share. There is no society in recorded history that ever suffered because its people became too reasonable....

The level of atheism throughout the rest of the developed world refutes any argument that religion is somehow a moral necessity. Countries like Norway, Iceland, Australia, Canada, Sweden, Switzerland, Belgium, Japan, the Netherlands, Denmark and the United Kingdom are among the least religious societies on Earth. According to the United Nations’ Human Development Report (2005) they are also the healthiest, as indicated by measures of life expectancy, adult literacy, per capita income, educational attainment, gender equality, homicide rate and infant mortality. Conversely, the 50 nations now ranked lowest in terms of human development are unwaveringly religious. Other analyses paint the same picture: The United States is unique among wealthy democracies in its level of religious literalism and opposition to evolutionary theory; it is also uniquely beleaguered by high rates of homicide, abortion, teen pregnancy, STD infection and infant mortality. The same comparison holds true within the United States itself: Southern and Midwestern states, characterized by the highest levels of religious superstition and hostility to evolutionary theory, are especially plagued by the above indicators of societal dysfunction, while the comparatively secular states of the Northeast conform to European norms. ...

•Religious faith is a conversation-stopper. Religion is only area of our discourse in which people are systematically protected from the demand to give evidence in defense of their strongly held beliefs. And yet these beliefs often determine what they live for, what they will die for, and—all too often—what they will kill for. This is a problem, because when the stakes are high, human beings have a simple choice between conversation and violence. Only a fundamental willingness to be reasonable—to have our beliefs about the world revised by new evidence and new arguments—can guarantee that we will keep talking to one another. Certainty without evidence is necessarily divisive and dehumanizing. While there is no guarantee that rational people will always agree, the irrational are certain to be divided by their dogmas....

When we have reasons for what we believe, we have no need of faith; when we have no reasons, or bad ones, we have lost our connection to the world and to one another. Atheism is nothing more than a commitment to the most basic standard of intellectual honesty: One’s convictions should be proportional to one’s evidence. Pretending to be certain when one isn’t—indeed, pretending to be certain about propositions for which no evidence is even conceivable—is both an intellectual and a moral failing. Only the atheist has realized this. The atheist is simply a person who has perceived the lies of religion and refused to make them his own.


















































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