Thursday, July 31, 2014


Democrats are introducing a new common sense bill that is a step in the right direction for every hard working middle-class American.

Senate Democrats have introduced "No Federal Contracts for Corporate Deserters Act." As the title suggest, the bill would bar American companies from receiving government contracts if they move overseas, or merge with foreign firms, to avoid paying taxes in the United States.

So, which political party do you think will do what they can to kill the bill? Hmmm ...

- Mark 


Conversely, President Clinton was running budget surpluses when he left the White House ... and, FYI, President Obama has reduced budget deficits from the $1.4 trillion per year left to him by President Bush in 2009 to the $514 billion that's expected this year by the Congressional Budget Office.

- Mark

For a review of U.S. budget history, click here.

Click here for just one example why the GOP can't balance a budget.

Tuesday, July 29, 2014


One of the cable programs that I enjoy watching is Pawn Stars. The shop's co-owner, Rick, seems like a good guy who knows his stuff. It's also fun watching the experts come in to explain market values on everything from classic cars to classic toys.

I especially like watching when people come in with artwork or other artifacts they purchased or inherited. They often believe what they have is worth a small fortune, only to learn from the experts that what they have is worth only a fraction of what they want. Most accept the experts opinion. Others leave grumbling, saying that they will get the price they want (or paid).

But we all know, absent the appearance of a miracle or a sucker, they're really just talking to themselves. They won't get the price they want.

I bring this up because we are seeing the functional equivalent of Pawn Stars' disappointed and delusional clients played out at the international level. Only this time, instead of Rick, we have Argentina telling grumbling creditor-clients that they need to accept new market prices, which were established in 2005 and 2010 when 90 percent of Argentina's creditor-clients renegotiated what was owed to them.

Here's how it happened.

When Argentina experienced a political crisis in 2001 and 2002 banks and other financial institutions who had lent Argentina money in the 1980s and 1990s (and earlier) became worried. Many believed that Argentina could no longer pay what they owed and decided to sell their debt contracts.

Many debt contracts were sold in a fire sale for pennies on the dollar, with the sellers effectively telling the buyers, "Good Luck."

While 93 percent of Argentina's creditor-clients accepted the result of the negotiations, and new prices, a small group of holdouts who had purchased Argentinian debt contracts (again, for pennies on the dollar) did not. They want to be paid the full value of the debt contracts they purchased, and have dug in their heals.

They are also considered "vulture capitalists" because of how they are preying on distressed debt.

So, for example, a $100 million Argentinian debt contract might have been discounted and sold for $35 million. But the new buyers want $100 million. If we're thinking about Pawn Stars, it would be as if someone bought or inherited a classic piece of valuable art that suddenly dropped in price. They then enter Rick's pawn shop to demand that Rick pay them what the art piece was once worth.

What do you think Rick is going to say?

Unfortunately for Argentina things aren't so cut and dry in international financial markets. When Vulture Capitalists purchase and hold contracts that are worth more than what they paid they can use both political pressure and the courts to press their case. It doesn't matter that Argentina negotiated new debt contracts in 2005 and 2010, which established a new "market" price (interest and terms were renegotiated too). With politicians and the courts working for them Vulture Capitalists believe they are entitled to the full value of the contract.

While Argentina did not agree to pay 100 cents on the dollar they did agree to pay more than the pennies on the dollar the Vulture Capitalists paid. You would think that this would have been good news for the Vulture Capitalists, right? Not so fast.

The new creditors want to be paid the full value of the contract. And they're threatening to force Argentina into default this week if they don't get their way.

This is where it gets interesting, and why additional history is warranted.

After Argentina went through economic turmoil in 2001 and 2002 - a period that was called the worst in its history - Argentina's debt as a percentage of GDP rose to 166 percent. Worse, the political gains made in the 1990s, after decades of military rule, were very much in danger. Argentina's President Fernando de la Rua (now on trial) even had to flee the presidential palace on a helicopter after riots escalated.

Everyone understood the stakes involved.

After much hand wringing and negotiations, Argentina and its debt holders agreed to restructure their debt contracts. This was no easy feat, and took years (2005 and 2010). The new terms gave Argentina some breathing room, which has enabled the country to pay its international obligations on time ever since. The nation's debt as a percentage of GDP now stands at about 45% (for comparison, U.S. debt to GDP stands at 103%)

Over 90 percent of Argentina's creditors - which included U.S.-based unions, pension and retirement funds -  agreed to accept the new reduced terms. So, for example, instead of getting a 15 percent interest rate of return creditors might get 10 percent. This was considered better than the alternative, which included non-payment, or outright default.

Again, this was an agreement that over 90 percent of Argentina's bondholders accepted.

Those who accepted the new terms understood that you cannot drive debtors into a corner (think Wiemar Germany). They wisely understood that an Argentinian political and economic meltdown could do damage that would reverberate throughout the region, and the global economy.

Unfortunately, this is not the case with 7% of Argentina's bondholders, who are known as Vulture Capitalists. They don't care that they didn't actually lend Argentina money. They don't care that they purchased the contracts for pennies on the dollar. And they don't care that the only reason Argentina is in a position to pay back their debts today is because other creditors sacrificed and renegotiated.

Their only goal is to strip Argentina's economic carcass, regardless of the political and economic consequences it could have down the road.

Let's recap.

The market players who paid pennies on the dollar - and who work for Vulture Capitalist firms - are demanding that Argentina pay them the full value of their contracts. These firms never lent Argentina money. The firms simply purchased discounted debt contracts, many of which originated when Argentina was run by the a brutal and corrupt military dictatorship.

Worse, the Vulture Capitalists want Argentina to pay them before they pay those who agreed to restructure Argentina's debt, and those who are currently lending Argentina money.

To get satisfaction the Vulture Funds have taken their case to court in the U.S. Incredibly a New York district judge has sided with the Vulture Capitalists, awarding two firms $1.3 billion. Stating that 'judgments are judgments' U.S. District Judge Thomas Griesa is effectively elevating the rights of those who purchased Argentina's debt for pennies on the dollar over those who worked with Argentina, and helped the country avoid civil unrest.

Going back to our Pawn Stars example above, can you imagine the owner of a classic car going to Rick's pawn shop and telling him that if he doesn't get his $100,000 asking price that he'll sue him in court for the money? Can you imagine a court taking the car owners side?

Right about now, I'm sure, there's probably a few readers yelling at the screen something about the "sanctity of contracts." All I have to say is grow up. This kind of thinking is based on a flawed understanding of how the world really works.

Here's what you need to know.

1. SANCTITY OF CONTRACTS?: Union contracts regularly get busted or renegotiated during periods of stress. Just ask Detroit's auto workers, airline pilots, etc.
2. THE FINE PRINT: Private corporations, especially credit card companies, regularly play "fine print" games with their contracts, jacking up rates for no other reason than they can.
3. DISTRESSED DEBT OFTEN RENEGOTIATED: Bankruptcy judges in the U.S. regularly write down mortgages for commercial property, and other secured loans (just ask Donald Trump).
4. CONTRACTS-AGREEMENTS REGULARLY IGNORED: Many states - like California - backed out of contractually agreed upon raises after the 2008 market collapse. California even docked state employees 10 percent of their contracted wages to deal with the impact of the 2008 market collapse.
5. HIDING BEHIND BANKRUPTCY: Corporations and their subsidiaries regularly close up shop, file for bankruptcy, and ignore legal and other contractual obligations when they want to avoid legal obligations (like this one in West Virginia). 

There's more, but you get the point. In effect, market players who purchased distressed debt for pennies on the dollar knew - or should have known - what they were getting into. The sanctity of contracts is not carved in stone.

The Vulture Funds at the center of this dispute are lucky Argentina is in the position they are today. Simply, put, if things had gotten out of hand and others had not stepped up to the plate to renegotiate, the Vulture Funds wouldn't have a pot to piss in today.

Here's my take on the issue.

First, the market players who are holding out for full payout knew they were taking a big risk when they purchased Argentina's distressed debt. They knew that Argentina was in the process of renegotiating it's debt. They knew that dealing with a country is different than dealing with individual creditors in a domestic market. What the Vulture Funds are doing today, as they deploy the U.S. court system to do their dirty work, is simply mooching off of the blood and sacrifices of Argentina and the financial players who stepped up to the plate to renegotiate and help Argentina avoid political turmoil.

Second, what Argentina did when it renegotiated its debt was effectively go through a bankruptcy escorted debt restructuring. The difference is that it was done at the level of the nation-state. As a result of debt restructuring Argentina was able to put in place a new debt management strategy, which has benefited all of Argentina's debt holders over the past 10 years.

Using the courts to vacate the renegotiated contracts, and to get to the head of the payment line, is just wrong. What the Vulture Funds are doing today makes it clear that there are a group of market players (they're not investors) who don't care for the rules or the sanctity of the market.

Worse, they believe the institutions of the state are here to guarantee their market bets. Think about it.

As the Vulture Capitalists balk at paying U.S. taxes they regularly use U.S. government courts, to try and manipulate a U.S. government structured international trading regime, to get a sovereign government to pay them in government backed currencies. Vulture Capitalists are simply acting as corporate free riders.

Finally, as Argentina's President Cristina Fernandez de Kirchner never tires of pointing out, Argentina has never repudiated its debt. It simply renegotiated debt terms, as market players often do.

Argentina's President Cristina Fernandez de Kirchner

Anyone in the U.S. who has gone through bankruptcy restructuring understand what this means (again, see Donald Trump). Using the U.S. court system to enforce distressed contracts at full value makes a mockery of our markets, and subsidizes people who are gambling rather than investing. Where's the risk if U.S. courts are going to step in to guarantee your returns? (The point here is that there is no free market if this is your business strategy.)

If the Vulture Funds win the day this will send a terrible message to creditors and sovereign nations alike. No sensible creditor will want to renegotiate if they believe that their renegotiated flow of payments can be disrupted by Vulture Capitalists, who get to jump to the front of the line after someone else has done all the hard work of making a nation whole again.

At the end of the day, when it comes to Argentina, the Vulture Capitalists are little more than wealth extractors rather than wealth creators. They would rather feast alone on an economic carcass than dine with their peers at an economic buffet.

Argentina needs to take a hard line when their deadline to pay the Vulture Capitalists arrives this Thursday.

- Mark


Federal complaint filed against small Texas city's new ban on housing border kids and, of course, Muslims (Center for Public Integrity).

A silly clip that I'm betting you will watch more than once (YouTube).

Man gets run over by his own truck after road rage episode that he started (Gawker).

Target has stopped asking job applicants if they've been convicted of a crime ... here's why (Nation Of Change).

Poll finds that 64% of Americans believe Wall Street hurts them, and that the market is rigged against them (LA Times).

The U.S. has passed Saudi Arabia as the world's largest oil producer (Nation of Change).

The government rulebook for secretly labeling you a terrorist goes far beyond bombings, assassinations, and hijackings to include damaging computers used by financial institutions and acts intended to influence government policy through intimidation, among others (First Look). Then check this out.

European Court rules that Poland violated terrorist suspects' human rights by allowing their transfer to a secret Polish detention center (a "black site") run by the CIA (NY Times).

Families sick from fracking turn to scientists (Center for Public Integrity).

What do Chinese dumplings have to do with Global Warming? A lot when you consider the larger modernization of China picture (NY Times).

How oil and gas gained influence and transformed North Dakota (Center for Public Integrity).

Mark Cuban threatens to dump corporations that move off shore to avoid paying U.S. taxes (Huffington Post).

President Obama is going after the loophole that sends corporations to cheap tax haven countries (Business Insider).

Commentary: Astoundingly legal tax thievery by America's corporate elite (Nation of Change).

Detroit, other cash strapped cities, states slashing pension benefits while subsidizing professional sports stadiums (International Business Times).

The end game behind shutting off residential water in Detroit is a likely privatization attempt (Buzz Flash).

Thirsting for democracy in Detroit: Activists resist water service shutoffs, Wall Street, and privatization (Truth Out).

People kept complaining that this restaurant sucked ... look what they found out (The Meta Picture).

Ukraine under siege by the religious right (Buzz Flash).

The militarization of small city police departments continues ... Newington, CT (pop. 30,000) was just awarded an $733,000 armored vehicle from the U.S. military (The Courant).

It's mindless Modernization Theory all over again ... after spending millions of U.S. tax dollars on promoting soy-based products Afghans still don't like the stuff (Center for Public Integrity).

- Mark 

Monday, July 28, 2014


The headlines 100 years ago today (July 28, 2014) ...

After the assassination of Austria's Archduke Franz Ferdinand on June 28, 1914 in Sarajevo Austria-Hungary declared war against Serbia on this day 100 years ago.

Because of German commitments made to the Autstro-Hungarian Empire they would be dragged into war too. This triggered commitments from France, England, and Russia which would drag them in to defend Serbia. The Ottoman Empire (effectively Turkey) and the Bulgarians would join Germany and Austria-Hungary to form the Quadruple Alliance.

Germany's Kaiser Wilhelm II, Austria's Kaiser and Hungary's King Franz Joseph,
the Ottoman Empire's Sultan Mehmed V
, and Bulgaria's  Tsar Ferdinand.

The United States, as we know, would join the war effort years after (April 6, 1917) "the war to end all wars" began, which would propel the U.S. to the top of the geo-political world. However, after dropping the ball on the Treaty of Versailles, the U.S. bungled the post-war world order as successive U.S. presidents ignored the world's need to establish a new world order after the collapse of colonial empires.

The United States would not make the same mistake after World War II. The U.S. assumed the mantle of leadership and created a world order that reflected a new understanding of power and order building.

- Mark 


With workers and customers "on strike" over the firing of worker-friendly CEO Arthur T. Demoulas, business is down 75 percent at Market Basket. Robert Reich helps to synopsize recent events ...

Every once in a while something happens that exposes the underpinnings of American capitalism. In Lowell, Massachusetts, the birthplace of the Industrial Revolution, employees of the regional grocery chain "Market Basket" (with 71 stores in Massachusetts, New York, and Maine) have joined with managers and customers to protest the recent firing of Market Basket's CEO by its board of directors. Apparently he'd been too nice to his employees. He paid them well gave them good benefits. When the financial crisis hit in 2008, he replaced the money they lost from their retirement funds. Although his policy has paid off over the long term -- "Market Basket" is known for offering low prices and high levels of customer service, thanks in part to its worker-friendly policies -- the board wants more money, faster. 
This week, after eight managers who helped organize the protests were fired, an estimated 5,000 employees and customers rallied against the board of directors. Boycotts are being organized. Deliveries can't get through. Local politicians have weighed in with statements of support. This isn't the age-old labor versus management conflict. It's labor, management, customers, community and fired CEO versus greedy directors. 
Stay tuned.

- Mark

Sunday, July 27, 2014


Currently there are 5 states working to make their kids as scientifically illiterate as possible by teaching Creationism. In the FYI category, Creationism attempts to explain the world from a biblical perspective, and it's not pretty. Among those who believe in Creationism is Ken Ham, who you can watch in in this incredibly disturbing clip.

According to Ken Ham, most of the dinosaurs died in The Great Flood about 6,000 years ago because they didn't make it on to Noah's Ark. The dinosaurs - who were vegetarians, mind you - were left to drown, while those who did make it on to Noah's Ark eventually became extinct. Ironically, Ham suggests the dinosaurs who did make it on to the Ark are no longer around because they couldn't adapt to the post-flood environment (does this make Ham an evolutionary creationist?).

Below we have six equally plausible dinosaur extinction "theories" that, if you ask me, have as much explanatory power as Ham's Ark Theory ...

THEORY #1: Absent Minded Dinosaurs

THEORY #2: Bad Habits

The Dinosaur Cancer Theory

THEORY #3: Climate Change + Walnut Sized Brains

THEORY #4: Malthusian Dinos - Dig Their Own Graves

THEORY #5: Scientology Dinos

THEORY #6: Noah-Dino Naval Warfare

I know, I know ...

Seriously, with so many people buying into Ham's version of life it's no wonder the U.S. is falling behind the rest of the world when it comes to science and math. We now have entire segments of our population willing to reject critical thinking and the scientific method, choosing instead to place their faith in fairy tales and charlatans like Ken Ham.

Worse, their outlandish assertions about history and science are accepted by millions of people, in spite of the fact that their belief system actually makes it possible for the true believers to think that Jesus could have been the original "Dinosaur Whisperer" (you know, before Fred Flintstone) ...

Cowboy Jesus tames dinosaurs during his 40 days in the wilderness ... 
It could have happened, right? 

Sigh ...

- Mark

Saturday, July 26, 2014


From the 9/11 Commission Report, page 2 ...

The security checkpoints through which passengers, including Atta and his colleagues, gained access to the American 11 gate were operated by Globe Security under a contract with American Airlines. 

From Reuters ...

United Airlines said on Monday it plans to outsource more than 630 union jobs [which include gate agents] at 12 U.S. airports in a cost-saving move.

Here's Robert Reich's take on the reality behind Uniteds cost-savings move ...

United Airlines reports it’s outsourcing 630 gate agent jobs at 12 airports to companies paying near-poverty level wages. Employees who have been with the company for years, earning middle-class wages of $50,000 a year, will be replaced by people paid between $9.50 and $12 per hour. United says it must do this to cut costs and raise its profits relative to other airlines. But United CEO Jeff Smisek gave himself $8.1 million this year. If he cut his salary just $2 million (in line with the CEO of the more successful Southwest Airlines, who gets $4 million), United would save about as much as it will by cutting the pay of those 630 employees. 

United Airlines' CEO Jeff Smisek benefits from outsourcing
The problem in America isn’t that typical workers are paid more than they’re “worth” in the market. It’s that they have no bargaining power, while too many CEOs and other top executives have the power to pay themselves almost whatever they want. How do redress this power imbalance? Some call for stronger unions and greater shareholder say over CEO pay, but I'm increasingly of the view we have to change the organization of the corporation so that it has to respond to all stakeholders -- not just its shareholders but also its workers and affected communities. What's your view?

So, yeah, this issue is not just about "saving" money to make United more competitive.

At the end of the day, we all know that you get what you pay for ... and the race to the bottom continues.

- Mark 

Thursday, July 24, 2014


It's official. The Republicans are acting like a bunch of clowns (again).

Clown conference ... or GOP Obamacare caucus?
A GOP-led committee in the House of Representatives voted 7-4 along party lines today to advance John Boehner's frivolous lawsuit against President Obama. The lawsuit argues that President Obama has not properly implemented Obamacare.

In the process the GOP voted down every amendment proposed by the Democrats that would let the American people know how much the lawsuit was going to cost taxpayers.

As well, instead of passing legislation that would fix the language that's causing the confusion over the implementation of Obamacare, the GOP has made it clear that they're going home in August (watch Jon Stewart skewer the GOP for not fixing the language they're so upset about here).

Let's repeat the point. The GOP is claiming that there are flaws in the language of Obamacare. But they're not going to do anything to fix a law they did nothing to advance, but are now claiming they want to be properly implemented.

What a bunch of clowns.

- Mark 


- Mark