American Courts Possessed by the Spirit of Kuvera

Argentina will miss a bond payment today thanks to a U.S. court. Argentina had the funds set aside to make this payment, but when they were transferred to the bond trustee, a U.S. District Court judge, Thomas Griesa, ordered the payment sent back. He stated that his ruling will allow the parties to ‘negotiate’. What it will most certainly do is keep the scheduled payments from interfering with the vulture capitalists’ windfall—the windfall granted to hedge funds last week courtesy of our very own Chief Justice Roberts. Grieva’s ruling marks the first time in history a judge has prevented a country from paying a restructured bond holder. ((Russo, Camila, Argentina at Brink of Default as $539 Million Payment Due. Bloomberg News, June 30, 2014. Available: http://www.businessweek.com/news/2014-06-29/argentina-at-brink-of-default-as-539-million-payment-due))

This debacle reminds me of Edward Moor’s description in his ‘The Hindu Pantheon’ of the Hindu deity, Kuvera. This deity seems to be the patron saint of Chief Justice Roberts, Judge Thomas Grieva, Elliot Management Corporation, and Aurelius Capital Management.

“Kuvera, the regent of wealth, for a moment demands our attention; and although few people seek the favor of this deity with greater avidity than the Hindus, yet I find but little mention of him in my mythological memoranda; nor have I any image or picture of him…On Kama, Lakshmi, or Saraswati, poets and historians dwell with complacency and delight; but the gloomy, selfish, and deformed Kuvera, claims not, nor deserves, so much of our attention….

“His servants and companions are the Yakshas and Guhyakas, into those forms transmigrate the souls of those men who in this life are addicted to sordid and base passions, or absorbed in worldly prosperity. The term Guhyaka is derived from Guh (ordure), a word retained in several dialects: hence Guhya… We happily do not find that the regent of wealth is related in marriage or otherwise with Lakshmi, the goddess of riches, to whom a Hindu…would address himself for that boon, and not to Kuvera: he has, however, a Sacti, or consort, named Kauveri, whence I conjecture, the river of that name, in Myhsore, derives its appellation.”

Rabinranath Tagore had similar things to say about Kuvera:

“Those who are familiar with the Hindu Pantheon know that in our mythology there is a demi-god named Kuvera, similar in character to Mamon. He represents the multiplication of money whose motive force is greed. His figure is ugly and gross with its protuberant belly, comic in its vulgarity of self-exaggeration. His is the genius of property that knows no moral responsibility. But the goddess, Lakshmi, who is the Deity of Prosperity, is beautiful. For prosperity is for all. It dwells in that property which, though belonging to the individual, generously owns its obligation to the community. Lakshmi is seated on a lotus, the lotus which is the symbol of the Universal heart. It signifies that she presides over that wealth which means happiness for all men, which is hospitable.

“By some ill-luck, Lakshmi has been deprived of her lotus throne in the present age, and Kuvera is worshipped in her place. Modern cities represent his protuberant stomach, and ugliness reigns unashamed. About one thing we have to be reminded, that there is no cause for rejoicing in the fact that this ugliness has an enormous power of growth and that it is prolific of its progeny. Its growth is not true progress; it is a disease which keeps the body swelling while it is being killed.” ((Tagore, Rabindranath, The English Writings of Rabindranath Tagore: A miscellany. Sahitya Akademi, 1996))

Argentina: The Supreme Court’s Wicked Decision

The U.S. Supreme Court’s ruling that Argentina must pay hedge funds that refused to compromise on repayment of Argentinean bonds should be all the evidence Americans need that the Supreme Court is out of control. Many were jarred awake by the Roberts Court’s ruling in favor of Citizens United. However, efforts to remedy the problem have been limited to repealing the offending ruling. It’s obvious now that this approach fails to address the structural permissiveness and consequent moral threat of the Supreme Court.

Subsequently, we’ve seen the McCutcheon ruling, which is the equivalent of a smirk and a wink on the sunny, untroubled face of Justice Roberts, informing us that Citizen’s United was no fluke. This ruling struck down aggregate limits on the amount an individual may contribute during a two year period to all federal candidates, parties and political action committees combined.

The Court’s ruling against Argentina and in favor of hedge funds with no scruples about bringing down a sovereign nation should be the final straw, but it’s getting harder these days to drum up good old fashioned moral outrage. The hedge funds have even asked for and received a ruling that allows them to use U.S. courts to force Argentina to disclose the amount and location of its assets. This should be stopped before it goes any further.

In case anyone is under the impression that Argentina is a deadbeat country, as the sharks would like you to believe, here is some of the history behind Argentina’s debt. After years of dictatorship and shameless colonialist collusion by a series of supposedly democratic leaders, Argentina was left with a crushing debt. The last of these mafioso-supported ‘democrats’ was shown the door by Argentina’s voters when they elected President Néstor Kirchner in 2003. Argentina’s current president, Cristina Fernández de Kirchner was elected to the presidency in 2007, and reelected in 2011. The Kirchners belong to the Peronist persuasion, associated with Isabel Peron who was deposed by coup d’état in 1976.

Twelve years ago Argentina defaulted on $100 billion worth of bonds. Even though Argentina’s courts demonstrated the fraudulent origins of the debt, the government restructured its debt twice, in 2005 and 2010, in an effort to meet its obligations. Most of the holders of Argentinean bonds accepted repayment of 30 cents on the dollar. However there were holdouts—‘vulture capitalists’ who bought some of the defaulted debt at a steep discount and now want face value for the bonds plus interest. Shockingly, the Supreme Court has ruled in their favor. It is feared this will have serious consequences, both in the sovereign debt markets and in the future ability of sovereign governments to remain solvent through debt restructuring. The holdouts are New York hedge funds NML Capital LTD, a unit of billionaire hedge fund manager Paul Singer’s Elliot management Corp, and Aurelius Capital Management.

They would like you to believe the Argentinean public benefited from this debt. Nothing could be further from the truth. Ever since independence 200 years ago, Argentina’s foreign debt has been a source of impoverishment and corruption. Since the first loan negotiated by Rivadavia in 1824 with the British Bank Baring Brothers, the debt was used to enrich Argentinean financiers and allow them to control finances and empty the country of its wealth. The British government donated a statue of British colonialist George Canning to Argentina in 1857 in recognition of the debt.

Foreign debt has always gone hand in hand with big business. With complicity of nearly every government from Bartolomé Miter and Manuel A. Quintana, to Carlos Menem and Fernando de la Rúa. This created generations of technocrats and bureaucrats who favored banks and international corporations over their own country. Educated at Harvard, Chicago, Oxford or Buenos Aires, they include lobbyists Manual Garcia and Luis Belaustegui; and heads of the banking system, Pedro Pou, Roque Macarrone and Christian Colombo. These characters were administrators of a debt born in 1970s under the military dictatorship.

This situation became much worse after America’s defeat in Vietnam. Oil prices were rising and petrodollars flooded the world. Banks were offering credit at 3%. This was the birth of Third World debt. By 1981, interest rates had risen to 16%, leading to the bankruptcy of these Third World countries. An alliance of foreign banks and multinationals came to power in Argentina. After seven years of neoliberal policies, the dictatorship left the country with $45 billion in debt. Twenty-three billion of this was owed by multiantionals operating in the country, including Citibank, First Boston, Chase Manhattan, Bank of America, Banco de Italia, Banco de Londres, Banco Espanol, Banco Frances, Deutsche Bank, Banco Rio and Banco Ouilmes, Banco Galica, and many more. Other debtors included Ess, Fiat, IBM, Ford, Mercedes Benz, Swift Pirelli, as well as local groups owned by Perez Companc, Bulgheroni-Brida, Macri, Techint, Fortabat, Pescarmona, Gruneisen, Soldati, Cogasco, Celulosa, and others. The state was saddled with this debt by a bureaucrat of the dictatorship, Domingo Cavallo. He was a ‘super-Minister’ of Finance in the Menem and de la Rúa governments.

Even though Argentina’s courts ruled that parent companies were responsible for the debts of their subsidiaries, these swindlers made the government responsible for them.

But the foreign debt was also illegitimate. Much of it was created when the parent companies made loans to their subsidiaries. These loans were internal movements within the companies, but they were assigned to foreign debt. Dollars were bought in Argentina and deposited in the U.S. With this deposit as collateral, you got a loan to purchase more dollars and so on. This is known as ‘bicycling’ funds. Because of the difference in interest rates, participants, mainly the big conglomerates, became wealthy.

Usury has been another problem. It is estimated that with reasonable interest rates, Argentina’s debt could have been paid by 1988. But there have been no reasonable rates, interest or otherwise. At the end of Alfonsin’s presidency, the foreign debt was close to $54 billion. Then Menem let the creditors decide what they were owed with no debate in the Congress. This ignored the constitution and the ruling of the courts that the debt was fraudulent. Ten years later the debt was $130 billion.

Lately you’d never guess that the United States has a history of opposition to this type of fraud. In 1898, the Americans invented a concept called the Theory of the Odious Debt. At the end of the Spanish occupation of Cuba, Spanish banks were demanding payment from the Cuban government of loans they had made to the colonial government. The Americans said that if the Cuban people didn’t benefit from these loans, they couldn’t be called public debt. Further, in 1923, a British bank, the Royal Bank of Canada, lent Tinoco, a petty tyrant of Costa Rica, a sum that he used for personal goals. The bank proceeded to demand payment from Costa Rica. In a law suit arbitrated by former President William Howard Taft, it was decided this was a private debt and the public was not responsible.

The worst of Argentina’s betrayals came from supposed democrats. Social Democrat Raúl Alfonsin promised to defend human rights, but instead took the country into austerity. Carlos Menem claimed to adhere to the policies of the neo-Peronist party. His presidency coincided with the fall of the Berlin Wall, the theory of the ‘End of History’, globalization, and neoliberal democracies in Latin America. It took him only a few days to change his stripes. He immediately cozied up with the conservative minority directed by the former rebel officer Alvaro Alsogaray. His policies were dictated by the United States, the World Bank, and the IMF. Of course, other political leaders and labor leaders jumped ship as well.

Menem needed a biased Supreme Court to carry out his plans, as well as control of the federal courts. Parliament delegated special powers to him. In one month he had passed his Reform of the State law, which opened up privatizations. Menem controlled inventories with no accompanying balance sheets. For the privatization of Argentina’s two largest companies, YPF and Gas del Estado, large bribes were offered to members of Argentina’s congress, which they happily accepted.

Argentina’s budget had to be approved by Washington. The convertibility Plan, in which one peso equals one dollar, stopped inflation but ruined industries. Previously, the country had produced 95% of what it consumed. Afterward, it imported garments, meat, dairy, fruit, pasta, etc. After the artificial elimination of inflation, banks lent at 50% per year when rates in the U.S. and Europe were 7%.

The debt was now irredeemable. Cavallo negotiated with U.S. Secretary Nicholas Brady with the result that state enterprises were purchased with national bonds pegged at 15% of face value, but redeemable at 100%. The country lost more than $30 billion. Whole concerns were sold without debt and the government took responsibility for the layoffs of workers. The main investors were Spanish and French.

Entei was sold for a fifth of its value to Telefonica and France Telecom, who saddled it with a 6 billion dollar debt.

Aerolineas Argentinas was profitable and owned 37 planes. The Spanish line Iberia mortgaged them to purchase the business. Then they stripped it of its assets.

The state water utility was taken over by a European syndicate headed by Suez and Vivendi. The works agreed to were not completed and 800,000 people were left without drinking water. A million were without sewers.

The worst case was the railroads, which represented a fatal blow to the economy.

The state paid out subsidies to these privatized concerns and eventually owed the World Bank the $700 million it borrowed to pay for the layoffs and another $700 million in interest. Normally anyone who uses public property belonging to another country has to pay a fee. These companies never paid it, but then they financed all the campaigns, the governments, the coups d’état, and all the public works.

Then came the liquidation of Argentina’s oil and gas industry, an industry that was said to be a model for the world. In this, Argentina is a unique case. These industries were given up without losing a war.

Oil was discovered in 1907 in Patagonia. YPF was created in 1923 at the orders of General Mosconi. When YPF was created, it was the first state enterprise in the world. Oil was considered strategic and the sale of fuel, of national interest. If the international price rose, YPF kept the price low, based on its costs rather than the market price.

Hell hath no fury like Big Oil scorned.

When YPF was sold, reserves that had been allocated for the next 25 years were valued at the equivalent of 9 months. It was so irregular that Menam had to deal with it personally. An outside company was hired to underestimate the reserves. A year later they appeared in the accounts of the Spanish firm Repsol at their real value.

Gas del Estado was estimated at $25 billion by Petrobras Company. After being appraised by international consultants it was sold for $2.5 billion. Repsol took control and polluted entire groundwater systems destroying the usefulness of the land in those areas. And Carlos Menam was honored in Washington as the creator of the Argentinean miracle. ((Argentina’s Economic Collapse. Available: http://youtube/VK494Judxvg))And now the U.S. Supreme Court seems intent on finishing the job these hooligans started.

The Roberts Court has taken possession of an unholy fortress—a constitutional fortress of our own making. If we agree that the problem is the lack of constitutional restraint on justices, it will be clear that caution and wisdom are needed to correct it, but also that something must be done. If we fail to act, we may as well forget about trying to make the world a better place for ordinary people. If we allow Argentina to be brought down by vulture capitalists and our own Supreme Court, we don’t deserve a better place.

My Brother’s Keeper and The Letter

There are several criticisms of the My Brother’s Keeper initiative, but they are not what I want to talk about here. I think the most meaningful part of this discussion is a letter to President Obama voicing concerns about his initiative and signed by 200 black men. Yes, it’s another criticism, but the thing I want to talk about is the signers’ understanding that efforts at reform won’t succeed if black men leave their mothers and sisters and daughters behind. And that is exactly what such programs require them to do.

The letter’s signers are concerned that President Obama’s initiative for helping men and boys of color lacks a comparable focus on girls and women. To be clear, they don’t want a moratorium on such initiatives, but they think this program ignores the importance of women and girls in their own right—that is, the importance of women and girls to their community. I hope there will be more debate on the supposed benefits of the addition of women to this top-down program for men, but I think the signers have hit on a sound principle that should be emphasized.

Modern religions tell us that humans are the offspring of fallen Man. On the other hand, I’ve said humans have the potential to be great. However, I wasn’t making a case for the genetic superiority of the species. I meant to say that humans are great when they make their communities work for everyone. Human greatness only becomes visible in a true community.

Maybe My Brother’s Keeper will have a good effect. I hope it does. But I don’t think trickle-down social schemes will ever bring lasting change. Real change begins in a community and spreads outward from there. I think this letter illustrates that you don’t need help from governments or billionaires to understand that. And in any case, it seems the kind of community these signers imagine is not what the creators of My Brother’s Keeper had in mind.

Regardless of the immediate effect of this letter, it illustrates a powerful principle. It might just be the start of something great.

Fear and Loathing at ASU

In 2000 I took a required class in security analysis at ASU from John Cesta. I’m not an expert analyst by any means, but I learned how to use the formulas to calculate a given problem. We turned our homework in on floppy disks, which were returned to us after they were graded. Mr. Cesta consistently gave me a ‘B’, although he never specified what was wrong with them. At the end of the semester he said that anyone who did well on the analysis of an assigned stock would get an ‘A’ in the class. I analyzed Norfolk Southern Railroad, NSC during the time they were merging with CSX. I presented my analysis to the class using PowerPoint and Excel charts. The charts had formulas in the cells so the end result would change if you changed a single number. People told me I did a good job. In fact, no one else forecasted their stock’s price for the next year. Also, some of the members of the class chose not to give a presentation. I was given a ‘B’ for the semester. A year later, it turned out NSC’s price behaved as the formulas predicted.

During the semester, I never complained to anyone that Mr Cesta failed to answer my emails, or that he made himself unavailable to me during office hours. I should have complained. I would go to his office during his office hours and wait for him but I was never able to talk to him. On one occasion, I was there when his previous appointment with a young man ended. He saw me and said he had another obligation and couldn’t talk to me. About ten minutes later I saw him wandering around outside in the courtyard. When he saw me, he walked over to the fountain and stared up at the sky.

After graduation, I wrote Mr. Cesta an email telling him what I thought of him. He didn’t anwer, but sometime in the next week I got a $95.00 bill for a library fine. I hadn’t been informed of that bill before graduation. I don’t think it existed before that time because you wouldn’t get a diploma with an unpaid fine like that. I called the library. The person I talked to seemed mystified. He said it was a $10.00 fine plus interest. I asked this person to have someone call me, but no one ever did. Later I got a computer generated invoice with a note scrawled on it, “You didn’t contact us about this bill so you must believe it’s legitimate.” I wrote back that I had called them and they hadn’t returned my call. The next time I checked, the fine had disappeared from my record.

I wrote Mr. Cesta another email saying, “that’s one way to find out if you ever actually see any of your emails.” I told him that kind of interest rate sounds like his kind of finance. Again, he didn’t answer my email.

Now, more than a decade later, I finally complained to the school. Here’s the reason. Recently, I tried to open the floppy disk with the PowerPoint presentation and the charts. However, my computer was telling me the files were corrupted. I ordered a floppy disk reader from Amazon and tried again. The PowerPoint presentation was blank. The file with the charts still says it is corrupted and can’t be opened. Now that really makes me mad. I did that work—it was mine. I could have used it to analyze other stocks using the same charts and saved myself a lot of time.

I talked to Kay Faris, Senior Associate Dean at the W.P. Carey School of Business and told her the whole story. I don’t know what I expected to happen after all this time, but I think the school would want to be told if state employees are not doing their job. She told me that she would forward my complaint to the department dean. That was on April 2. At this time, I haven’t heard from the Dean or Ms. Faris. It’s now become an issue of courtesy on their part, and mistrust on mine.

I remember Mr. Cesta telling the class that a local man still blamed him for destroying his company with a negative stock analysis. He wanted us to be impressed. He shrugged, as if to say it wasn’t his problem. Yesterday a library fine, tomorrow who knows?