Tuesday, January 26, 2016
Puerto Rico is Our Greece
We, here in the U.S., have our very own Greece. There is the destruction of the city of Detroit, which has been raped and pillaged by hedge fund vultures who are major donors to both political parties, which means the politicians then pass laws to protect hedge funders’ money, that is usually invested in bonds. On a bigger scale there is Puerto Rico, which has labored under colonial rule since Christopher Columbus landed on its shores in 1493 and claimed it for Spain. After the Spanish American War in 1898 the U.S. acquired Puerto Rico in the treaty of Paris and ruled it as a territory since. Puerto Ricans are considered natural born citizens, but like all stepchildren they must abide by U.S. laws without a voting member in Congress. For decades the island was a jewel of the Caribbean with the highest per capita income in Latin America, but in 1996 when a Republican Congress and the Clinton administration agreed to a 10-year phase out of section 936, a tax exemption for U.S. manufacturing on the island and did not replace section 936 with an economic development plan to offset the impact. The island went into a recession as manufacturing fled Puerto Rico. The Puerto Ricans pay the same payroll taxes as mainland workers, but received much lower rate for Medicare and Medicaid. Then came the triple tax-exempt Puerto Rican bonds. The Wall Street people loved the bonds for they are free from federal, state and local taxes and anyone can buy them. With a law that Puerto Rico could not access Chapter 9 bankruptcy protection plus under the Territorial Constitutional, general obligation debt gets a senior position above all other items in the budget so investors receive all the upside benefits of tax-free bonds with little downside risk so, here all the hedge fund vultures come. Some people who have connections to these vulture capitalists are Obama/Clinton economist Larry Summers, who work for D.E. Shaw, Chelsea Clinton who worked at Avenue Capital, Chris Christie’s wife who worked for Angelo Gordon & Co., and Ted Cruz’s wife who works for Goldman Sachs. There is a way to fix this. Puerto Rico can vote if they live on the main land and 850,000 Puerto Ricans have moved to Florida and they are mad as hell at what has happened to their homeland. We will see what happens at the ballot box. Also, Senator Bernie Sanders supports their efforts. In fact, Sanders says that the debt should not be repaid because the debt was unconstitutional. A November 6 government financial report could nullify some of the debt. If not Puerto Rico could go by the way of Argentina, which also lost to the vulture hedge funders.