Mish's Global Economic Trend Analysis

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U.S. Postal Workers' Union Criticizes Staples-Run Post Offices; French Air Traffic Controllers Strike Again; PATCO Solution Posted: 20 Jan 2014 06:19 PM PST Here is a pair of related posts, one from California, the other from France. Union nonsense is at the heart of both. The LA Times reports Postal Workers' Union Criticizes Staples-Run Post Offices. California leaders from a national postal workers' union are criticizing a Staples pilot program that has installed dozens of small post offices in the office-supply stores. American Postal Workers Union leaders said that opening retail units staffed by Staples employees is a "disservice to postal workers and the nation's mail service." Staples Inc. and the U.S. Postal Service announced late last year an arrangement to allow 82 small post offices to operate at Staples stores in California, Georgia, Pennsylvania and Massachusetts. Who Doesn't Want Lower Prices? In general, if it lowers costs (with quality constant), as long as it does not impede on rights of others, I am all in favor of the idea. So is any rational thinking person. So, who doesn't want lower prices? Only three groups. Unions and Union Supporters The Fed Economic illiterates in academic wonderland (Paul Krugman types) Even union workers want lower prices (on everything they buy) but certainly not everything they sell. That's the nature of union hypocrites, especially those who shop at Walmart or buy online from Amazon.com. Let's now turn our attention to France to pick up the second part of this story. French Air traffic Controllers Strike Again Via translation from Les Echos, please consider Air Traffic Controllers Strike Again in Late January Air traffic controllers are on strike from January 27 to 31, with a black day 29. They oppose a proposed Brussels lower royalties. Three months after strike against the plans of the European Commission for the "Single European Sky", the French air traffic controllers will strike again, for the same reasons, from 27 to 31 January. SNCTA, the main union called a five day strike that should significantly disrupt traffic to and from French airports. Other European unions controllers also call for strike on January 29. Launched in 1999 with the aim to remove the air borders in Europe, a source of huge cost overruns, the single European sky is still divided into 27 national systems, sixty control centers and 650 airspaces. As in previous strikes in June and October 2012, air traffic controllers reject a draft Brussels to impose a cost reduction of air traffic control, two times higher in Europe than in the United States. PATCO Solution Gee, who coulda thunk that 27 national systems, 60 control centers, and 650 airspaces would raise costs? And of course unions don't want those costs lowered. Unions never want their costs lowered. So they go on strike. They have union sympathizers in their pockets (primarily politicians like president Obama and governors of states like California and Illinois). Those politicians are generally willing to bankrupt taxpayers to keep the unions afloat. I happen to like the PATCO solution: Firing every air traffic controller who went on strike was the single greatest thing president Ronald Reagan ever did. To understand the implications, please see a Wikipedia Report on PATCO. I recommend the same solution for police officers, firefighters, prison guards, and teachers. If you do not show up for your public union job, you are fired on the spot and lose all accrued pension benefits. Roosevelt and Unions It's high time we break the backs of public unions and the influence they have on cities and states. Even president Roosevelt, the bastion of liberal presidents, understood the problem of public unions. Message From FDR Inquiring minds are reading snips from a Letter from FDR Regarding Collective Bargaining of Public Unions written August 16, 1937. All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations when applied to public personnel management. The very nature and purposes of Government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with Government employee organizations. Particularly, I want to emphasize my conviction that militant tactics have no place in the functions of any organization of Government employees. A strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied. Such action, looking toward the paralysis of Government by those who have sworn to support it, is unthinkable and intolerable. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Highland Park Michigan Skids Towards Bankruptcy, Public Union Pensions to Blame as Usual; Fifth Third Bank and Highland Park in Pension Funding Lawsuit Posted: 20 Jan 2014 09:17 AM PST Highland Park, Michigan is on the brink of bankruptcy. There is no other realistic way out of the fiscal mess the city is in. As is typically the case, public union pensions are at the heart of the problem. Michigan Live reports Highland Park pensions in jeopardy if Fifth Third Bank halts loan payments. The city of Highland Park is operating on financial fumes and the pensions of its retirees could be in jeopardy if Fifth Third, one of the banks providing loans to the municipality, cuts of the money stream. According to the Associated Press, the bank has threatened to cut off loan payments to the city, which has prompted a legal battle that may have to be settled in court. At this point, Highland Park is a risky investment. It's ran nearly $500,000 over budget in 2012, the Associated Press reports, and under Public Act 436 will soon have to decide between accepting a consent order with the state, installing an emergency manager or filing bankruptcy. In any case, the city's creditors could face losses if the communities finances don't recover. Voters in Highland Park, which currently owes Detroit $18 million in water bills, voted in 2007 to take on $27 million in debt in order to maintain pension payments. Comment of the Day The comment of the day award goes to "Group W Bench" who responded to the Michigan Live report with: "When you already owe $18M you can't pay, for something so vital as water, why would you agree to take on an additional $27M to cover pension payments? Why would a lender agree to loan this much money to a municipality that obviously cannot pay the debt back?" Without a doubt the voters were stupid. So stupid, that I strongly suspect union and city official coercion to get that vote through. Regardless, it's going to backfire in a huge way. Fifth Third Bank, Highland Park Lawsuit The Detroit News reports Highland Park, bank battle over loans for pension costs. Officials from financially strapped Highland Park and a bank providing loans to the city could appear before a federal judge after the bank threatened to halt the funds to cover pension costs. Fifth Third Bank informed Highland Park last month it would stop providing loans the city uses to help pay worker pensions. Highland Park filed suit in Wayne County Circuit Court, saying that without the money, retirees would lose earned benefits. According to court documents, Fifth Third Bank wants to cut off the loans over concerns that the city will not be able to pay up. In a Dec. 12 letter to Mayor DeAndre Windom, the bank outlines its reasons for suspending the loans "based on the city's incurrence and continuance of debt relating, among other things, to the city's failure to pay amounts owed to the city of Detroit and the Detroit Water and Sewerage Department." The city sought a temporary restraining order in Wayne County Circuit Court to block Fifth Third from halting the line of credit. The bank responded by requesting the case be moved to federal court. Gov. Rick Snyder called for a review board to decide by next month whether bankruptcy will be declared or if the city will operate under a consent judgment. The city could also get an emergency manager to oversee the day-to-day finances rather than the community's elected officials. Time to Cut Losses Fifth Third Bank is correct to cut losses. A state review last year of Highland Park's finances found violations of the Uniform Budgeting and Accounting Act during fiscal year 2012. The general fund went over budget by $491,161. Breaching state-approved deficit elimination plans and violating the state budget law for municipalities are grounds for state takeover. Unable to Pay Electric Bills Highland Park Shuts Off Lights This is not the first time Highland Park is in trouble. In 2011 Yahoo!Finance reported Unable to pay bill, Mich. city turns off lights. Not only did the city turn off the lights, contractors from DTE Energy Co. began rolling through the streets, taking out two-thirds of the light poles. Councilman Christopher Woodard called shutting off the lights a "winning proposition". The city has a $4 million electric bill it cannot pay. DTE considers the electric bill "uncollectable". Wikipedia notes: In June 2001, because of the Highland Park's mounting fiscal crisis, an emergency financial manager for the city was appointed under the supervision of the State of Michigan. In April 2009, state officials fired Arthur Blackwell as Highland Park's emergency financial manager for over-payments that Blackwell received, and appointed Robert Mason as the new emergency financial manager. In August 2011, over two-thirds of the streetlights in Highland Park were removed by the city, due to an inability to pay a $60,000 per month electric bill. The street lights were not only turned off, but decommissioned, or removed from their posts. The city advised residents to keep porch lights on in order to deter crime. Highland Park IS Bankrupt There is no question regarding the bankruptcy of Highland Park. The only open issue is when the city files. Those running the city ought to understand that and do what's right for taxpayers. The sooner the better. How many more "winning propositions" can residents take? Since city officials are resisting bankruptcy, one can only suspect they are out to protect their own pensions. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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