The U.S. -- the last Ponzi scheme standing -- is now facing its own version of the Greek crisis as US third-world cities face a financial breakdown. Compton is the fourth California city (after Stockton, San Bernadino, and Mammoth Lakes) in month to head toward default or bankruptcy.
In addition these cities are lined up and facing the music.
- Los Angeles faces a budget shortfall of $238 million, enormous unfunded pension liabilities and has an annual budget of roughly $7 billion.
- Oakland plans to borrow $211 million (again) to pay for its pension problems.
- San Diego plans to roll the dice on the hope it earns more money in investments than it costs in interest to borrow. The city is taking out a $750 million loan, called a pension obligation bond to paper things over.
Detroit's insolvency could easily be confused with Greece. It's operating on a consent agreement, a lifeline financed by the state. The city's own attorney is fighting the agreement in court.
On Wednesday, as a condition of this agreement, Mayor David Bing pushed through a 10% city-worker wage cut and work-rule change. This will end up in court as well since the mayor overruled the council, which voted 5-4 against the action. Just as in Europe, city layoffs of a proposed 2,500 workers are being fought tooth and nail. For example, 164 of Detroit's 881 firefighters will be laid off at the end of July.
The list of failing cities could go on and on and include many other states.
Even after a massive tax increase, Illinois is now looking at a $500 million deficit and (additionally) "… a backlog of about $8.5 billion in unpaid bills … $27 billion in outstanding bonds … roughly $80 billion owed to the state's public employee pension funds," wrote John Robino of Iclicks.
An excellent measure of America's third-world conditions are the more than 46 million people on food stamps. It burdens all levels of government and is the starting point to understanding where we stand today.
For all practical purposes, the U.S. has its own equivalent of Egypt in terms of food-stamp dependency. In the U.S., roughly a third of the population spend 25 to 50% of their income on food and energy. Egyptians on average spend about 40% on food and energy. On the gasoline front, any benefit derived from lower prices is vanishing fast. Gas inventories are low and corn for ethanol might be diverted by special order.
Source: www. tirvisonno.com
The IMF has a report out that equates a 10% increase in global food prices, to a 100% increase in anti-government protests and riots. The bottom quartile earners in the U.S. spend more than 30% of their income on food, and not very healthy food to boot. I would argue that people in traditional Third-World countries eat better quality food than they do.
The U.S.'s Great Drought of 2012 throws another big wrench into the food-cost continuum. All Americans, and especially the poor, eat corn-based foods. Corn is used in 75 percent of supermarket products, hiding in foods you'd never imagine would contain high fructose corn syrup.
If it isn't corn then it's wheat and soybean oil. All grains are used as feed and have been a key U.S. export. The Great Drought will cause increases in food prices and create even greater burdens for all Third-World populations, including the U.S. version , and by extension local and state governments, which will be hard pressed to keep even minimal public safety in place.