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“The most alarming thing ... is the level of complacency,” says Meredith Whitney,...
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Monday, December 20, 2010, 12:42 PM ET“The most alarming thing ... is the level of complacency,” says Meredith Whitney, warning about a financial meltdown in state and local governments "in the next 12 months." The size of this calamity? "Fifty to 100 sizeable defaults ... hundreds of billions of dollars."
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This news story has 40 comments:
From 1998 - 2000, public pensions were inflated to match the dotcom fantasies. When those imploded, they were never re-negotiated down.
Funny how that works. Its not that way in the private sector.
The governor-elect of Florida ran on a platform of reducing the number of state employees by 6,000 and pulling government compensation back to be more in line with taxpayer earning levels. A bold move that got him elected. I'm sure congress is very nervous about providing another round of stimulus to the states to "maintain' government jobs with.
We live in interesting times!
So now there are no new taxes for this project. But a 67% increase in state taxes for prior years spending. And then this project can haunt everyone in 5 years when it will slam DuPage county citizens, painful it will be on top of the already ballooned state sales tax.
I am not seeing complacency...the majority of people already knows the debt overhang problem and its consequences for potential growth capacity...a lot of people are already claiming the fall of the US....
In CT for example, according to a Pew Research study, the people are on the hook for $15 billion in underfunded pension liabilities and $22 billion in unfunded benefits. Yet no urgency from the state or municipalities to curb borrowing and start cutting.
Something's gotta give.
Some politicians realize the voting tide has turned against the government employee, i.e. The rest of the voters are forming an ad hoc voting blocks against more government largeness. Hopefully, politicians will see the light in time.
If the Fed starts getting into mass muni purchases, we're hosed. That's not like buying Treasuries from banks that then sit on the cash. That would be pumping funds that have instant velocity, creating some wicked inflation.
But then, in our current societal condition, if you gave someone a credit card and told them they had an infinite limit and to not worry about repaying the balance, fiscal responsibility would fly right out the window.
CNBC's analysis is just another example of not looking past the first ripple in the pond.
Or, allow the banks to buy these muni's as part of their reserve requirements, LOL. The bank earnings could double/triple overnight compared to required treasury securities.
Fear is the greatest opportunity for profit!
keep the class warfare going and the hate and the self destruction and power mad controlers in charge and watch as slavery comes back into vouge
Uh, NO. An independent commission made the decision to cut legislative pay. The commission wasn't under Brown and in fact, had nothing to do with his office at all. Some legislators have asked Brown, as the attorney general, if the commission could cut their pay and Brown said, they could. But to say Brown cut their salaries is beyond spin. Like I was saying, its easy to con the majority of California voters.
The commission's vote will shave rank-and-file lawmakers' salaries by more than $20,000 a year, from $116,028 to $95,143. The pay of legislative leaders will drop from $133,639 to $109,584. Tax-free per-diem payments of up to $35,000 a year would not be affected.
The state's 238,000 employees already have seen their pay cut by up to 10 percent through involuntary furlough days. About 5,000 state workers received final layoff notices last week.
Gov. Arnold Schwarzenegger, who set the stage for the legislators' pay cuts a few weeks ago when he appointed two of the five commission members who voted for them, applauded the move as a timely response to Tuesday's vote. "
San Diego Union, May 21, 2009
Regarding, QE MUNI, just threatening such a move would probably quiet the markets given FRB success with commercial paper and the mortgage markets.
My locality in Virginia gives great tax breaks on commercial property to stimulate development. But this only stimulates more population growth and the need for more schools ie more bond issues. The commercial real estate interests gain speculative profits from the value appreciation and sales of buildings after nearly a tax free holding period during construction. The profit leaves the area and is now in the banks in New York and Miami.
While all this happens, even in a declining real estate market, they increase my property valuation and my taxes have gone up!
Property valuation is an administrative process where the appeal process is always more costly than the gain in a fair valuation. It would cost me $5000 in legal fees to fight a valuation to save me $500 in taxes on the property.
If I am late in paying my taxes, they assess me an additional 10%. If I refuse to pay, they tell the mortgage holder and then they foreclose on the property. In the foreclosure, the county gets all the back taxes owed - the new owner picks up the burden.
The time between foreclosure and new ownership to pay taxes is the main problem that is causing a cash flow problem for some municipalities. The bond holders in the process seldom if ever misses a coupon payment.
Do you mean to imply that no budget cuts should occur?
One little left over from the housing bubble: every new home means potentially at least 1 new kid in the system, if the property taxes collected can't cover the cost of said kid (about $12,000 per kid here in CT) then how is that shortfall made up? Moreover, many municipals have put caps (breaks really) on a new home's property taxes.
So all over the country states and municipalities ramped up spending during the bubble because tax and fee revenues were through the roof, now when the extra revenues are dead, they are going borrow more and ask homeowners to pay more taxes on a depreciating asset. Not a good plan.
Send them over to my house and tell them to bring 6 of their friends.
We'll spin a globe around, bang a pair of chalkboard erasers together and re-enact Shakespeare.
Then send them back home at 2:30PM. I'll also take off 3 months a year during summer, plus another 2 months in holidays and 'teacher's conferences'.
That's 84 k for 6 months of short, half days. Not bad for just hanging out and learning.
To understand this process in greater detail, one can look at Catherine Austin Fitts's explanation of what went on in Los Angeles when the lid began to blow off Iran Contra.
She noticed patterns in the influx of illegal drugs into certain neighborhoods. She became a major persona non grata in the Kemp reign at HUD.
She is still alive though, unlike Gary Webb, the journalist who turned up a lot of information on the issue. He reputedly committed suicide with three shots to his own head.
The ability of a location to attract gentry will determine what happens with the bonds.
The San Francisco Bay area and the Boston area seem able to attract gentry no matter what. Maybe they are safe despite other factors which might make one think they are not.
This is a highly complicated topic.
Either we get FISCAL conservatives or we continue to head into Castroville ( who denounced , with little fanfare by our MSM, that socialism had failed)
btw, love the "suicide by 3 shots to his own head"
Unions controlled GM
Unions are outwardly ashamed of their socialist/communist connections BUT internally love the thug approach to their agenda
proof is in their actions
NOT MY WORDS
any time you force one to give to another it wont turn out good
the schools are living proof
people like to cite Europe as some shining example
bull
pay directly from ones pocket to those who teach and you eliminate the admin the politics etc
The United States spends more per student than any country on Earth yet our kids have the worst test scores of any industrialized nation.
We're being robbed and our children are being dumbed down.
One thing to keep in mind. During the Great Inflation of Germany, the biggest losers were the public employees on fixed pensions. It will be that way here too. And since our politicians here don't have the stones to adjust down these pensions which are killing us, we will just have to let nature take its course and watch as the bond bullies do it for us. There are no adults in DC. Only children with their hands in the cookie jar. And those who vote for more cookies.
Retired New York Sate teachers,town and county police receiving
pensions of $100,000 per annum with retirement starts in their early
50's,same for MTA workers (ticket collectors earning $100,000 per
annum, Yonkers police non ranking officers earning $200,000 plus per annum with overtime. School administrators earning $200,000 per annum and collecting multiple pensions approaching $400,000 per annum. This is insanity someone needs to present the details of whats really going. Internet dating sites publishing the outrageous salaries of federal workers to solicit potential dates ! Its all insanity !
This combination is the mistake. The mandate is the government should pay its employees comparable salaries to the private sector but this has long ceased to be the case. however, I suspect it is next to impossible for the government to redress this and reduce or hold steady salaries and packages.
Not anymore.