Tag: Debt Crisis

Quinn Spends Another $1.5 Billion We Don’t Have

Democratic Gov. Pat Quinn on Thursday signed into law an extra $1.5 billion in spending for road construction and child welfare investigations, even as Republicans decried the measure as including ill-timed, pork barrel money.

via Chicago Tribune.

What is wrong with this guy?  Really?

Quinn already stopped a bond auction because the rates for Illinois bonds are too high (and only going to go higher.)

Illinois already has $9 billion in unpaid bills.  There’s also the looming pension time-bomb that no one wants to talk about.

What does The Machine not understand?

STOP SPENDING MONEY!

 

Wanna See Our Future?

Hundreds of people jostled for free vegetables handed out by farmers in a symbolic protest earlier on Wednesday, trampling one man and prompting an outcry over the growing desperation created by economic crisis.

Images of people struggling to seize bags of tomatoes and leeks thrown from a truck dominated television, triggering a bout of soul-searching over the new depths of poverty in the debt-laden country.

“These images make me angry. Angry for a proud people who have no food to eat, who can’t afford to keep warm, who can’t make ends meet,” said Kostas Barkas, a lawmaker from the leftist Syriza party.

Other lawmakers from across the political spectrum decried the images “of people on the brink of despair” and the sense of “sadness for a proud people who have ended up like this”.

People have seen their living standards crumble as the country faces its sixth year of recession that has driven unemployment to record highs.

Greece has been forced to push through painful wage and pension cuts demanded by its European Union and International Monetary Fund lenders as the price of bailout funds to avert bankruptcy.

FARMERS ANGRY

Greek ships sailed again from the busy ports of Piraeus and Rafina on Wednesday after the government ordered seamen to end a six-day strike aimed at securing wages and union rights.

At dawn, smiling passengers who had been stranded at Piraeus carried their luggage across the port, relieved to be boarding the ships.

But in northern and central Greece, farmers protesting high production costs and fuel prices placed their tractors on the sides of highways, threatening to block the country’s main road artery if not satisfied.

In the capital, bus and trolleybus workers held a four-hour work stoppage, as did journalists at state broadcasters.

The free food handout in Athens began peacefully as hundreds of Greeks lined up in advance outside the agriculture ministry, where protesting farmers laid out tables piled high with produce, giving away 50 metric tonnes (55.11 tons) of produce in under two hours.

Tensions flared when the stalls ran out of produce and dozens of people – some carrying small children – rushed to a truck and shoved each other out of the way in the competition for what was left.

One man was treated for injuries after being trampled when he fell to the ground in the commotion.

“I never imagined that I would end up here,” said Panagiota Petropoulos, 65, who struggles to get by on her 530-euro monthly pension while paying 300 euros in rent.

“I can’t afford anything, not even at the fruit market. Everything is expensive, prices of everything are going up while our income is going down and there are no jobs.”

via Reuters.

I’m willing to consider any logical and rational explanation as to why this won’t happen here.  But frankly, I don’t see how it can be any other way.

Our debt to GDP ratio is now just over 100%  in that we have over $16 trillion in debt and a estimate 2012 GDP of $15.8 trillion.

As recently as 2007 Greece’s ratio was a mere 105.1.  Today it’s 157.  How did this happen so quickly?  Because the debt kept growing faster that the economy was expanding; they economy was actually contracting for awhile (as was ours.)

Spend a few minutes over at Shadow Government Statistics and you’ll see that sound economists believe this is exactly what is happening here.  Our debt keeps growing and growing and the economy is actually shrinking.

This wouldn’t be the first time your government was lying to you.

Tough times ahead.  Plan accordingly.

What Drives Corporate Profits?

In a heady story over the Business Insider today Joe Weisenthal walks us through an analysis as to why corporate profits are so high right now.  It generally all comes down to this chart:

It shows the various drivers and drags on corporate profitability. So for example, household savings are always a drag on profitability, since that’s money not spent to buy goods. Net investment helps boost corporate profitability, since that investment will flow to the profit line of another corporation. When the government is in a surplus, that reduces corporate profitability, since that means the government is taking in more than it pays out. When the government is in deficit, that boosts profitability.

As you can see in the chart, what REALLY stands out is the huge explosion of the red area (representing government deficits), helping to drive corporate profits at a time when nothing else is doing the work.

via Business Insider.

So what exactly does that mean?  It means that those out there who are complaining about high corp. profits (which by the way drive stock prices up) are not helping the working man should take a look at the root cause of these high profits.  i.e.  Government debt.

What corporations know is that the current spending levels are unsustainable.  We must stop spending money we don’t have.  As a result of this, government deficits will go down and so will corporate profits.  This is why corporations are trying to save as much cash as they can right now.  Because they know that tough times are coming and today they need to save like they have never saved before.

Similarly, you should be saving.  We without a doubt have inflation so it makes little sense to hold on to a lot of cash.  But you should be paying down debt and getting your own financial house in order.  Tough times are coming and today you need to save like you have never saved before.

 

The Fiscal Entitlement Cliff

The U.S. Census Bureau says 108 million Americans live in households where at least one person participates in a means-tested program. We estimate that 80 million are the primary recipients….

Since the president took office:

• Medicaid is up from 46.9 million to 56 million people.

• Disability beneficiaries are up from 7.5 million to 8.8 million.

• The food stamp program has grown from 32 million Americans to 47 million.

Add to that 80 million beneficiaries 40 million Americans age 65 or older on Social Security and Medicare (9 million of the 49 million on Medicare, including some under age 65, also receive means-tested benefits).

That 120 million does not include the numerous smaller entitlement programs.

Put them all together, and a number approaching half of the country participates in an entitlement program.

Now add in the 16 million new Medicaid beneficiaries, thanks to ObamaCare, plus an estimated 12 million people who enter the health insurance exchanges by 2014, where most will receive federal subsidies.

The budget implications of these programs are huge. For fiscal 2012, America spent $2.2 trillion of its $3.7 trillion budget on entitlement programs — $400 billion less than the $2.6 trillion in gross annual revenues.

Oh, and interest on the federal debt was $220 billion.

Thus, the cost of entitlement programs plus interest on the debt are nearly equal to total federal revenues today.

Virtually everything else the government does is with borrowed, or printed, money.

via Investors.com.

I realize that this is all a little hard to understand for a lot of people.  So to put it in easy to understand terms:

This is like living on a credit card — spending 50% more money than you actually earn — and then dying and leaving the bill for your kids.

400 Richest Americans’ Worth $1.7 Trillion

The net worth of the richest Americans grew by 13 percent in the past year to $1.7 trillion, Forbes magazine said on Wednesday, and a familiar cast of characters once again populated the top of the magazine’s annual list of the U.S. uber-elite, including Bill Gates, Warren Buffett, Larry Ellison and the Koch brothers.

The average net worth of the 400 wealthiest Americans rose to a record $4.2 billion, the magazine said.

via Chicago Tribune.

I love stories like this.  The Left will go on and on about how its unfair that these people earn this money; it’s terrible that anyone should be allowed to have this much money, and what-have-you.

So let’s just take.  Let’s just take all of it.  Let’s take these thieving bastards money and redistribute it so everyone benefits.

$1.7 T / 314,409,835 people = $5,406.96 per person.

That would be a one time payment by the way.  No one would ever get another nickel from these people ever again.  Hardly seems worth it to me.

Maybe we should use it to pay off our national debt.  After all every citizen owes the government over $51,000.  Surely we’d all be better off if we just paid down the debt.

$16T – 1.7T = $14,300,000,000,000

After that we all now owe about $46,000 to the government, each. … Huh?!   Still seems like we all owe a lot of money.

And this is the folly — we can Eat the Rich — but it would never be enough to save us from what we’ve already done to ourselves.

Inflation and austerity are coming.  Plan for it.

More Bad News on the Pension Crisis

If I was Rahm I would so totally throw Daley under the bus on this issue.

The debt from 10 Chicago-area pension plans swelled more than 600 percent to $27.4 billion between 2001 and 2010, according to a study released Monday by the nonpartisan Civic Federation. That’s $8,993 for each man, woman and child in Chicago, according to the report.

The shortfall comes on top of more than $83 billion in unfunded pension liabilities at the state level, driving the cost up to nearly $15,000 per Chicagoan, the report shows.

via chicagotribune.com.

Shear insanity.

 

JP Morgan: Public Employee Pension’s Set to Explode

But they wanted to keep the story to themselves:

JPMorgan recently circulated a “strictly confidential” report among leaders at the bank and with trusted hedge fund allies outside of the bank which details an impending public pension crisis. And we mean big time nastiness.

Massive cuts in services will have to happen, or massive tax increases will have to happen, or both, to keep many pensions and municipalities from going over a cliff. The politicians know that disaster is coming. JPMorgan and their hedge fund buddies know that it’s coming. The public, though it has a sense of impending doom, still doesn’t grasp the avalanche that is headed toward states and cities in the very near future.

Charlie Gasparino details in the attached article that JPMorgan did not want the information in the report to become public because it feared angering the politicians in the municipalities and states where default due to public pensions is a very real possibility. Many local politicians are lying when they tell their fire fighters and teachers that pensions are in good shape. According to what the report supposedly says these workers should probably start making alternative plans for retirement. But to say that is very messy politically.

JPMorgan didn’t want to lose its very profitable muni bond underwriting business in these same localities, which is determined to a large degree by these same lying local politicians, so this information was kept quiet.

via AgainstCronyCapitalism.org.

To the actual article:

OK, it’s no secret that nation’s public pension funds are in big trouble, holding large “unfunded” liabilities owed to public workers once they retire. But most politicians (New Jersey Gov. Chris Christie is an exception) will tell you the problem is fairly containable, that there are simple fixes — such as raising taxes on the rich or pruning benefits. …

Not so, warns a “strictly confidential” report JP Morgan issued last year. It describes in straightforward, frightening detail how underfunded pensions are huge ticking timebombs for many of the nation’s big cities and states.  …

Nationwide, the actual size of unfunded public pension liabilities is four times larger than the $900-plus billion that officials are ’fessing up to. That’s right, the bank sees a $3.9 trillion hole; to plug that, states and cities will need large tax hikes, massive budget cuts or both. Plus, public-sector unions will have to accept smaller retirement packages, and later retirement ages, to keep the pension systems going.  …

In New York, for example, JP Morgan said state officials would have to immediately cut spending by 12.3 percent or raise taxes on everyone by 7.4 percent. And they’d need to make these tax hikes and budget cuts permanent for the next two decades to fully fund public-employee pensions.

New Jersey faces an even bigger hole. Even after Christie’s reforms, it would still have to cut spending 30.8 percent or raise taxes another 17.2 percent, keeping them in place for two decades, to solve the problem.
via NY Post.

No word on how Illinois fares.  But as we are the #1 unfunded pension state in the union it’s no doubt a bad, bad, bad situation.

Chicago Aldermen: White Collar Criminals

An analysis of pension fund documents for 21 aldermen who retired under the plan shows they are in line to receive nearly $58 million during their expected lifetimes, though contributions and assumed investment returns are predicted to cover just $19 million, or a third of that sum.

The pension deal was inked more than two decades ago, but the costs began to kick in recently. Most of the 21 aldermen in the Tribune/WGN-TV analysis have retired within the past five years, and there are 53 more in the pipeline.

Former Ald. Thomas Allen is a prime example. After retiring from the City Council in 2010 at age 58, Allen went on to become a Circuit Court judge while also collecting roughly $90,000 a year from his city pension. During his lifetime, he stands to receive more than $4.2 million in benefits, though contributions and assumed investment returns are expected to cover only $1 million.

via Chicago Tribune.

We’re doomed.  Chicago will not be able to sustain itself under this kind of dead weight.  The taxpayers are going to be asked to provide more and more payments for services they will not receive.

Glad the Tribune is on the story now… but where has it been for the last 20 years?  Where’s the Sun-Times (the “Bright One”) on this?

We’re going bankrupt and no one cares.