Mounting State Debts Stoke Fears of a Looming Crisis

Mounting State Debts Stoke Fears of a Looming Crisis

www.nytimes.com

While next year could be even worse, there are bigger, longer-term risks, financial analysts say. Their fear is that even when the economy recovers, the shortfalls will not disappear, because many state and local governments have so much debt — several trillion dollars’ worth, with much of it off the books and largely hidden from view — that it could overwhelm them in the next few years.

(visit the link for the full news article)

Wow.... This is rather crazy... But i believe at most of us saw this handwriting on the wall... It has now become hand wringing....

Just reading through the first page of this article is rather scary...

So here is a thought experiment....

If all the states went bankrupt... What would happen? What type of power would fill that vacuum? Would it be Big business? Debt owners? The Federal government?

Im not sure what happens here... Police funding drops, and just like in simcity, the crime rate goes up?

What are your thoughts?






www.nytimes.com
(visit the link for the full news article)

All the answers are in this brilliant documentary.

So here's my question. What tells us countries or states for that matter, are really in such deep debt holes? Hear me out for a second.

A corporation has quite a bit of similarity to a government. They have revenue, expenditure and are left with either a positive balance or a negative one ( I know it's way more complex than that but for the sake of example). Now, a company keeps financial records of all those transactions and so should a government.

You can very often easily obtain company's financial overviews which reflect their financial health which in turn shows whether it's healthy or failing. How about the government? You are basically its 'shareholder' yet you have no information at all. Officials tell you that the vaults are empty and the country or state is defaulting, where's the proof? Why don't they provide the average Jo on the street with genuine financial statements SHOWING their critical debt mass and can prove the urgency for bailouts or cash injection of any kind?

Shouldn't we know where our money goes instead of having a random official telling us it's going from bad to worse and they need another bailout without any real proof. We take what the guy says for granted just because he's on tv and 'official'.

Am I missing something here?

Thread Barometer: 80% S+F

After reading the entire article and remembering exactly how 2008 banking crisis unfolded I see quite horrific similarities but even worse. Next year the cities, counties, and states will begin laying people off as some cities will default and maybe even some states such as Illinois, New York, New Jersey, or California.

Once this happens unemployment will shoot up and thus the need for food stamps will increase as well. However both of these things will be too unsustainable for state budgets and will have to be scaled back just as states are laying people off in mass numbers. As urban cities default investment into those cities will plummet and more businesses will exit these teetering cities.

As these businesses leave the city will face even worse problems with more unemployment and tax revenue issues. Then the state will face the storm but the problem is that many states can’t handle a storm of such epic proportions and they will start to lay people off and slash payments to their workers as investments into their states are dropped.

Then states might begin to default and if that occurs then it will be more difficult for the stabile for states to gain investment. It’s a domino effect come next year either the federal government bails out the states or we are looking at the Great Recession 2.0.

There will be mass homelessness and starvation leading to crime in the cities while many people will lead an urban flight for more hope in the rural areas as the cities collapse under their own debt from reckless spending and entitlement programs.

Prepare for the real Depression to occur by the end of next year when you combine the intentionally kick started inflation by the Federal Reserve to start early next year thus destabilizing the economies even more and leading to more hunger.

Altogether this adds up to be the final blow to the American economy.

reply to post by Misoir


Unfortunately this appears to be our biggest weakness...

Originally posted by Misoir
Thread Barometer: 80%

S+F

After reading the entire article and remembering exactly how 2008 banking crisis unfolded I see quite horrific similarities but even worse. Next year the cities, counties, and states will begin laying people off as some cities will default and maybe even some states such as Illinois, New York, New Jersey, or California.

Once this happens unemployment will shoot up and thus the need for food stamps will increase as well. However both of these things will be too unsustainable for state budgets and will have to be scaled back just as states are laying people off in mass numbers. As urban cities default investment into those cities will plummet and more businesses will exit these teetering cities.

As these businesses leave the city will face even worse problems with more unemployment and tax revenue issues. Then the state will face the storm but the problem is that many states can’t handle a storm of such epic proportions and they will start to lay people off and slash payments to their workers as investments into their states are dropped.

Then states might begin to default and if that occurs then it will be more difficult for the stabile for states to gain investment. It’s a domino effect come next year either the federal government bails out the states or we are looking at the Great Recession 2.0.

There will be mass homelessness and starvation leading to crime in the cities while many people will lead an urban flight for more hope in the rural areas as the cities collapse under their own debt from reckless spending and entitlement programs.

Prepare for the real Depression to occur by the end of next year when you combine the intentionally kick started inflation by the Federal Reserve to start early next year thus destabilizing the economies even more and leading to more hunger.

Altogether this adds up to be the final blow to the American economy.

edit on 12/5/2010 by Misoir because: (no reason given)

You are correct, it will be a spiral downward. The states layoff but they still lose revenue and they lose revenue so they cut state benefits. I think state debt (not counting the pensions) is alot more than 7 trillion, and I think this will start next year. What the states are hoping for is a federal bailout, but I think the Fed won't do that. Because the minute that a state asks for and receives an okay for a bailout, the other 49 states will want one and they will demand it via their representatives in congress and the senate.

I have kept my eye on this situation for several years now. I live in California, the rural north end. and me and my husband are still blessed enough to have decent paying jobs. However, I work in public mental health which is dependent on Medi-CAL billing (medicaid it's called in other states). As a realist, I've spent the last two years developing an austerity plan. We have speculated about differing scenarios, and developed a "Step" system depending on how bad things get. For instance, if one of our jobs is toast, we already know what expenses will be cut from the family budget and we'll be living quite simply, but not bustin' in to the food we stocked up. If both of us lose our jobs, we sell off stuff and pound the pavement or enough income to scrape by with rent, utilities and food. I may have to go back to bartending to make the rent money. If things get REALLY bad, we liquidate everthing and live in our travel trailer on someone's property. We also know some pretty remote areas around our county we could virtually disappear.

Trust me, folks - the EXCREMENT IS GOING TO HIT THE FAN - maybe tomorrow, maybe in five years, but the consensus of the REAL trends forecasters and financial analyists (not the bobble-heads on TV news), but the guys who have been RIGHT all along like Bob Chapman, Marc Faber, Peter Schiff, Catherine Austin Fitts. John Galt & Gerald Celente.

Crime will definately go parabolic. We may have places at times with no electricity, There will be little to no food in stores, so it will be rationed and paid for with exhorbitant pricing.. So you better get ready - what is your austerity plan? Do you even have a plan? Imagin what your life will look like without cheap, readily available foods, with having little or no fuel, when the local ER shuts down or is too overwelmed to help you and yours? If you are already prepared, what will you do when a gang of thugs is outside your door demanding anything you have - what then?

I don't ever lose hope,though - I hope to God we're all wrong. And if we are, so what if we have bags of beans, coffee, flour, etc. stashed away. Certainly doesn't hurt to have it!

reply to post by Rockerchic4God


Well said...

Thanks for your opinion

The house of cards is collapsing,the question is. Was/is this by design? There are but two answers. The ptb are either inept or corrupt,either way they need fired. My consensus is that it was all by design they new exactly what they were doing and of course they have the solution. A new world order with a new world currency. I say if they were enept enough to collapse the current world order we certainly dont want them in charge of the new world order.

Great info,great thread,something wicked this way comes. Prepare accordingly or prepare to end up on your knees begging for crumbs.

I believe if an individual state goes bankrupt it becomes the Federal Government's responsibility to ensure the ongoing workings of that state, although I could be wrong. This does make sense though.

Maybe this could explain why the Federal Government appears to be doing so little to help out individual states, they would like to see them go under so that they can come under Federal control, especially the old "Republic of" states like California.

I believe California has an "out clause" of the United States that with a referendum that they can leave the Union any time they like and revert to being a Republic? Again, could be mistaken.

Originally posted by babybunnies
I believe if an individual state goes bankrupt it becomes the Federal Government's responsibility to ensure the ongoing workings of that state, although I could be wrong. This does make sense though.

Maybe this could explain why the Federal Government appears to be doing so little to help out individual states, they would like to see them go under so that they can come under Federal control, especially the old "Republic of" states like California.

I believe California has an "out clause" of the United States that with a referendum that they can leave the Union any time they like and revert to being a Republic? Again, could be mistaken.

See now this could very well be the case... I tend to fall on the side of "Humans are inherently blind" as opposed to "Humans are smart enough to orchestrate complex conspiracies"... but I still think your point merits further investigation.

Originally posted by babybunnies
I believe if an individual state goes bankrupt it becomes the Federal Government's responsibility to ensure the ongoing workings of that state, although I could be wrong. This does make sense though.

Maybe this could explain why the Federal Government appears to be doing so little to help out individual states, they would like to see them go under so that they can come under Federal control, especially the old "Republic of" states like California.

I believe California has an "out clause" of the United States that with a referendum that they can leave the Union any time they like and revert to being a Republic? Again, could be mistaken.

As far as I know, only Texas has that option. After the civil war, the supreme court ruled that states could not unilaterally leave the union.

I will say this about state debt:

I work at a university in Texas. I'll tell you that I've been blind to my state's financial problems. I've lived my whole life in Texas, hearing everybody talk about how great it was here. Business friendly, no state income tax, and a balanced budget. A fiscal conservative's wet-dream (I could be mistakent on that....but you get the idea)! I drank the kool-aid and never questioned any of this. Seemed about right to me.

So, you can imagine my surprise when the Chair of our department at the university told us that Texas was somewhere between 9-20 billion dollars in debt, depending on what politician you were talking to. We're a state school and have had budget cuts for the past couple of years, but this next cut is rumored to be big.

I have to admit that I'm a little embarrassed to have never questioned the financial state of my......well....state. I'm a member of ATS. I'm supposed to already know stuff like this!

reply to post by yadda333

Interesting. As of 2009(the latest year for which the information is available) Texas is the third LEAST debt ridden state in the nation.

Total State Debt: $33,299,313,000

Total Population: 24,326,974

Debt per Resident: $1,368.82

Surprisingly, to me anyway, California did not make the top ten list of most debt ridden. I believe that their large population saved them there.

reply to post by HunkaHunka


first the government collapses. then martal law. then the race wars begin, dividing the otherwise united peoples... then once communication between the coasts is destroyed, foreign invasion by the oldest empire on earth. I mean, they bought this country, why wouldn't they take it?

The Chinese are Comming! the chinese are comming! We must run and tell the king!
Am i ever sick of that one...NO the chinese are not comming...they have enough problems of their own without taking on the North American continent....
What may happen is that the United Sataes may declare war on somebody else so we dont catch on to the rest of the bad news.

reply to post by stirling


I was thinking corporations actually....

reply to post by HunkaHunka


its foreign multinationals mostly. i think land in texas is being sold to spanish companies nowadays. anything can be leased or sold by the municipal/state/federal governemnt. why? because it is their property and they have the right. you are as well, if you are a citizen of the UNITED STATES OF AMERICA.

if you want to find out about your state or city finance, check out their comprehensive annual financial reports by going to the website of the city or state or just googling (City name) Annual Comprehensive Financial Report 2009 or 2010 if it is out yet, which is shouldnt be. i hope you dont live in a large city, otherwise you will have a task ahead of you.