Meredith Whitney: 'Detroit Will Start A Wave Of Municipal Bankruptcies' - By Economic Policy Journal (25/7/13) PDF Print E-mail
Economic Policy Journal   
Thursday, 25 July 2013 13:54

Whitney writes in FT:

As jarring as the reality may be to accept, Detroit’s decision last week to declare bankruptcy should not be regarded as a one-off in the US municipal market – which is what the bond-peddlers are now telling their clients. The aftershocks of the largest municipal bankruptcy in US history will be staggering, and Detroit will set important precedents.

Municipal bankruptcies have historically been rare for a number of reasons – including the states’ determination to preserve their credit ratings, their access to cheap funding and the stigma of bankruptcy. But, these days, things are very different in the world of municipal finance.

At the root of the problem is the incentive system that elected officials used to face. For decades, across the US, local leaders ran up tabs for future taxpayers; they promised pensions and other benefits for public employees that have strong legal protection. That has been a great source of patronage for elected officials: they can promise all sorts of future perks to loyal supporters (state and local workers) with very little accountability on the delivery of those promises.[...]

Leaders across the country cannot continue as they have. They must choose sides because there is simply not enough money to go around. Will they side with taxpayers, unions or the municipal bondholders? If they back residents, money will be directed to underfunded public services at the expense of pensions and bondholders. If they side with the unions, social services will continue to be cut and the risk to bondholders will increase considerably. If they side with bondholders, social services and pensions are at risk.[...]

There are five more towns like Detroit in Michigan alone. There are many more municipalities across the country in similar positions.



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The Edifice Of "Recovery" Is Crumbling - By Phoenix Capital Research (25/7/13) PDF Print E-mail
Phoenix Capital Research   
Thursday, 25 July 2013 13:50

The corrupt edifice that has propped up the US big banks and financial system is beginning to crumble before our very eyes.
 
First and foremost, the former head of the Bureau of Labor Statistics (the group in charge of calculating the “official” unemployment numbers and inflation measures) has stepped forward and stated, point blank, that the unemployment numbers in the US are a joke.
 
Keith Hall believes the US economy is a lot sicker than the 7.6 percent unemployment rate would lead you to believe.
 
And he should know.
 
Hall was, from 2008 until last year, the guy in charge of Washington’s Bureau of Labor Statistics, the agency that compiles that rate.
 
“Right now [it’s] misleadingly low,” says Hall, who believes a truer reading of those now wanting a job but without one to be more than 10 percent.
 
Source: NY Post

 
The Government claims we’re in recovery because the unemployment rate is falling. But we have the former head of the BLS stating that real unemployment is greater than 10%.
 



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The Most Rigged Economic Indicators - By Money Morning (25/7/13) PDF Print E-mail
Money Morning   
Thursday, 25 July 2013 13:49

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Economy: We Are In The Terminal Phase Of An Unprecedented Debt Spiral - By Michael Synder (24/7/13) PDF Print E-mail
Michael Synder   
Wednesday, 24 July 2013 12:32

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Gold In A (Un)Tapered World - By Axel Merk (24/7/13) PDF Print E-mail
Axel Merk   
Wednesday, 24 July 2013 12:30

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