Sunday, December 19, 2010

[Video] 60 Minutes - States; the Day of Reckoning

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We are generally quite early to a trend, which in actuality is a bit of a negative from an investing standpoint because trends tend to go much longer than anticipated (and whistling past a graveyard aka ostrich head in sand, are national pasttimes).... and as we've seen the past 3 years, government and central bankers willingness to kick the can is almost unending.   So while we were discussing the coming disaster that was state budgets in 2007,  [Dec 16, 2007: California in a State of Fiscal Emergency - Coming to a Theater Near You] that can has been 'kicked' the past 2 years with stimuli after stimuli to shore up state and municipal budgets. [Jun 18, 2010: States Nationwide Plead for More Backdoor Bailouts... err, "Stimulus"] I will be very interested to see if the Tea Party club that joins Congress in 2011 bows to the states now yearly desperate pleas to spend far in excess of what they bring in.  As for those underfunded state pension plans?   [Jan 5, 2010: FT.com - US Public Pensions Face $2 Trillion Deficit[Apr 5, 2009: AP: $1 Trillion Hit to Pension Funds Could cost Taxpayers, Workers]  Furgeddaboutit... that's going to be a Federal Reserve/federal government bailout one of these days (ponzi baby).... or perhaps Ben's master plan to take the S&P to 3000 will fix everything. [Dec 30, 2009: Eric Sprott Wonders if US Debt Scheme is Simply the Biggest Ponzi Scheme Ever] [Oct 27, 2010: PIMCO's Bill Gross -  Fed's QE is "If Truth be Told, Something of a Ponzi Scheme"]

60 Minutes has been touching a lot of interesting topics of late - tonight they began introducing the topic FMMF readers have had waved in their face for 3 years.  Guest appearances by Governor Christie of New Jersey (a viable 2016 presidential candidate if he 'fixes' New Jersey)  [Feb 18, 2010: [Video] NJ Governor Chris Christie Talks Tough on Out of Control Spending, with Some Shocking Statistics] , and Meredith Whitney.

14 minute video

   

By now, just about everyone in the country is aware of the federal deficit problem, but you should know that there is another financial crisis looming involving state and local governments.

It has gotten much less attention because each state has a slightly different story. But in the two years, since the "great recession" wrecked their economies and shriveled their income, the states have collectively spent nearly a half a trillion dollars more than they collected in taxes. There is also a trillion dollar hole in their public pension funds.

The states have been getting by on billions of dollars in federal stimulus funds, but the day of reckoning is at hand. The debt crisis is already making Wall Street nervous, and some believe that it could derail the recovery, cost a million public employees their jobs and require another big bailout package that no one in Washington wants to talk about.

[Oct 29, 2010: This Day in Taxpayer Abuse - Buffalo Teachers Skim $9M in 2009 Alone for Cosmetic Surgeries]
[Jan 24, 2010: For the First Time, More Union Workers Work in Government versus Private Sector
[Aug 11, 2009: LA Times - Amid Cost Cutting, Los Angeles City Pensions Continue to Soar]
[Dec 4, 2009: Public Workers Continue to Live the Good Life in New Jersey]


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