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PostPosted: Sun Jun 18, 2017 9:39 am 
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I'm a lot less concerned about the Yellowstone volcano cooking off or an EMP event than I am about basic arithmetic catching up to states and cities that have been making promises they can't possibly keep, and the effect on our overall fiscal condition and "state of the nation." At some point the giant debt pyramid our economy has been floating on is going to collapse under its own weight - the book "When Money Dies" by Adam Fergusson is an eye-opening look at what happens to societies when currencies become debased into near-worthlessness. Let's please just talk about this from a "what happens if my city/state/country defaults on its debts (or prints them away) and how this would impact things like a barter economy - no "cause and effect" discussions as that would inevitably turn political, and I'd like the focus to be on "what if" not pointing fingers.

http://www.zerohedge.com/news/2017-06-1 ... alse-alarm

As reported previously, the state Transportation Department said it would stop roadwork by July 1 if Illinois entered its third consecutive fiscal year without a budget - the longest such stretch of any US state - while the Powerball lottery said it may be forced to dump Illinois over its lack of budget. For now, state workers have continued to receive pay because of court orders, but school districts, colleges and medical and social service providers are under increasing strain.

And yet, despite the sharp selloff in Illinois GO bonds which some had expected could force the two sides to reach a bargin, neither the Democrat-led legislature, nor Republicans governor Bruce Rauner appear closer to a consensus. Which probably explains today's Associated Press "shock piece" exposing just how serious the situation could become in under two weeks absent a resolution. It focuses on state Comptroller Susana Mendoza - who has had the unenviable job of essentially sitting at the kitchen table trying to figure out how to pay the bills - who is warning that the previously discussed new court orders in lawsuits filed by state suppliers that are owed money mean her office is required to pay out more than Illinois receives in revenue each month. That means there would be no money left for so-called “discretionary” spending - a category that in Illinois includes school buses, domestic violence shelters and some ambulance services.

“I don’t know what part of ‘We are in massive crisis mode’ the General Assembly and the governor don’t understand. This is not a false alarm,” said Mendoza, a Chicago Democrat.

“The magic tricks run out after a while, and that’s where we’re at.”


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PostPosted: Sun Jun 18, 2017 11:09 am 
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What happens is - the Bolivarian Republic of Venezuela. Scary thought. Very scary.

They are in total meltdown right now. I can't say this is what is coming, but....

How this, Detroit and Puerto Rico (The PIIGS of North America) will eventually be handled is an open question.

One good question would be to see if your retirement fund has "invested" in bonds issued by these near-death entities.

Another good question is how will you deal with the modern version of "Grapes of Wrath" (population displacement).
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Back then

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Your future neighborhood?

Wuddya gunna do?

-Get out of debt, stay out of debt.
-Become job resilient - that is to say, develop additional skills / education that might be marketable in a down economy.
-Downsize all your stuff. Having less stuff can make you more nimble - that is to say - have the ability to move quickly (a relative term) to where there is work to be had.
-Try to build up a rainy day fund to cover short term employment issues.

---Build up a deep pantry - at least avoiding starvation is something you can take steps for today.

The face of true poverty could arise once more.

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PostPosted: Sun Jun 18, 2017 11:45 am 
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You need to watch Puerto Rico deal with its debt problem. This IMO is what the Illinois debt workout may follow.

However, states are not allowed to declare bankruptcy under current law but that will not prevent them from trying to litigating the matter.

This is a good article on the subject.
https://www.forbes.com/sites/johnmauldi ... 827bc22f2d

Honestly the real risk is to anyone holding any municipal bonds, which is a common holding in most portfolios face the real risk here. This has a real risk of making them in effect toxic.

The other very vulnerable group are state and municipal employees receiving pensions payments. We have seen them targeted in the Detroit bankruptcy.

BTW the "magic" that state comptroller refers to is a BS term that any accountant will recognize as withholding payments on current payables as long as possible. There is no magic in being a slow payer and squeezing your suppliers until they scream and file suit like Illinois has done.

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PostPosted: Sun Jun 18, 2017 3:52 pm 
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Quote:
Honestly the real risk is to anyone holding any municipal bonds, which is a common holding in most portfolios face the real risk here. This has a real risk of making them in effect toxic.


Or a winning lottery ticket.

http://www.americanow.com/story/society ... y-winnings

How do you screw up a lottery? It is a license to print money.



We don't have to discuss the cause and effect but these are nearly always a deliberate mismanagement and corruption issues. Does not matter if it is Illinois or Birmingham. Illinois is infamous for government corruption and people taking bribes to overcharge the government or just give them government money for nothing.

The answer: Get a better government.

You can either move to a better state or get involved and try your best to force accountability. Allowing corruption to run unbridled and then adjusting your quality of life and paying for it yourself is enabling at best allowing yourself to be a slave to another's greed at worst.

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PostPosted: Sun Jun 18, 2017 8:09 pm 
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Stercutus wrote:
Quote:
Honestly the real risk is to anyone holding any municipal bonds, which is a common holding in most portfolios face the real risk here. This has a real risk of making them in effect toxic.


Or a winning lottery ticket.

http://www.americanow.com/story/society ... y-winnings

How do you screw up a lottery? It is a license to print money.




To quote state Comptroller Susana Mendoza “The magic tricks run out after a while, and that’s where we’re at.”

Not paying the lottery winners is one of the "magic tricks" described. A good rule of thumb; when a government accountant or finance official uses the term "magic tricks", you can be sure that if you or I performed similar magic we would be explaining to a judge (maybe 2 civil and criminal) how the magic was legal.

In this case Illinois is using the Golden Rule, not the one we all learned in Kindergarten but the other one, and claiming they are magical and exempt from any other rules but their own.

I have sympathy for the lottery winners but the business who shelled out capital to supply goods and services only to be stiffed when it comes time to pay can have a very corrosive effect on the overall economy.

This has been going on for a long time.They have been using this "magic" for years.
This is a Feb 2016 article.
http://www.chicagobusiness.com/article/ ... e-at-state

Here is one from 2013.
https://www.illinoispolicy.org/illinois ... the-state/

Here is one form 2010.
http://www.nbcnews.com/id/37136518/ns/u ... pay-bills/

BTW one key expense in the Illinois budget issue is funding the pension plans of state employees.

This is a long but excellent video on underfunding a pension plan.
https://www.khanacademy.org/humanities/ ... bligations

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PostPosted: Sun Jun 18, 2017 11:18 pm 
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It's a magic trick all right, it makes the money of the poorest people disappear.

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PostPosted: Mon Jun 19, 2017 8:20 pm 
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Let me bring a note of optimism to the issue. Illinois Chicago, Detroit, Bakersfield, etc are cities not countries. So at least the productive (and not so productive) can leave to another part of the country. If you are in Venezuela well no such luck. My grandfather always said with water and 4 acres you could survive. Luckily, that is pretty available in this country (CA, NV maybe lacking on the water part). I remember reading about a military study of Japan in the 2000's, a country with a very high productivity and technology level but almost destitute of natural resources. The study claimed if they were cut off from outside resources ( in this scenario a Naval embargo from China) but this could apply just as well to an economic meltdown, that they would only be able to provide the nutritional level of one small red potato per week to each citizen. The US didn't even get that bad in the Great Depression and the Civil War ( the revolutionary war was a different kind of situation but the country was much smaller then).

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Last edited by The Twizzler on Tue Jun 20, 2017 5:43 pm, edited 1 time in total.

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PostPosted: Mon Jun 19, 2017 11:04 pm 
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The Twizzler wrote:
The study claimed if they were cut off from outside resources ( in this scenario a Naval embargo from China) but this could apply just as well to an economic meltdown, that they would only be able to provide the nutritional level of one small red potato per week to each citizen. The US didn't even get that bad in the Great Depression and the Civil War ( the revolutionary war was a different kind of situation but the country was much smaller then).


I am going to say that is a flawed study. Japan is self sufficient in a number of food items. Their problem is that they changed their diet after WWII to imported meats, oils and grains like corn with the increase of income. Soy is almost all imported too.

So long as they can fish and revert their diet back to pre-60s type they would only starve moderately. But they are the world's biggest importer of food. But an embargo by China would almost certainly mean World War III as US Farmers would see their favorite market closed.

Japan is not insolvent... yet.

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