The cost of the proposed border wall is a rounding error in terms of total government spending or the US national debt. From Simon Black at sovereignman.com:
We are in the midst of the longest government shutdown in history.
Don’t get me wrong, I like having the government shut down. As I’ve said before, I believe it is my moral duty to pay as little taxes as possible.
The government does some really stupid things with your tax dollars. I’d rather not pay for a $2 billion Obamacare website that doesn’t work, or to defend Congressmen against sexual assault allegations.
So, by starving the beast, I at least ensure they’re not squandering my money.
But I think it’s ridiculous that this government posturing is financially crippling the 800,000 government workers (and millions of contractors) who are now out of work – or being forced to work without pay.
To be fair, last night the president signed a law guaranteeing they would be paid for past work – a month into this fiasco. It’s a step in the right direction, as there’s a word for forcing people to work without pay – slavery.
That’s why I offered to pay the rent of any government workers hurt by the shutdown. I am using my tax savings to bail out some of these government workers the feds left high and dry.
But at its core, this whole shutdown comes down to a disagreement over $5 billion. That is how much money Trump wants to build the border wall between the US and Mexico. And Congress refuses to fund it.
Granted, that’s a lot of money to you and me. And it should be a lot of money to the government, too.
All that’s left for Chicago is the bankruptcy filing. From Simon Black at sovereignman.com:
While the federal government is slowly careening toward permanent, fiscal disaster, many state governments (which don’t have the power of the printing press) are already staring into the abyss…
Take Illinois, for example. It’s the most broke state in the US with nearly $250 billion in debt. And it only brings in enough in taxes each year to cover 92% of its expenses… so the problem is getting worse.
Good thing Rahm “you never want a serious crisis to go to waste” Emmanuel is the current Mayor of Chicago. You may remember, the above quote was from Rahm’s days as Obama’s Chief of Staff, as told to the Wall Street Journalduring the depths of the Great Financial Crisis…
What followed was the greatest monetary experiment known to man.
Now Rahm has another crisis on his hands – Chicago’s woefully underfunded pensions. And he’s reaching into his old bag of tricks.
Governments can only kick the can down the road for so long. Eventually, they’ve got to make some tough decisions – like who they’re going to default on. Despite the promises made by certain political representatives, it’s impossible for everyone to have everything…
And today, Rahm must choose…
Either Chicago defaults on the pension promises it’s made to city workers or it defaults on its massive debt. It’s simple arithmetic.
Rahm, it seems, has chosen the latter.
Stock markets have staged a vigorous rally and the economy has expanded since the financial crisis of 2008-2009. Paradoxically, pension funds have become more underfunded. From Stephanie Pompoy of Macro Mavens at nebula.wsimg.com:
Actions have consequences. Even for the Fed.
That’s not a reference to the market’s grumpy reaction to the central bank’s continued rate hikes and quantitative tightening. No. The impact of both on financial assets were as obvious as they were inexorable. To be sure, Wall Street’s resident soothsayers had a good run spinning tales that ‘this time’ was different. A tightening Fed, we were assured, was a good thing—a ringing endorsement of the economy’s indefatigable strength. But, in the end, there was simply no way around the basic fact: Just as rate cuts and QE were designed to expand the pool of credit and incent the embrace of risk, so would rate hikes and QT necessarily beget the reverse. And so they have.
But while the impact of receding liquidity and the reduced reward for reckless speculation and risk-taking have finally begun to play out on Bloomberg screens everywhere, the real devastation has yet to be revealed. In the ensuing weeks and months the full and lugubrious legacy of the Fed’s great monetary experiment of the last decade will finally come into view. Beyond inflating and bursting a bubble in corporate debt (with leveraged loans acting as posterchild), the Fed’s decade-long financial repression has had a far larger and more sinister impact. It has silently bankrupted the US pension system.
America’s corrupt economy and way of life are headed for a crack-up, regardless of anything President Trump may or may not do, but the mainstream media is blissfully oblivious. From James Howard Kunstler at kunstler.com:
You had to love the narrative that the financial media put over about the 1000-plus point zoom in the DJIA on Wednesday: that pension funds were “rebalancing” their portfolios. It dredged up the image of a drowning man at the bottom of the deep blue sea with an anchor in one hand and an anvil in the other, switching hands.
Thursday’s last minute 900-point turnaround was another marvelous stunt to behold. Somebody gave the drowned man a pair of swim fins to kick himself furiously to the surface for a gulp of air. The truth, of course, is that pension funds are sunk, however you balance their investment loads while they’re underwater. They over-bought stocks out of sheer desperation during ten years of near-ZIRP bond yields, and started rotating back into bonds as they crept above the ZIRP handle, and now with bond yields retreating, they’re loading up again on still-overpriced stocks that pretend to be “bargains.” Everybody knows that this will not end well for pension funds. Glug Glug.
Posted in Business, Collapse, Cronyism, Debt, Economy, Environment, Financial markets, Government, Media, Morality, Pensions, Politics
Tagged President Trump, Stock Market, The swamp
California is a great place to be…during a bull market. From John Rubino at dollarcollapse.com:
California Governor Jerry Brown inherited a $27 billion deficit from Arnold Schwarzenegger eight years ago. This month he’s leaving his successor a $13.8 billion surplus and a $14.5 billion rainy day fund balance. Pretty good right? Approximately 48 other governors would kill for those numbers.
Unfortunately it’s all a mirage. California, as home to Silicon Valley and Hollywood, lives and dies with capital gains taxes. In bull markets, when lots of stocks are rising and tech startups are going public, the state is flush. But in bear markets capital gains turn into capital losses and Sacramento’s revenues plunge. Put another way, the state’s top 1% highest-income taxpayers generate about half of personal income taxes. When their incomes fall, tax revenues crater.
That’s happening right now, as tech stocks plunge, IPOs are pulled and billion-dollar unicorns endure “down rounds” that shave major bucks from their valuations. So if this is a replay of the 2008-2009 bear market, expect California’s deficits to return to the double-digit billions.
All of the revolutions, quasi-revolutions, and proposed revolutions out there are pushing for higher spending and less taxes. That’s problematic when the overthrown governments are deeply in debt. From John Rubino at dollarcollapse.com:
The past few years have seen more than the usual amount of political upheaval. But, interestingly, most regime changes have resulted in pretty much the same thing: Higher government spending and bigger deficits.
Apparently the only “reforms” today’s voters will accept – which is to say the only actions that don’t get a leader kicked out of office – involve spending rather than saving money.
Three recent examples:
Republicans – the party of smaller government – gained control of the White House and Congress in 2016, and proceeded to take a meat ax to bloated entitlements, lowering the government’s share of the economy to levels not seen since the Reagan years.
Just kidding. They tried to eliminate the newest entitlement, Obamacare, but failed to produce even a coherent proposal. So instead they cut taxes, expanded the military and left everything else on autopilot. Now, nine years into a recovery with official unemployment below 4% — and with the small-government party in charge:
(MarketWatch) – The Treasury Department says that adjusted for timing-related transactions, the deficit would have been $270 billion over the last two months compared to $250 billion during the same period the prior year, with tax revenue up by 1% but spending up by 4%.
The budget picture is deteriorating as the U.S. taxes individuals and companies less and spends more, mostly on defense and benefit payments to an aging population. Though a growing economy is softening the blow, it’s possible that the annual deficit will top $1 trillion this year.
Posted in banking, Capitalism, Collapse, Currencies, Debt, Economics, Economy, Governments, Insurrection, Money, Pensions, Politics, Taxes
Tagged France, Italy, Macron, Revolutions, US budget deficit
Perhaps the biggest rift will be between private sector employees with inadequate retirement savings and public sector employees with rich pensions paid for by the private sector’s taxes. From Adam Taggart at peakprosperity.com:
Most Americans will never be able to afford to retire.
We laid out the depressing math in our recent report Will Your Retirement Efforts Achieve Escape Velocity?:
- The median retirement account balance among all working US adults is $0. This is true even for the cohort closest to retirement age, those 55-64 years old.
- The average (i.e., mean) near-retirement individual has less than 8% of one year’s income saved in a retirement account
- 77% of all American households aren’t on track to have enough net worth to retire, even under the most conservative estimates.