Forget Puerto Rico, German Munis Are In Trouble

Tyler Durden's picture




 

Submitted by Martin Armstrong of Armstrong Economics,

Bremen-buergerschaft

Part of our job is monitoring everything everywhere. We are gathering data om whatever moves on a global basis. I have stated numerous times, it is IMPOSSIBLE to forecast a single market in isolation because the wildcard comes from contagions set in motion elsewhere. It is like sunning on the beach and there is a tidal wave coming because of an earthquake you didn’t know happened. Unless you monitor the world, you cannot even forecast the weather for tomorrow. It would all be just dumb-luck and chance.

I have been warning that about 50% of the municipal governments in Germany are on the verge of bankruptcy.

I have warned that about 50% of the German municipalities are on the verge of bankruptcy. The pensions have been unfunded and are absorbing everything. As we saw in Detroit with more than 50% of current revenue going to pensions, taxes either rise, the borrow more, or they are out of business. We are in a giant bull market for taxes increases on every level. This is the real downside of Marxism – they theory that just keeps taking.

 

The German municipalities currently need more than 100 billion euros to renovate their dilapidated infrastructure. Government has been mismanaged on a grand scale and all politicians can do is think it is the public’s fault for not paying more taxes. They refuse to ever look at how they are running government on every level. It would be nice if there really were smart elite people in charge for only someone without any common-sense would have designed a political system that currently rules the world.

 

God never promised honest politicians nor did He promise qualified ones. Society votes for people who smile nice and we think that there is an honest politicians in the every corner of the world. The problem is, God made the world round and he has been laughing ever since.

 

German municipalities face rising debt levels that mimic Greece. They cannot afford the investment to even maintain schools and roads any more. We are headed into an economic abyss beyond contemplation.

This is part of the reason they are looking for bail-ins and even Merkel has determined they cannot allow any referendums fearing the people will vote against the EU.

The Bremen state government has now imposed a spending freeze today. The reason has been the unexpected expenditure and revenue shortfalls in the total amount of 60 million euros. The Hanseatic city must therefore finance until further notice only mandatory tasks.

Politicians cannot see that this system is doomed. They keep looking for everything possible to raise more and more taxes. They only see what they need, not what they are doing in the total destruction of the economy. Around 350 German companies have to pay back discounts on green electricity. Corresponding changes in the German Renewable Energies Act, the European Commission has confirmed. Compared to the rebates granted by a total of 10 billion euros but the repayment of 30 million euros are required.

german-high-court

Meanwhile, German highest Constitutional Court criticized the applicable tax privileges for corporate inheritances. So far heirs get the tax completely canceled if they continue the inherited company. Heirs of private assets, however, have to give a large part of the state. Moving in this direction wiped out small farmers in the USA forcing them to sell land to pay the taxes. When applied to productive business, applying inheritance taxes forces companies to close and reduce employment. It is not the same as just inheriting money or assets. An ongoing business is the economic engine of the economy.

It is just amazing who disconnected government are from the reality of the economy. Everything is geared to move toward the confiscation of wealth not reforming the system. These people are just brain-dead. Unemployment among the youth if over 60%. In American over 60% of students have been defrauded by telling them they need a college education, saddle them with huge debts that are NOT dischargeable even in bankruptcy, and they cannot find employment based upon the education they just paid for. That is fraud. If I sold you a trading program and it didn’t work, isn’t that consumer fraud? Not if you are a school.

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Sat, 07/12/2014 - 16:50 | 4950675 Sudden Debt
Sudden Debt's picture

And all that money in all those saving accounts that sit idle...what a waste...

Sat, 07/12/2014 - 16:58 | 4950694 Pinto Currency
Pinto Currency's picture

 

"...It is just amazing who disconnected government are from the reality of the economy. Everything is geared to move toward the confiscation of wealth not reforming the system. These people are just brain-dead. ..." 

 

Brain dead? Not so. 

Can't have collectivism while everyone has assets.

Meanwhile the central banks have printed 10s of trillions and bought equities placing them ultimately in the hands of the state.

There is no pattern  here.

Sat, 07/12/2014 - 17:01 | 4950708 Sudden Debt
Sudden Debt's picture

Central banks and states are 2 totally different things and have nothing to do with each other besides the fact that the states are the customers of the central banks. And customer may be king but isn't king.

Sat, 07/12/2014 - 17:12 | 4950721 Leonardo Fibonacci2
Leonardo Fibonacci2's picture

If Hitler would be around, this shit would simply not happen!!! Why you ask?  Because all this leveraging & HFT bullshit would give the culprits a "one way ticket" to the furnace of  Auschwitz-Birkenau.  Wall Street criminals would burn to a crisp!!!   Sieg Heil Mein Fuhrer.

 

BTW OBUMMER give The Third Reich its Gold back.

Sat, 07/12/2014 - 17:55 | 4950819 Pinto Currency
Pinto Currency's picture

 

 

SD - wait until the states take the assets from the cb's.

p.s. Hitler was just another central planner loser surrounded by a pack of perverts and losers.  Kind of like Barry.

 

Sat, 07/12/2014 - 18:32 | 4950907 gmrpeabody
gmrpeabody's picture

Is this the same Armstrong that predicted $60K gold?

Sat, 07/12/2014 - 18:56 | 4950968 SafelyGraze
SafelyGraze's picture

Die Munizipalbondenpessimistenheit ist nicht neue.

viele huggen,
Meredith Wittney

 

 

Sat, 07/12/2014 - 18:59 | 4950969 samsara
samsara's picture

He never predicted that.

Sat, 07/12/2014 - 19:11 | 4950993 DoChenRollingBearing
DoChenRollingBearing's picture

gmrpeabody

You might be thinking of FOFOA.

Sun, 07/13/2014 - 04:37 | 4951763 Ondoron
Ondoron's picture

A fact that most of you guys obviously do not know: Hitler was a 1000% Keynesian! Germany was bankrupt in 1939 and had to start the war! Otherwise the bankrupcy would have been obvious to everyone. Hitler started the war and had the besieged countries pay for the German war efforts!
Is there any ressemblance to possibly developing situations? Think about it!

Sat, 07/12/2014 - 17:27 | 4950764 malek
malek's picture

The customer is king, but the shop owner is imperator, and the accountant is pope.

Sat, 07/12/2014 - 17:03 | 4950713 max2205
max2205's picture

Even Whitney capitulated on munis demise

 

Wtf happened to her....must be pounding Corzine

Sat, 07/12/2014 - 17:34 | 4950781 Son of Loki
Son of Loki's picture

She underestimated the power of manipulation and printing presses by CBs.

Sat, 07/12/2014 - 18:35 | 4950918 gmrpeabody
gmrpeabody's picture

Her timing was off..., that's all.

Sat, 07/12/2014 - 19:13 | 4950994 DoChenRollingBearing
DoChenRollingBearing's picture

My guess as well.  Muni bonds?  No, thank you.  I'll take gold instead.

Sat, 07/12/2014 - 20:22 | 4951137 nightshiftsucks
nightshiftsucks's picture

So did I.

Sat, 07/12/2014 - 17:08 | 4950730 booboo
booboo's picture

We Germans luf our fatherland and will gladly give up our savings accounts for the good of our french masters and I have dreams of Christine Legaard tying me up, branding me with a fork a while singing 100 billion luft balloons.

Sat, 07/12/2014 - 17:57 | 4950823 Joe A
Joe A's picture

Zee Germans have been paying for zee reunification and after that they were paying to prop up zee Germans banks so these could buy zee rest of Europe. Now zee Germans need to continue paying to bailout zee Germans municipalities? (I doubt that 50% of German municipalities is about to go bankrupt though) How much patience and stamina does zee German people have? Really amazing.

Sat, 07/12/2014 - 19:14 | 4950999 DoChenRollingBearing
DoChenRollingBearing's picture

Holy moly, booboo!  Now how am I supposed to sleep tonight?

Sat, 07/12/2014 - 18:35 | 4950919 yogibear
yogibear's picture

Wait until the government grabs them.

Sat, 07/12/2014 - 16:54 | 4950680 orangegeek
orangegeek's picture

I recently bet a friend - I chose france - he chose germany - these were not FIFA bets.

 

Surprisingly, germany kacked first.  Shocking

 

Now I owe him a dollar.  DOH!!!!!!!!!!!!

Sat, 07/12/2014 - 17:05 | 4950723 Wolferl
Wolferl's picture

Keep your money. Because this Armstrong guy has absolutely no clue what he is talking about.

Sat, 07/12/2014 - 16:54 | 4950682 maskone909
maskone909's picture

How can they expect to be taken seriously in those rediculous costumes

Sat, 07/12/2014 - 16:58 | 4950702 Sudden Debt
Sudden Debt's picture

The germans like relics... Even barbarous relics...

Sat, 07/12/2014 - 17:27 | 4950763 disabledvet
disabledvet's picture

"Is it safe? Is it secure?"

"Is it safe? Is it secure?"

Sat, 07/12/2014 - 18:19 | 4950872 DutchR
DutchR's picture

 + Nice reverence...

 

We all better be long distance runners

Sat, 07/12/2014 - 17:01 | 4950707 debtor of last ...
debtor of last resort's picture

As long as it's bought and paid for, the length, colour or shape doesn't matter. At least, not for you.

Sat, 07/12/2014 - 17:04 | 4950716 ebear
ebear's picture

No one expects the Spanish Inquisition!

Sat, 07/12/2014 - 16:57 | 4950696 debtor of last ...
debtor of last resort's picture

I'm a Detroiter.

Sat, 07/12/2014 - 19:19 | 4951012 tunnelvizn
tunnelvizn's picture

Ich bin eine Detroiter !

Sat, 07/12/2014 - 17:07 | 4950710 GrinandBearit
GrinandBearit's picture

Crash already for Christ's sake!

And I'm an atheist -lol

Sat, 07/12/2014 - 17:08 | 4950732 fiftybagger
fiftybagger's picture

Spell check Martin

Sat, 07/12/2014 - 17:12 | 4950739 robertocarlos
robertocarlos's picture

How?

Sat, 07/12/2014 - 17:13 | 4950738 NoWayJose
NoWayJose's picture

I was thinking this morning about the US being in a situation where our elected leaders from the 'One Party' either fail to see the problems we are facing or are incapable/unwilling to do anything about them. The push for punishing overseas banks and going after overseas accounts is an easy revenue grab because no one within the US is going to complain. But the author is correct - the inability to reform anything or to cut expenses is what ultimately will cause the system to collapse.

Sat, 07/12/2014 - 17:13 | 4950741 Reaper
Reaper's picture

Their monkeys wear red robes, ours black. The great delusion is that red robes or black robes make any lawyer either honest, smart, or not for sale. The politician monkeys who pick these monkey judges are equally venal. Anyone promising you something for free is running a hustle. Frau Merkel kommt nicht.

Sat, 07/12/2014 - 17:17 | 4950746 apberusdisvet
apberusdisvet's picture

So the real SHTF moment may start with Germany. followed by the start of the 4th Reich?  That would be  historical Karma.  But, but but.... the US has had such a head start since 9/11.   We just have to be first; we can't allow this.

Sat, 07/12/2014 - 17:19 | 4950752 deflator
deflator's picture

Everything is geared to move toward the confiscation of wealth not reforming the system.

 

 

Not really "confiscating" wealth but merely "distributing" wealth lol.

Sat, 07/12/2014 - 19:05 | 4950980 RECISION
RECISION's picture

The purpose of politics is to maintain the status-quo.

and to STOP anything changing. [for as long as possible - and as slowly as possible]

It is not to reform anything.

.

First the political establishment has to be removed - and then change can happen.

Sun, 07/13/2014 - 02:08 | 4951680 o2sd
o2sd's picture

Yes, but as Machiavelli said in The Prince, the people are also conservative and cling to the status quo. So even if you remove the current political establishment, you can't change too much, or the people will throw their weight behind the revolution that gets rid of you.

 

Sat, 07/12/2014 - 19:32 | 4950756 malek
malek's picture

Wow, now here Martin Armstrong really does a lot cherrypicking and taking things out of context!

First of all municipalities only pay the pensions of their public servants (bureaucrats), and yes they are often in a situation similar to San Jose, CA. However, in Germany (after states pay their state bureaucrats' pensions) all other people's retirement payments come from the federal government as practically no 401k or similar exist, and they have a so much bigger problem - that this pointing to municipalities can only be taken as intentional deception.
And why doesn't he give us some numbers that puts the outstanding municipal debt into relation to the federal and states levels.

Secondly yes the infrastructure is detiorating, but from a high level and slower (still more maintenance/repairs done) than in the US for example.

The whole meddling such as the Renewable Energies Act and its revisions will for sure drive out some companies faster, but without it nothing would be solved or significantly improved.

Update:
Oh, and Bremen has always been the worst run state ("city state" in that case) of all.

Sat, 07/12/2014 - 17:27 | 4950766 29.5 hours
29.5 hours's picture

 

 

Once again, another diatribe from Drama Queen Armstrong. For proof of his contention that 50% of the cities of Germany are on the verge of bankruptcy, he quotes from an authority...himself.

I don't totally disagree from Drama Queen but we should hold to higher standards in ZH posts.

 

 

 

Sat, 07/12/2014 - 17:45 | 4950804 Eirik Magnus Larssen
Eirik Magnus Larssen's picture

Seconded.

Sat, 07/12/2014 - 17:29 | 4950769 One And Only
One And Only's picture

"Everything is geared to move toward the confiscation of wealth not reforming the system."

Unless...

It is the confiscation of wealth, and, redistribution of wealth, which is the means of reforming the system.

Sat, 07/12/2014 - 17:34 | 4950777 natty light
natty light's picture

google translate?

Sat, 07/12/2014 - 17:44 | 4950799 Eirik Magnus Larssen
Eirik Magnus Larssen's picture

I certainly hope so.

Sat, 07/12/2014 - 17:46 | 4950805 Davos
Davos's picture

Lets just get it over with. This crash is like caring for an incontinent old aunt, she keeps eating your food, using your gas and pissing on your sheets, making you poorer every day, but she just wont fucking die

Sat, 07/12/2014 - 20:25 | 4951146 nightshiftsucks
nightshiftsucks's picture

Thats what pillos are for, man up.

Sat, 07/12/2014 - 18:00 | 4950832 Lostinfortwalton
Lostinfortwalton's picture

The youth unemployment rate in Germany in 7 percent. A large percentage of young people are attending trade schools and have jobs lined up before graduation. Likewise engineering is highly respected in Germany and the head of industrial companies are likely to have a doctorate in engineering. I don't know what Martin Armstrong is taking but he really should lay off.

Sat, 07/12/2014 - 19:15 | 4951002 malek
malek's picture

Sorry, what of your mentioned facts has anything to do with even only the general direction what Martin Armstrong pointed at.

The youth unemployment rate in Japan is even lower... so all is great in Japan??

Sun, 07/13/2014 - 07:22 | 4951842 Lostinfortwalton
Lostinfortwalton's picture

Employed citizens in good jobs pay taxes. Countries that sell highly specialized, extremely expensive machinery to the rest of the world, like Germany, have a favorable trade balance. Those very profitable companies also pay taxes. There in no indication al all that Germany is another Greece/USA basket case with failed leadership.

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