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Forget Puerto Rico, German Munis Are In Trouble

Tyler Durden's picture


Submitted by Martin Armstrong of Armstrong Economics,


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.


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


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
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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


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.

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


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."


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.

Sat, 07/12/2014 - 19:50 | 4951058 kurt
kurt's picture

I see the German officials are 1% more truthful than the American officials.

Sat, 07/12/2014 - 18:10 | 4950854 smacker
smacker's picture

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

This is always the first resort of a socialist government. Germany might have a successful manufacturing sector but it's still a socialist nation.

Sat, 07/12/2014 - 18:55 | 4950966 Ludwig Von
Ludwig Von's picture

Which makes it a "Manufacturing" sector.

Sat, 07/12/2014 - 18:12 | 4950856 Spungo
Spungo's picture

"this Armstrong guy has absolutely no clue what he is talking about."

In an interview with Greg Hunter, he said taxes are no longer important because the government can just print money. I can't believe someone can say that with a straight face. Even Mike Norman and Michael Hudson have a bit of a smirk when they say we can just print our way to prosperity.

Sat, 07/12/2014 - 18:50 | 4950946 Dickweed Wang
Dickweed Wang's picture

I find Martin Armstrong's views interesting but he really needs to hire a proofreader for his written work.  Over the last couple of days this is the 2nd article of his I've read that would have received an "E" in a 10th grade English class.  Mentally substituting what I think is the correct word in place of his typo's takes too much work . . . . here's a good example:

" . . . 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. . . ."

Sat, 07/12/2014 - 19:09 | 4950986 Seer
Seer's picture

It's the SYSTEM!  Got nothing to do with "govt."  The SYSTEM is predicated on perpetual growth!

I'd made the statement here on ZH a couple of years back stating that Germany was fucked.  I don't recall Armstrong making that prediction back then: he, like most of the other talking-heads, only ventures forward when it's obvious.

Again, you don't need spreadsheets.  You don't need "inside access" to information.

Sat, 07/12/2014 - 19:46 | 4951052 goldhedge
goldhedge's picture

Germany get your Gold back.  That will fix it.  ROFL

Sat, 07/12/2014 - 23:40 | 4951524 TheObsoleteMan
TheObsoleteMan's picture

Funny how no sooner had East Germany been absorbed into the western half, most of the country went socialist! Who really "won" the reunification after all? I'm not surprised at all that half of all German Munis are junk. The dominate party by far is socialist.

Sun, 07/13/2014 - 02:09 | 4951682 walküre
walküre's picture

German Munis have collateral. If all fails, they can go back to using their own coinage. Sure, socialism will not live forever and that is a good thing.

Sun, 07/13/2014 - 08:48 | 4951756 Sauerkraut-Opinion
Sauerkraut-Opinion's picture

....a little bit generalized. But the reality ones more is that each muni has it's own destiny: Some are without debt (like Düsseldorf), others are on the edge - e. g. in areas of structural change (like Bremen).

Many problems were caused by a fiscal reform performed by Gerhard Schröder - no act of socialism but neoliberalism. Overnight rich munis turned into poor munis. Hence facts mentioned above by the author makes it worse and most of all suddenly became more aparrent and evident.

Germany might have enough money to maintain it's infastructure but reunification (since 1989) and wealth-funding in the PIGGSZ-zone & and Brussels (respectively bailouts of German & European banks) are other burdens and alienation of tax money which makes it difficult to compare the situation with Greece or Costa Rica.

Sun, 07/13/2014 - 07:28 | 4951846 Lostinfortwalton
Lostinfortwalton's picture

"Part of our job is monitoring everything everywhere." What's the other part?

Sun, 07/13/2014 - 08:58 | 4951925 Batman11
Batman11's picture

Politicians are not the only ones that are incompetent, the businees and banking elites are only adding to the trouble.

Since businesses worked out how to stop passing on rises in productivity into wages and constant offshoring, wherever the workforce is cheapest, they have been killing demand for their products and services. This was masked until 2008, by almost infinite credit and housing booms.

The tickle down effect is totally swamped by the raging torrent flowing upwards.


Bankers are just hopeless and always the weakest link in a global economy.

Two Wall street crashes 1929, 2008

Two Global recessions 1930s, now

Follow the timelines of global recessions to the first big event and you always get to Wall Street.


The lunatics have taken over the asylum.



Sun, 07/13/2014 - 09:00 | 4951927 fiboman
fiboman's picture

2 scenarios for European stocks (VGK)

Sun, 07/13/2014 - 09:01 | 4951930 epwpixieq-1
epwpixieq-1's picture

"In American over 60% of students have been defrauded by telling them they need a college education" - well, defrauded is not the correct word, "pushed towards" would be. In US the high school education is absolutely useless. This is why after graduating from the system's (or lacking of such) high schools the students have NOT develop any significant science or analytic knowledge so they are pushed to the next level promising, much of the education that they should have had in high school.

Sun, 07/13/2014 - 09:34 | 4951962 Seize Mars
Seize Mars's picture

The problem is simply government. We could say that it's those damned socialists or whatever, but it's just the existence of government altogether.
Imagine a family turns over it's finances and work goals to the child. It might be alright for a while but eventually the whole thing falls apart.
Government, as an allocator of resources and planner is fundamentally unstable.
Give up on the delusion that there is an "authority" that will direct everything.

Sun, 07/13/2014 - 12:37 | 4952507 Batman11
Batman11's picture

I don't think business leaders had anything to do with aboilishing slavery and child labour, these are good for profits.

Bankers were given low regulation, free markets and created 2008.

Businesses left to their own devices form cartels and monopolies to boost profits.

At least bad Governments can be voted out, the Wall Street fools who created 2008 are still there.

Current ideas seem to be about taking the first world back to conditions of the third world, with a small priveledged, wealthy elite and the majority, a down trodden mass.

The main problem with democracy at the moment is that there is no one worth voting for, I am sure current thinking and the main parties desire to maintain the status quo will bring about the emergence of more radical parties that may offer some solutions.

A system that only benefits the top ten per cent is always a democratic time bomb, it just hasn't gone off yet.




Sun, 07/13/2014 - 18:20 | 4953482 Seize Mars
Seize Mars's picture



Bankers were given low regulation, free markets and created 2008.

Don't kid yourself. There are no free markets. All markets are manipulated by the FED. This was a fundamental tenet of Marxism. Marx is firmly in the ideological driver's seat here in the US as well as in Germany.

Businesses left to their own devices form cartels and monopolies to boost profits.

No. Businesses, left to their own devices, will do what's best for their customers, or they're out of business.

At least bad Governments can be voted out, the Wall Street fools who created 2008 are still there.

No. You cannot vote them out. All the bad guys are still in power. Politics doesn't work. Only free people working together "works."






Sun, 07/13/2014 - 13:11 | 4952640 random999
random999's picture

alright.. so germany is in on it too.


Borrow a million. Buy Gold and go bankrubt when the shit hits the fan. oh yeah.

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