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Which Cities/States Will Be The First To Default When The Economy Rolls Over?
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
What happens to local governments when the economy rolls over?
Though we're constantly reassured the "recovery" that's stumbled for five years has years of strong growth ahead, history suggests the "recovery" is due to roll over. Few recoveries last longer than 5 or 6 years, and the business cycle is graying fast: subprime auto loans are not exactly the foundation of "strong growth."
So what might push the economy over the cliff? The strong U.S. dollar is crimping overseas sales and profits, the global economy is already recessionary, mortgage applications have dried up, auto sales are being driven by subprime loans, and the valuation bubbles in stocks and real estate are due for a breather, if not an outright reversal. Retail sales are flat, and with all these headwinds, growing profits by 10% to 20% a year becomes impossible for the vast majority of enterprises.
So what happens to local governments when the economy rolls over? Tax revenues decline.
The consensus is that local governments are sitting pretty: sales and property values have risen smartly, pushing tax revenues higher, and the cost of borrowing money via tax-free municipal bonds has fallen. Nice, but these are all functions of expansion and rising tax rates.
The uneven nature of the "recovery" has left some cities and states more vulnerable to a downturn than others.Let's catalog the various risk factors that might become consequential as the global and U.S. economies weaken.
1. Those dependent on foreign tourism. The weak dollar made America a bargain destination for the past decade. As the dollar strengthens and other currencies lose purchasing power, America is no longer a bargain--especially as job cuts decimate the number of people who can blow a few thousand dollars on overseas vacations to the U.S.2. Auto manufacturing-dependent locales. Vehicle sales have been strong, and the cheerleaders claim sales will keep rising for years to come. Really? With what money? As soon as layoffs hit the marginal workforce and the subprime auto loan bubble implodes, vehicle sales will follow suit.3. Cities and states that depend heavily on capital gains taxes. Once the current housing and stock bubbles deflate--or simply stop expanding--tax revenues from the enormous capital gains reaped in the past five years will wither.4. Locales dependent on high income taxes. Given that most of the job growth of the past five years has occurred in low-wage sectors, adding jobs hasn't boosted income taxes much. High income-tax states have jacked up rates on high-income earners, but there is no law of nature that says high-income jobs will survive a global downturn.Rather, enterprises desperate to tighten operating costs will want to jettison high-cost employees first.5. Local governments with enormous debt burdens. With interest rates low, municipalities and states went to the bond market over the past few years for "free money." Once tax revenues plummet, the interest on all that "free money" will take a larger percentage of tax revenues, heightening the cost of new bond debt as buyers start adding in the risk of eventual default.6. Locales with high fixed costs. These include high healthcare costs for homeless, elderly, government employees, etc., interest on all those bonds, government employee pensions, etc. The fixed costs only increase every year, regardless of tax revenues. Every local government with high fixed costs is in a tightening fiscal vice once tax revenues plummet.7. Local governments with generous employee benefits and pensions. Once the stock market rolls over, the big capital gains that have funded public pension plans dry up, and the annual contribution has to be paid out of declining tax revenues.Should interest rates actually rise, pension fund bond portfolios would plummet in value, too.8. Local governments dominated by self-serving entrenched interests. That is, all of them: sclerotic, self-serving, entrenched interests resolutely refuse to accept any cuts in their swag. As tax revenues fall off a cliff, government managers will face a dilemma: they can't cut costs because the self-serving interests have made that politically impossible, and they can't borrow money for operating expenses.
That leaves defaulting on debt as the only choice left. And since that's the only choice left, that's what they'll do.
The vice will close on some cities and states sooner than others, but it will eventually squeeze every city and state with declining revenues and rising fixed costs into default.
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Detroit
...but, but, Detroit is (close to) emerging from BK?
They can just raise taxes to cover the expenses....you know for the children and education...you can't say no to that unless your an unpatriotic terroritz
Well R U?
For da chilrens
What's the Chinese word for "Detroit"?
Wherever there are more people in the wagon then pulling it!
Silicone Valley will be the last to go down, as it is the center of the universe.
Detroit used to be the center of the universe in 1962.
Funny how things change.
If you are referring to Hollywood you spelled it correctly. Otherwise it should be Silicon.
Clearly this is around 85% of American cities...
"Turn out the lights, the party's over".- as sung by "Dandy Don" Meridith on Monday Night Football...
Government?
What about all of the companies that loaded up with cheap debt to buy back their stock. The private sector is going to take it directly up the poop shoot.
There's two ways to consider that cheap debt stock buy back business model.
DOW 35,000 or bust.
or
DOW 35,000 AND BUST
"The private sector is going to take it directly up the poop shoot"
True, and another reason why your local municipality is dead, I mean you do know that government cannot turn a dime unless they confiscate it from the private sector.... right?
A dead mule turns no soil but your welcome to keep whipping it.
$100 per week?
To risk their lives?
Pffftttt.
Obama can have American troops do this dangerous work and it will only cost US taxpayers a few million dollars per week.
is Hollywood the capital of silicone or Miami?
Clearly this is around 85% of American cities...
"Turn out the lights, the party's over".- as sung by "Dandy Don" Meridith on Monday Night Football...
Chicago and Los Angeles will go down before much longer and take Illinois and Cali with them.
Not Hollywood or Miami, but Orange County, CA... no comparison, not even close.
Special economic zone
Ahhhhh ..that would be New Jersey ....
Camden, yo!
Fu Ked
"What's the Chinese word for "Detroit"?"
China
"What's the Chinese word for "Detroit"?"
Ditelu
D.C. has already defaulted and their plan to fix it is ebola.
Well Plan B doesn't seem to be too effective yet either. What is Plan C?
Plan C, historically, is Rob A Bank. It comes after Plan B (Win The Lottery) fails.
That.
And no one ever defaults....that has been rendered obsolete. Debt is just rolled over in ever more creative ways.
California
We depend on the flatulence of Governor Moonbeam to power us so we should be ok.
Miffed
Shows what really happens to your brain on drugs.
Just be sure you're well inland when the big one hits.
The piece that breaks off is heading up to Alaska;)
Kaiser,
It's with great shame I must admit I talked my husband into moving here from Washington in the 80s. What's even worse, he was contemplating a move to Seattle and probably would have ended up in Microsoft. Yes, I carry a Twofer in mega idiocy. Most men would have cause enough to send me packing. I have tried to make this up in other ways. We still have the 100 acre family farm in Spokane if all goes finally in the crapper.
This was once a wonderful state that his become the laughing stock of the Nation. I take no responsibility for this and pray for a reset hopefully in my lifetime.
Miffed
Miffed:
I mean this sincerely:
It is great to find a woman who doesn't always think she is right despite being wrong, and one who is not afraid to admit (even publicly) when she is wrong.
And it looks like you have found the golden rule to keeping any real man happy: 1. Sex, 2. Food. Boom, you are done. Do whatever else you want and he'll stay.
Your post brings hope for the female "race". Go forth and procreate for the sake of all males!
We could always spot the 'Zonies' arriving at the Cali beaches with their inner tubes, swim fins, umbrellas and canvas rafts. Now they'll be spotted arriving without geiger counters, asking about the dead starfish, the Japanese trash floating ashore and the missing sea life. And the missing local residents and vacant houses.
3. Still getting together with his friends for Poker night.
4. Affordable hobbies.
Better start puttin those 39 hips to good use ~ Start poppin out some puppies ~ & send 'em back 2 the farm...
Oh wait! That's sexiss
Ha ha! I've already popped my 2 pups and they are out in the world making mischief as only I can do. Should have stayed on the farm and popped a few more. I guess I should make that a threefer. All I needed to do was slip into some lingerie and bam...preggers! This was, therefore, my fault in male logic. ;-)
Miffed;-)
The world is desperately short of intelligent puppy poppers.
THANK YOU 4 YOUR SERVICE!
"Yes, I carry a Twofer in mega idiocy"
I dinged ya, cuz I disagree. You're one of the most cogent posters here. After listening to Joel Skousen, in a SHTF scenario, Seattle is the last place you'd want to be as it's his estimation that's where pooty poot would nuke first.
I've come to realize even the biggest triple decker shit sandwich is not without a gift whether we see it or not. I'll betcha a fiver your decision was the best one. ;)
Now, go ahead & beat me up.
Absolutely not!! We acknowledge there may have been many advantages to what has happened. Only that we could have taken the money and ran. But we may have waited too long.
I agree completely with you and thanks for your kinds words.
Miffed
When God drops the hammer on our current iteration of "civilization", you will be EXACTLY where you should be and nowhere else. While there you will do EXACTLY what He intended for you to do there... and you probably won't see any of this until the SHTF, at which time you'll have an "Ah HA!" moment and all will be right with your world, and you'll understand everything you need to understand.
Good luck, and May God bless you.
Detroit has had it's teeth pulled. It's already bad enough, and 1/3 is now open ground. Look 250 miles west.
Chicago. From some of the highest tax rates in the country to unfunded pensions, this city is already on the brink. Just need a little push.......
Love this site -
http://heyjackass.com/
Note that the murder map has areas of blue - where no killings take place - in the inner city. Chicago is a nightly turf war waged by the free shit army gangs over feel good controlled substances. XBox and 40 oz. by day, roaming bands at night. When the EBT feed tube gets pulled the zombies will definately be on the move.
Yes, and East St Louis, Memphis, Philly, Baltimore, East LA....take your pick of many, many more.
The coming slaughter in these decaying and poverty stricken cities will not be pretty.
Pretty no, entertaining yes. Welfare bill reduced by 50% at the end of it.
"Eeeexxcccelent."
Fucking awesome BandGap!
Makes it clear that Chicago must make gun ownership and carry mandatory.
BoP
EastLo not bad - San Bernardino is flat out dangerous.
Sorry man, I meant South Central LA....
So many cities to choose from. Camden, Flint, Cleveland, Oakland, etc....
http://en.wikipedia.org/wiki/List_of_U.S._cities_with_large_African-Amer...
Dass rayciss
Thanks for the link.
"Shot-in-the_Junk_O_Meter
Now that's just classic.
Listen.
"It’s been a rough month or so for the CPD, a total of 6 officers have been shot – 2 on-duty, 3 off-duty and 1 selfie."
Looks like August is peak "Crotch shot" season...
Dude... that is some funny shit.
Anybody know how many Detroit zombies migrated to Chicago after Detroit started really imploding? I bet a lot
I can’t quantify but I have heard of more than one enlistee of the FSA – typically females – moving from Michigan to California because the welfare bennies and weather are nicer there.
The males move to Florida and look for old women to pork.
That is simply awesome.. Best site all day.
At some point, there will be a recognition that the teacher's unions are just mainlining money to those who "socially promoted" because the teachers and administrators were too busy running their: ebay shop or etsy shop. The greatest crime of the last 100 years is the hiring of the stupidest who can afford a college debt, meaning everyone who puts ink to the application for college. Wanna see a mess? Look at who is going through the nursing programs...those who can get the loans (everyone) and especially those Who Want To Live on Loan money.
It's pretty weird in America that once upon a time being a teacher or being a nurse meant you were truly good at what you do. Now they are the very worst, gawd help you if you need any medical care. Nurses are as stupid as pumpkins and teachers are the sluts of the universe. Both groups are horrid.
HOw does this apply? Both of these groups have huge unions that have ruined cities like Detroit and Chicago. They have used their, once respected positions to self-aggrandize and then raid the public via taxes. (flying through on the memories of those old enough to remember when these were really good and smart people in these jobs and who don't realize how absolutely horrible these people are now)
The country is now comprised of those who take what they can when they can; we once had honor in this country.
ive begun to notice this with nurses too. on the plus side, the last tatoo'd freak who drew blood on me had no problem finding my vein; it looked like she had plently of practice on her own veins...
You still have too many dipshits who believe our education is the best and that's why they continue to vote for their raises.
This is clearly a humor site a la The Onion as Chicago is a gun-free zone.
Chicago "shot clock"... LOL
EBT gets pulled ? Gubment just doubled down
How 'Double Bucks' For Food Stamps Conquered Capitol Hill ......http://www.npr.org/blogs/thesalt/2014/11/10/361803607/how-double-bucks-f...
EBT not gon' get pull bro'...if d'net go down, dey be rovin' bands a' gubmint 'ployees bustin' out FRN's and some 'bamafone...
No, New York City.
NY City is dependant totally on Wall Street to run its nanny-state. An extended bear market of any consequence will KILL NY City's finances
Why do you think htey have Vision Zero initiative, ticketing any driver driving over 25MPH. They are creating another source of tax revenue.
Doomville?
https://www.youtube.com/watch?v=DI7pPVJTeSY
All 57 of them.
Wait, what was the question?
Brilliant, I know Obama been to 52 of them so far.
Have they counted the votes in the last seven of thoes 57 states yet ?
[quote]
Obamatron and And the 7 czars: Choomie, Tokie, Snortie, Huffy,
Wowie, Buzzme and Visine.
[/quote]
The other 7 states are possibly "altered" states! :>D
california
I hope Guion, Arkansas will be OK.
We pray that Couchspring, Wyoming makes it through.
"The vice will close on some cities and states sooner than others..."
That's "Vise". We already know about the "Vice closing in...", that's why we have You-Know-Who as the ComChief.
I dunno, addiction to debt is what's being discussed here. ;-)
Man, I told and TOLD that Calderone not to jack with Sonny Crockett and Rico Tubbs. Now the Vice is closing in!
https://www.youtube.com/watch?v=jswHsTJQL_c
Any state with a MLK Blvd.
EBT and BET (bread and circus)
+100
That is just too perfect to be true, and yet it is.
Have to narrow that down a bit brah: Any city with an MLK blvd that is bisected by a Church St.
Now we're fukkin talking.
at least 730 in the US, 11 states do not have any
The only thing I take issue with from this article is the statement " [...] enterprises desperate to tighten operating costs will want to jettison high-cost employees first"
Really? When does that ever happen? It's always the people who do the actual work that get outsourced, downsized, right-sized, whatever-sized. Why do you think matrix reporting was invented and thrives to this day? It has nothing to do with Neo, red vs. blue pills, or bullet time, in case anyone was wondering...
i'm assuming he means the $100K grunts in the cube farm ... not the executive suite
Ok, I'll concede that point. Upvoted.
Say, that reminds me... Chicago.
And they're gonna take the whole state down with them.
Same with New York, California, Georgia, and Mishitgan.
how about Mass a two shits? is it ok?
Rhode Island is fucked hard already
So it's a definite goner when SHTF
Ain't it like above thread... they take capital out of the state, maybe through taxes and through assigning assets to private-public partnerships... and of course some places try to spend way over their budgets... not doubt the MBAs and Bankers talk municipals and county governments into big spending projects.
Like Jefferson County Sewage
Jefferson County JPMorgan Deal Called Safer Than Suing ...
www.bloomberg.com/ news/ 2013-11-20/ jefferson-county-seeks-approval-to-end-2-year-bankruptcy.html -
I have to take issue with the suggestion that entire states will implode from a debt burden.
For instance, I live in rural upstate NY, which is a far cry from manhattan or the Bronx or even the city of Buffalo. The cites are the worst culprits and will get caught with their balls where they shouldn't be. Most of the rural communities, say, 15 or more miles from the core, will be just fine so long as they can cut firewood, shoot deer, turkey and rabbits and generally ignore what happens in the grand cities.
Same goes for any rural place, I suppose, be it in Cali, Mich, Georgia or any other place.
"Mishitgan"...nice. Down in Central IL, we refer to Chicago as Chicongo.
It takes a lot of balls to downvote this comment given the financial disaster that is Illinois' debt-fueled spending.
http://www.usdebtclock.org/state-debt-clocks/state-of-illinois-debt-cloc...
Libtardland.
Everyone's state of mind.
no mention of areas that depend on healthcare and higher education?
Are you kidding? Thanks to Uncle Sugar, these places are black-holes that absorb wealth like no other.
Just like GM is a channel-stuffing mofo, so are the federalized education and healthcare systems.
TBTF like NO other.
The facade will not be denied.
Is this a red or blue question?
Historic Defaults for $200 please Alex.................
Mississippi will be in serious trouble.
Isnt 50% of the state of some form of public assistance/welfare?
So whos going to pay for those welfare benefits if the government is broke ???
Id say more than 50% of mississippi is on the dole
Same with West Virginia. Zombies don't like the hills, though.
If all of that shit isn't already federalized, bet your life that it soon will be. Levers like lending states UE benefit money come in pretty handy when push comes to shove.
Same as always. The Fed prints it up.
Nobody. That's the purpose of the 2nd amendment.
Some places gonna need claymores.
Umm...I believe you are.
munis defaulting good for Ts ... just sayin' ...
So? Which ones?
The lucky ones?
as a taxpayer, i say screw the bondholders (before raising my taxes)
and if that means my locale has to start living within its means ... all the better
LOL, as if that's the way this scam works...
in some cases might not be wishful thinking ... if taxes get too high at local/state level ... residents always have option of voting with their feet ... and taking their $$s (and property values) wtih them
Why do you think they will start living within their means after screwing the bond holder's? If they were capable of doing that they would start now. I'm in the People's Republic of Connecticut and I wouldn't be at all surprised if we go bust first. Nothing but spending Democrats at the federal level have been elected here. They own the Governorship both houses at the state capitol. We are what the United States will be if Obama lets these illegals flood into the country.
if default, then borrowing terms onerous going forward ... 'might' have to survive on balanced budget (and raising taxes might not be option if voters against and/or pols worried people would just leave)
They'll raise your taxes to pay their pensions...
There are no fucking markets only exchanges of ill repute.
Moscow will go down first.
Yes. Because Moscow relies solely on the USD, and sanctions will actually work??.. Way to not pay any attention what-so-ever, genius..
Judging by how preoccupied viedoklis_lv is with Russia, I'd say he has a bitter man-crush on Putin. He just can't stop talking about him.
By all means, sensible criticism of any nation or leader can help open-minded readers understand the complexities of a given situation in which all sides are spinning - but honestly, you're just a tedious, insipid cunt.
Meredith Whitney must be spinning in her grave.
Except she's not dead. Only early with her call.
her box has been like a dead clam for years
Who cares what cities/states default? What's worriesome is the wealth transfer it creates, straight from private workforce retirees to government workers' pensions. What should be troubling is someone owns that paper and it ain't government employees.
vice/vise
what's the difference
The cities and states are going to expect the fed govt to assume their pension liabilities and other debts.
Localities? Municipalities? There will soon be no such thing. Here is the latest example:
https://lintvkrqe.files.wordpress.com/2014/10/doj-abq-settlement-agreeme...
All attempts at reasoning have been postponed until further notice. Blades, pitchforks and sharpening tools are available in isles 15-22 in the Green Zone.
Its all gonna go.
it was a good run Cleveland, but you arrrrrrre OUTTTA here. Detroit good bye. California, don't be over there holding your breath hoping that I wont pick you, you know your gone.
Salvage Bankers have Cleavland in their sights.
It’s not the states that’ll go BK. The states will take our bank accounts and 401Ks then jack us on higher sales and property taxes. The states will be fine.
secession happens as soon as there is a state on the "realized" brink. right now, my state, new jersistan survives by being on the federal dole. if i told you non NJers what my property taxes were, you would shoot me
I already know what NJ citizens pay,and it's off the charts. And throw in the loss of right to carry a firearm for self protection as a further insult. Well the tomatoes in season still rock. And for kickers, defense rounds MUST be FMJ's only. And when a Jersey LEO retires,they must use FMJ's. Of course being a police state, they can carry and citizen shit can't.
Adios Chicago.
An American, not US subject.
Fence it off and make it a maximum security prison.
Just make Cook County jail larger so it's more appropriate in size.
No worries, DHS/NSA/etc. have this under way. The perimeter is just tad larger though (sort of shaped like the continental US).
Ideally, you could turn Illinois in to 2 states. One bounded by I-80 to the south, and I-355 to the west and the other the rest of the state. Round up the sumbitches in Springfield, ship them to the state of 'Chicago', and eureka, the remaining Illinois is now a pretty cool place........so long as you aren't in to scenery and stuff......
...and goodbye People's Socialist State of Illinois.
Alibaba® carries promethazine. Find a way to synthesize codeine and go into ‘Sizzurp’ or ‘Purple Drank’ manufacturing. To hell with the state. It's every man for himself.
I kind of wonder why someone would name a company after a legendary woodcutter who discovers the entrance to a den of thieves. Are they trying to say that the company is a magic portal to a den of thieves?
Well it appears the 1.30 levitating act is still working, nothing collapses today.
..pass the purpledrank..
The coming collapse of the police state. Cry me a river....
You read my mind.
so basically all of them.
It's starting. My area is now offering property tax escrow payments.
Fuck public unions. The motherfuckers keep rolling along business as usual while everyone else is getting fucked to death. I suggest to anyone that might lose property to these goddamn parasites to burn their fucking house down and send them a bucket of fucking ashes.
In other words, most Democrat cities, or to put it another way, most cities.
There's only one solution: raise taxes. The Dems are good at this, what's taking so long?
Spike in Obozocare penalty hits a max of $975 per family in 2015.
Will they ever learn?
As for municipality, and other taxing zones, being bankrupt or destitute, it is a lie.
Recently a friend sent me a link to an article by a guy that knew how the local systems really work to to benefit the local pols and crats. I figured it was some guy pontificating about some "dark hat" scheme that he just knew existed, but couldn't prove. Ney-ney, I had to say.
Turns out that taxing zones must file a CAFR accounting document with the Feds each year or so. Reading those, instead of the number they release for public consumption, is quite illuminating.
Turns out that all of these taxing zones move funds "off books" to commercial enterprises and operations, and all of them are sitting on millions, billions, of dollars in undeclared assets, cash and profitable enterprises. Often the same pols and crats claiming tax zone poverty are also working for one of the commercial entities funded by fraud from the tax zone they lord over.
The author of the below article analyzed, I think, Detroit, but I did it for the town of 30,000 that my dad lives in. He was shocked, as just the night before the town had held a "coming to Jesus" meeting about needing to raise taxes to fund the increasingly impoverished town. Turns out that much of the town's assets were out in the ostensibly "private-partnership" resort and the little airport north of town in addition to several other nefarious things. He pissed off a few people showing them that little basket of snakes.
I did it for Chicago, and the town I was living in as well, and all that I have to say is, "Somebody's lying."
Anyways, click on the link below, learn how it's done, and then do it for your tax zone.
The link: http://realitybloger.wordpress.com/2013/02/27/unmasking-the-cafr-scam-in...
An American, not US subject.
"Show me the corruption!"