muses of the moment

October 1, 2010

States will be next crisis

Filed under: Bailout Nation, Dollar Crisis, Economic Crisis, US Government Debt — totallygroovygirlfriday @ 4:30 am

Huge amount of fantastic information in this 10-minute interview with Meredith Whitney as she describes how states will go bankrupt. A must listen (at least 3 times).

Click here and scroll down.

Some very interesting points:

  • Whitney’s team had to create their own qualification for State financial stability because the regulators do not have any information. Scary! That means, no one sees this coming (again).
  • California is worst, Texas is best.
  • State governments have high leverage on their “off-balance” accounts, (ie. pension funds). State pension funds will be completely gone very soon or taken by the Fed and reduced to pennies on the dollar.
  • State failures will be the next crisis and will require at least a trillion-dollar bailout. Further negative outlook for the USDollar.
  • Can states raise taxes to compensate for collapse? Yes, and they will.
  • States will default, but in a different way: reduced spending on education, transportation, health care, pensions, unemployment, and infrastructure. Get ready. More gas lines exploding and raw sewage leaking into rivers.
  • When states default, counties and cities default too.
  • Regional banks will be highly impacted by this default and the renewed housing downturn.
  • This is a long-term, continuing crisis that will be paused, not solved, by the coming Federal bailout.
  • Muni bonds could default, state bonds will probably be bailed out?
  • Double-dip in housing coming or as groovygirl calls it, continued downturn, because when did it go up?
  • Whitney didn’t want to state a confirmed double-dip, but I don’t know what else one could conclude based on the information she presented.
  • Fourth quarter will be bad for US banks…..lay-offs for early next year (80,000 lost jobs in the banking sector). Finally the big banks pay some dues, but unemployment doesn’t get any better.
  • This will create a new twist on the ongoing states’ right wars.
  • None of this is dollar positive, all negative.

Groovygirl still thinks that US Treasuries will implode, causing the USDollar to completely collapse (or force a “revalue”) and thus usher in a hyperinflation depression. But she thinks the Fed needs to print just a little more money to completely panic the international community, so the Fed is the one and only buyer of its own debt. A few big state bankruptcies should do it. Click here.

Side musing: Click here for a very important judicial decision. This case involves an oil company, but the implications for missionary companies, like Blackwater, is clear. This is very disturbing.

Side-side musing: Another disturbing bit of news that is blacked-out¬† in the US. Click here. This does not help the world’s view of the US. If Israel would only incorporate, they would be covered (see side musing above).

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