Posts Tagged ‘economics’

The Coming Financial Armageddon.

Thursday, January 7th, 2016

An interesting piece in New York magazine describes the opinions of the man who wrote the book, The Big Short.

He is not optimistic.

Dodd-Frank really worked, and they kind of disagreed with the end of the movie, which implies that this is all going to happen again.
It sort of worked. One thing it has not changed is the sheer size of these institutions, they’ve gotten bigger rather than smaller. And I don’t understand that , I would have thought that from Too Big To Fail we would have found a way to make them small enough so that it was ok for them to fail. And know there’s all this complicated language about how you can resolve them in bankruptcy but I don’t believe it, and the markets don’t believe it. The bigger thing is — I regarded this crisis at bottom as a problem of incentives. People behaved badly because they were incentivized to behave badly, and the incentives haven’t really changed that much.

No, they haven’t and ZIRP is one reason. ZIRP is “Zero Interest Rate Program.”

I think they should have broken up the banks.

And in your opinion, why didn’t that happen?
It didn’t happen because the Obama administration decided that it was worse than the course of action they took. They considered it, kind of. If you asked Tim Geithner why it didn’t happen, he would say how am I going to do that? I am going to have to nationalize these banks, and then break them up. Well, we’re really not equipped to run the entire financial system out of the Treasury. And the system is in such disarray and chaos that we are more likely to create more crisis, than resolve the crisis if we do that. Which is not a terrible argument.

Geithner is, of course, the villain of Sheila Bair’s book, “Bull by the Horns.” My review of her book points out this statement.

Her tenure was stress filled and some of that stress came from the actions of soon-to-be Treasury Secretary Tim Geithner. The story opens in the crisis of late 2008 when the TARP legislation was first defeated by the House, then finally passed. She notes that the purpose proposed for the bill was immediately abandoned after it was signed. It was supposed to fund purchase of the toxic assets held by banks and by investors but quickly became a bailout for the big banks, judged too big to fail. Much of her time was spent fending off Geithner as he seemed to be obsessed with the welfare of CITIBank, a huge and weak international player. She is very critical of his efforts and of the CITIBank management.

Soon after this he became Treasury Secretary for Obama. Like a lot of people, he was thinking this.

Another kind of reform, which would eventually cause them to shrink a lot, would be vastly increasing the capital requirements, which has been floated by people, require them to hold not just about 7 percent or 6 percent but 20 percent, and what happens is they’d become a lot less profitable, they can’t take big big bets and no one would want to invest in them or work for them. But that has been roundly defeated at the regulatory level. I think, beneath that, the bigger problem is, virtually everybody at the table, even well-meaning government employees, when they are talking about what to do about these places, have — even if they aren’t thinking about it consciously, cannot help but consider the likelihood that the way they are going to make a living, a very good living, when they get done with government work, is to go work for one of these places.

That is called Moral Hazard and it has defeated any attempt at reform. And it may now be too late to fix it.

Analysts also point to concerns over Chinese market regulators, who they believe do not appear to have a good grasp of the market, even with the introduction of the circuit breakers. In an attempt to stabilize markets, China’s securities regulator has issued new rules to restrict the number of shares major shareholders in listed companies can sell every three months to 1 percent.
Marc Ostwald, a strategist at ADM Investor Services, believes that Soros’ comments — alongside a gloomy report Wednesday from the World Bank — only serve to cast a “long shadow” over global markets.
“It should be noted that the current turmoil distinguishes itself from 2008, when reckless lending, willful blindness to a mountain of credit sector risks and feckless and irresponsible regulation and supervision of markets were the causes of the crash, given that central bank policies have been encouraged and been wholly responsible for the current protracted bout of gross capital misallocation,” he said in a morning note.

Why is this different from 2008 ? It isn’t.

people didn’t want to know there was a bubble in the housing market, even though everyone knew something bad was going on.
It was really true, I remember coming across this phenomenon, on the wrong side of things: People were just thinking, “This doesn’t have to last very long for me to do well. And if it all goes down it’s not going to affect me. So why think about it too much?” There’s a great line in the movie: “You tell me the difference between corrupt and stupid and I’ll have my wife’s brother arrested.”

This explanation is still relevant.

For five years, Li’s formula, known as a Gaussian copula function, looked like an unambiguously positive breakthrough, a piece of financial technology that allowed hugely complex risks to be modeled with more ease and accuracy than ever before. With his brilliant spark of mathematical legerdemain, Li made it possible for traders to sell vast quantities of new securities, expanding financial markets to unimaginable levels.
His method was adopted by everybody from bond investors and Wall Street banks to ratings agencies and regulators. And it became so deeply entrenched—and was making people so much money—that warnings about its limitations were largely ignored.
Then the model fell apart. Cracks started appearing early on, when financial markets began behaving in ways that users of Li’s formula hadn’t expected. The cracks became full-fledged canyons in 2008—when ruptures in the financial system’s foundation swallowed up trillions of dollars and put the survival of the global banking system in serious peril.

That was part of it. The rest was the corrupt bargain that Democrats had with lobby groups for minorities.

I wrote about this in 2008 as it was happening.

Things did not begin to heat up again until the end of the Clinton Administration. The internet stock bubble left a lot of people with money to invest but few good opportunities. Many had taken their money out of the stock market after making plenty of money. Secondly, after 9/11, the Bush Administration was determined to avoid a recession brought on by the huge capital loss of the WTC collapse. The Panic of 1907 was precipitated by the San Francisco Earthquake and the huge losses to insurance companies. The Great Depression was partly a reaction to the default of war loans from World War I and the reparations demanded of Germany. There was fear that another severe financial panic would follow 9/11. In fact, that may have been a large part of the plan by Osama bin Laden. As a result, the banks had a lot of money to lend and they soon ran out of worthy borrowers. What to do ? Lend it to people with less than sterling credit. After all, houses were going to keep going up in price, weren’t they ?

Enter the chislers and scammers. Some of whom were former Clinton Administration members who got themselves appointed to the boards of the two big mortgage lenders. Did they have a broad background in mortgage banking ? No. They were politicians, like Jim Johnson who recently left the Obama campaign where he had been serving as the co-chair to vet potential VP nominees. What was his background ? Politics, not finance.

James A. Johnson is a United States Democratic Party political figure. He was the campaign manager for Walter Mondale’s failed 1984 presidential bid and chaired the vice presidential selection process for the presidential campaign of John Kerry. In the 2008 election, he is a member of the vice-presidential selection process for the presumptive Democratic nominee, Senator Barack Obama.

From 1991 to 1998, he served as chairman and chief executive officer of the Federal National Mortgage Association (Fannie Mae), the quasi-public organization that guarantees mortgages for millions of American homeowners. Previously, he was vice chairman of Fannie Mae (1990-1991) and a managing director with Lehman Brothers (1985-1990).

The rest is history but much of it is at that link.

The Trump Phenomenon

Sunday, December 27th, 2015

trump

A good column in the NY Post today describes the elites horror at the Trump supporters.

It was quite evident at Meet The Press this morning as the guests expressed suitable horror at Mr Trump’s progress toward the GOP nomination.

Now, after months of whistling past the graveyard of Trump’s seemingly inexorable rise and assuring themselves that his candidacy will collapse as voters come to their senses, a CNN poll released Wednesday showing Trump now lapping the field has the GOP establishment in full meltdown mode. The survey shows Trump with nearly 40% of the primary vote, trailed by Ted Cruz at 18%, Ben Carson and Marco Rubio tied at 10%, and the also-rans (including great GOP hope Jeb Bush) limping along far behind.

I am not a Trump supporter but I am intrigued at the steady progress he is making toward success. I have been a fan of Angelo Codevilla’s characterization of America’s Ruling Class.

The recent collapse of Republican Congressional resistance to the left’s political agenda as noted in the surrender of Paul Ryan to the Democrats in the budget, has aggravated the Republican base and its frustration.

Ryan went on Bill Bennett’s radio show on Tuesday to tell his side of the story, which involves the fact that he inherited from outgoing Speaker John Boehner an unfavorable budget framework, as well as some of the tradeoffs involved (especially defense spending). He also laid out the argument I’ve heard elsewhere, which is that he needed to “clear the decks” so that a real return to “regular order” budgeting next year will be possible. You may or may not be persuaded, but the contrast with Boehner is fairly plain, I think.

In other words, perhaps the omnibus should be thought of as something like the Dunkirk evacuation. But if so, we still need our Churchill to explain it and chart the path forward in a compelling way. This requires the presidential field to step up.

Dunkirk brought the British Expeditionary Force home almost intact, although minus their weapons. Ryan did the equivalent of surrender.

Their panic was best articulated last week in The Daily Beast by GOP consultant Rick Wilson, who wrote that Trump supporters “put the entire conservative movement at risk of being hijacked and destroyed by a bellowing billionaire with poor impulse control and a profoundly superficial understanding of the world .?.?. walking, talking comments sections of the fever swamp sites.”

Some might take that as a backhanded compliment. Can the GOP really be so out of touch with the legions of out-of-work Americans — many of whom don’t show up in the “official” unemployment rate because they’ve given up looking for work in the Obama economy? With the returning military vets frustrated with lawyer-driven, politically correct rules of engagement that have tied their hands in a fight against a mortal enemy? With those who, in the wake of the Paris and San Bernardino massacres by Muslims, reasonably fear an influx of culturally alien “refugees” and “migrants” from the Middle East?

The Daily Beast is not exactly the Republican voter and the “GOP Consultant” seems to be ignoring the possibility that his job prospects might be harmed by his contempt for the voters he is supposed to understand and convince.

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Two Nations…

Sunday, November 8th, 2015

two nations

We have now become two nations, divisible, without liberty and justice for all.

As usual, I read another good Belmont Club post.

I get discouraged about the future when I see the stupidity of the youngest generation in college. The left is worried that Republicans hold most state offices. Why has this happened ?

That dominance — and what it means to the policy and political calculations and prospects for both parties at the national level — is the single most overlooked and underappreciated story line of President Obama’s time in office. Since 2009, Republicans have made massive and unprecedented gains at the state level, gains that played a central role in, among other things, handing control of the U.S. House back to the GOP in the 2010 election.

It’s just inexplicable. Why would the country that elected Barack Obama twice choose Republicans for those offices closest to their own lives ?

While the story at the national level suggests a Republican Party that is growing increasingly white, old and out of step with the country on social issues, the narrative at the local level is very different. Republicans are prospering at the state level in ways that suggest that the party’s messaging is far from broken.

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We approach the final act

Friday, September 25th, 2015

As usual, Belmont Club has the clearest view of what is coming. It will not be pleasant. I have just returned from Europe from what will probably be my last trip. We were going to go to Greece but cancelled due to the financial unrest and the “migrant” crisis. Instead, we went to Britain and to Belgium where we did some history. We also saw a small portion of the migrant invasion.

The Washington Post, a reliable indicator of leftist thinking in Washington, reports that the Syrian Crisis has “forced” Obama to meet with Putin in New York.

White House press secretary Josh Earnest said that the meeting came at Putin’s request and that at the top of the agenda for Obama will be Ukraine, where, he said, Russian separatist troops remain in “clear violation of the territorial integrity of that sovereign nation.” …

Earnest said that when the two leaders talk about Syria, Obama would encourage Russia to join coalition efforts to combat the Islamic State but warn that “doubling down on the Assad regime is a losing bet.” He added that “a face-to-face sit-down seems appropriate at this juncture.”

There is, of course, no reason to believe that this statement is true. Earnest is well known to lie for his master.

Willing or not, Obama’s been dragged to New York to meet a man he would rather not. The Russians and Syrians for their part, are pushing the story that Obama has already pre-surrendered to Putin and is merely looking for a way to put the best face on it. AFP reports: “Russia and the United States have reached a “tacit agreement” on ending Syria’s bloody crisis, a senior adviser to Syrian President Bashar al-Assad has said.”

Allegations that it’s all over bar the shouting were half-heartedly denied in the Washington Post story which said, “the administration says it has no interest in Putin’s still-vague proposal for Syria — that the West drop its insistence that Assad must go and that all parties join together to defeat the Islamic State. But administration officials still believe there are grounds for U.S.-Russian cooperation there, if Putin is willing.”

Long ago, when the USA was still run by realists, this would be called “surrender.”

The Russians are working behind a fait acompli and that is a strong card. Moreover, Moscow is amping up the pressure by sending a fleet for “drills” into the Eastern Mediterranean. The message is: we’re here to stay and you’re not man enough to push us out. Sources told Bloomberg that Putin will go it alone if Obama balks. “President Vladimir Putin, determined to strengthen Russia’s only military outpost in the Middle East, is preparing to launch unilateral airstrikes against Islamic State from inside Syria if the U.S. rejects his proposal to join forces, two people familiar with the matter said.”

The Europeans, beset by the Islamic invasion (where is Charles Martel when you need him ?) are of no use.

In a statement that surprised many, German Chancellor Angela Merkel said early Thursday that Syrian President Bashar al-Assad should be part of negotiations with the West.

“We have to speak with many actors, this includes Assad, but others as well,” Merkel was quoted as saying at a news conference following an E.U. summit in Brussels. Many German commentators and journalists described the statement as groundbreaking. “Approaching Assad would be an about-face in the way the West is dealing with Syria,” Der Spiegel concluded in its online edition….

Merkel’s willingness to bring Assad and Iran to the negotiating table will be met with skepticism in other Western countries, primarily in the United States and France. Last weekend, Secretary of State John F. Kerry said that the United States was “prepared to negotiate” but that “Assad has to go.”

These developments must certainly create unease in the Leader of the Free World, who looking behind him at his expected support, has found them all dwindling away.

This farce began with the overthrow of Libyan dictator Gaddafi and the threat to cross a “red line” if Assad used chemical weapons on his own people. Here we are after years of Obama, Hillary and Kerry running our foreign policies. What did you expect ?

The Russian moves appear to be part of an deliberate plan prepared long in advance to bring the Western Alliance into an ambush zone. The most disturbing aspect of it is that president Obama didn’t even see it coming. Not even close. He walked into it, got up, asked for the number the truck and walked into it again. When he comes to himself he’ll be ready to ask a boy about a clock. Maybe that way he’ll get the time of day.

Charles Krauthamer notes that Putin always seems to be one step ahead of the Obama. Yet despite the apparant truth of that assertion, it is hard to actually test the proposition. Obama’s position on Syria has been so vague that he can plausibly convince his followers that, whatever the result, it was what he intended to begin with. It’s pitiful to watch.

Obama has truly achieved a fundamental transformation in America.

Growing old is not a pleasure when one considers the pain of arthritis and the loss of pleasures like golf and sailing but there is the positive aspect of not having to live long with the consequences of Obama’s regime.

Is this 1789 ?

Sunday, August 30th, 2015

ruling

In 1789, the French Revolution began. How ?

On May 5, 1789, Louis XVI convened the Estates-General. Almost immediately, it became apparent that this archaic arrangement—the group had last been assembled in 1614—would not sit well with its present members. Although Louis XVI granted the Third Estate greater numerical representation, the Parlement of Paris stepped in and invoked an old rule mandating that each estate receive one vote, regardless of size. As a result, though the Third Estate was vastly larger than the clergy and nobility, each estate had the same representation—one vote. Inevitably, the Third Estate’s vote was overridden by the combined votes of the clergy and nobility.

The essay of Angelo Codevilla in American Spectator in 2014 described a similar phenomenon in 21st century America. American citizens begged for control of illegal immigration and crony capitalism.

As over-leveraged investment houses began to fail in September 2008, the leaders of the Republican and Democratic parties, of major corporations, and opinion leaders stretching from the National Review magazine (and the Wall Street Journal) on the right to the Nation magazine on the left, agreed that spending some $700 billion to buy the investors’ “toxic assets” was the only alternative to the U.S. economy’s “systemic collapse.” In this, President George W. Bush and his would-be Republican successor John McCain agreed with the Democratic candidate, Barack Obama. Many, if not most, people around them also agreed upon the eventual commitment of some 10 trillion nonexistent dollars in ways unprecedented in America. They explained neither the difference between the assets’ nominal and real values, nor precisely why letting the market find the latter would collapse America. The public objected immediately, by margins of three or four to one.

Today, we have a situation in which the Muslim world of the middle east is being overrun by a radical faction of Muslims who call themselves ISIS.

Richard Fernandez, whose writing I read every day, has another good discussion of what is happening and likely to happen in the future.

The anniversary of the U.S. war against the Islamic State passed with little notice. It was August 7 of last year that President Obama authorized the first airstrikes against ISIS in Iraq, a campaign he expanded a month later to include targets in Syria. So far this month, the president has delivered remarks on the Voting Rights Act, his deal with Iran, the budget, clean energy, and Hurricane Katrina. ISIS? Not a peep.

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America is in Play

Friday, August 28th, 2015

trump

Peggy Noonan has a column today that has lots of people talking.

I have been pessimistic about the future of the country for a while. Recently, I have been very pessimistic.

One of the arguments for the impossibility of an event is lack of previous failure. “It never failed before and thus can never fail ever”. The Washington Post’s editorial board invokes a variant of this logic to refute Donald Trump’s border policy, arguing there are so many illegal immigrants it is too expensive to deport them all, leaving no alternative but to accept more.

Naturally, the WaPo is certain they know what could happen.

A useful case study is California, whose economy accounts for about 13 percent of U.S. gross domestic product and whose 2.6 million undocumented workers include almost a tenth of the state’s workforce.

Well, guess what ? Peggy is talking to Hispanics.

Something is going on, some tectonic plates are moving in interesting ways. My friend Cesar works the deli counter at my neighborhood grocery store. He is Dominican, an immigrant, early 50s, and listens most mornings to a local Hispanic radio station, La Mega, on 97.9 FM. Their morning show is the popular “El Vacilón de la Mañana,” and after the first GOP debate, Cesar told me, they opened the lines to call-ins, asking listeners (mostly Puerto Rican, Dominican, Mexican) for their impressions. More than half called in to say they were for Mr. Trump. Their praise, Cesar told me a few weeks ago, dumbfounded the hosts. I later spoke to one of them, who identified himself as D.J. New Era. He backed Cesar’s story. “We were very surprised,” at the Trump support, he said. Why? “It’s a Latin-based market!”

What is going on ?

On the subject of elites, I spoke to Scott Miller, co-founder of the Sawyer Miller political-consulting firm, who is now a corporate consultant. He worked on the Ross Perot campaign in 1992 and knows something about outside challenges. He views the key political fact of our time as this: “Over 80% of the American people, across the board, believe an elite group of political incumbents, plus big business, big media, big banks, big unions and big special interests—the whole Washington political class—have rigged the system for the wealthy and connected.” It is “a remarkable moment,” he said. More than half of the American people believe “something has changed, our democracy is not like it used to be, people feel they no longer have a voice.”

I could not agree more. I keep recommending Angelo Codevilla’s essay in American Spectator. I even saved it on this blog because Spectator dropped it for a while. Now it seems to have become such a topic of conversation that it is back on their web site.

I have even been saying that we need a revolution, and maybe it is coming.

“It is accepted that primary schools have increasing numbers of pupils, which causes all manner of problems, but what is frequently not referred to is why we have such a boom in numbers.

“And the answer is unlimited immigration into this country. It hits some areas harder than others but there cannot be many primary schools in the country which have not been affected at all,” said Mr Nuttall, UKIP Education spokesman.

Wow ! That is Britain ! I will be in Britain in little more than a week and it will be interesting to have this conversation with my friends, a retired British Army physician and his wife. We will go to Belgium while avoiding the Chunnel to avoid rioting at Calais as “migrants” try to invade Britain though the Chunnel in search of the Dole.

finn_calais_port__3080803k

This might even be the start of the West trying to save itself from the predicted Suicide.

In 1964, as today, it is very easy to see how a thinking person might see the intellectual drift to the left as a move toward societal suicide. For liberalism is a cry for the supremacy of general good intentions over the practical application of common sense. Burnham said that liberals are often driven by “profound non-rational, often anti-rational sentiments and impulses.” Ideas like the welfare state and leniency on criminals to facilitate rehabilitation may have sounded good coming out of the mouth of a liberal, but they were disastrous in practice.

Burnham’s book, “Suicide of the West”, was in effect a warning that leftward drift would ultimately destroy all affluence and freedom in the world. Fortunately, many of the readers of his book heeded Burnham’s cry and helped stem the leftward movement of policy and ideas in America.

Is it ending ?

Here We Go !

Monday, August 24th, 2015

ghost

UPDATE: Here is a good description of what I think is coming.

The US stock market is being buoyed upward by technology shares that are pure luxury items, a bit like the China Ghost Cities.

America’s technology darlings aren’t exactly making good on Silicon Valley’s legacy. Microsoft, Cisco, IBM and a few other businesses of the old guard have a reasonable claim to being the companies that run the world, but Twitter and Facebook? Not so much – whatever their crazy valuations.

You see, as much as global financial concerns are going to hit tech companies harder than other sorts of enterprise, so too will their own lack of ambition. The ugly truth is that Silicon Valley has largely given up trying to fix big problems and has retreated into photo-sharing apps and productivity tools. That may sound harsh, but just look at some of the absurd and pointless startups that are getting vast checks written and tell me that founders don’t need a kick up the ass and a reminder that no one has solved batteries yet.

I have been pessimistic for several years. That may be just my own psychological makeup but I am not the only one.

California is getting a bit agitated about what is happening in China.

Gyrations in the stock market have taken California’s fragile finances for a ride before — when the dot-com bubble burst, when the Wall Street crash sank the national economy less than a decade ago.

So when the market continued its dive Monday, state officials began glancing around for their seat belts.

More than most states, California depends heavily on taxes from the wealthy, pulling about half of its income tax revenue from just 1% of residents in recent years.

California is a top down society because it depends on income tax. Texas doesn’t and its state government is funded by sales tax, which everyone pays, even illegals.

The Obama Administration has been playing a Ponzi Scheme for years.

A Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned by the operator.

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Socialism is running out of other people’s money.

Saturday, August 1st, 2015

Socialism is on its last legs except for college faculty lounges. Venezuela is now seizing private companies’ facilities.

“There is an economic war here and this company, Polar, is at the heart of it. They hide products from the population, and inflate their prices!”
The government had first notified the landlord of plans to expropriate the industrial park in 2013, Nestle spokesman Andres Alegrett said by telephone from Caracas on Thursday. Nestle used the facility to dispatch about 10 percent of its products in the country, supplying sweets and drinks to the western side of Greater Caracas, he said.

Nestle is no stranger to Socialism. Jonah Golberg noted Nestle’s connection years ago.

About ten years ago I went on a junket to Switzerland and attended a talk with the CEO of Nestlé. Listening to him, it became very clear to me that he had little to no interest in free markets or capitalism properly understood. He saw his corporation as a “partner” with governments, NGOs, the U.N., and other massive multinationals. The profit motive was good for efficiency and rewarding talent, but beyond that, he wanted order and predictability and as much planning as he could get. I think that mindset informs the entire class of transnational progressives, the shock troops of what H. G. Wells hoped would lead to his liberal-fascist “world brain.”

Yes, Nestle has a history of cooperation with various do-gooder initiatives although it has kept its eye on profits.

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Here We Go ! California’s coming bankruptcy.

Friday, July 31st, 2015

Today, the Orange County Register has has a nice piece on why California is Illinois with sunshine. The California economy, while described by Democrats as the tree that grows money, is actually very fragile and susceptible to economic panics like 2008 and the coming national insolvency.

Within the span of only 11 years, the hole at the bottom of California’s state and local pension funds increased a staggering 3,046 percent.

The monstrous growth of the gap between what public agencies have promised workers upon retirement and what they actually have – from $6.3 billion in 2003 to $198.2 billion in 2013, according to figures gathered by the state controller’s office – matters to all Californians, reformers argue.

The article suggests that it must be filled with better investments, this in a state that chooses political criteria for pension fund investments, or the difference has to be made up by taxpayers.

Because in California, the promises made to public workers on Day One of their employment can never, ever be broken – at least, not outside of federal bankruptcy court. And even in court, officials from Vallejo and Stockton and San Bernardino did not request permission to modify these burdens, fearing they’d have trouble attracting and retaining workers if the city next door offered something better.

In Illinois, the new governor tried to modify pensions but was rebuffed by the state Supreme Court.

A judge on Friday struck down the state’s landmark pension law that sought to fix Illinois’ $104.6 billion government retirement system debt, declaring the measure unconstitutional and clearing a path for a showdown in the Illinois Supreme Court.

Sangamon County Circuit Court Judge John Belz agreed with public employee unions and retirees who challenged the December 2013 law, maintaining that it “without question” violates the state constitution’s provision that a public worker pension cannot be “diminished or impaired.

The Tribune approves of this decision which was upheld by the Supreme Court but it is a disaster and will probably lead to an Illinois bankruptcy filing within two years.

Notice that California’s pension hole is deeper than Illinois’ which has the reputation of a corrupt and poorly managed state while California had an undeserved reputation as an economic powerhouse.

Unfunded liability is not debt and shouldn’t be viewed that way, said a spokesman for Californians for Retirement Security, a coalition of unions trying to protect the current system.

Sure and promises are not intended to be kept except by those who were promised something.

“For citizens and taxpayers, unfunded pension liabilities are actually more of a burden than bonded debt,” said David Crane, a research scholar at the Stanford Institute for Economic Policy Research. That’s because they tend to rank higher in priority in bankruptcy proceedings than other kinds of debt and are repaid first. He pointed to New York City’s woes in 1975, when it suspended interest payments on debt but kept paying pension liabilities.

That’s what they say now but there is a big “haircut” coming for the whole country, I believe, and pensions will be just part of it when the national debt becomes unsustainable. Just ask Greece about that.

Meanwhile Los Angeles becomes a third world city as the middle class leaves the state. Who do they think will pay those taxes ?

Greece is going glimmering.

Sunday, July 5th, 2015

Greeks

I’ve been planning trip to Greece for months. Back in January, I decided to wait until the Greek monetary crisis was closer to resolution. Finally in May, I made reservations for September. I even posted my plans here.

Well, today it may be all going glimmering. The Greeks have apparently voted NO to the EU deal.

Greece has overwhelmingly rejected Europe’s latest bailout package, plunging the country’s future in the Eurozone into jeopardy.

With most of the votes counted in a referendum that will shape the future of the continent, the ‘No’ campaign has a staggering 61 per cent of the vote – 22 points ahead.
German Chancellor Angela Merkel and French President Francois Hollande called for an EU crisis summit to find a ‘solution’ for Greece, with leaders set to meet in Brussels on Tuesday.
Thousands of anti-austerity voters took to the streets in celebration as the leader of the pro-EU ‘Yes’ campaign resigned, with an official announcement of the final result imminent.
But German politicians warned of ‘disaster’ as they accused Greek Prime Minister Alexis Tsipras of ‘tearing down bridges’ between Greece and Europe.

Now what ?

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