As talk of downgrading the US credit rating and the death of Amy Winehouse, whoever she is, rule the airwaves looming problems seem to slip through the cracks almost unnoticed. With the economic problems we are facing around the world some people have taken it upon themselves to be as ready as possible to prosper in this unpredictable time we live in.
At the time of this writing the US National debt is currently above $14.3 trillion. With a US population of 311,827,558 that brings us to $45,859 for every person in the United States. Cities and municipalities are reaching the point at which they can no longer afford services they have promised and if there not already defaulting they are on the verge. Vallejo California, Menasha Wisconsin, Orange County California, Los Angeles California, Miami Florida, Harrisburg Pennsylvania, Detroit Michigan, and Jefferson County Alabama to name a few are all facing similar problems.
Chapter 9 bankruptcy provides municipalities the ability for reduction of any expected pension benefits for current employees and retired former employees. Cities defaulting on their debt is extremely rare in the past and there isn’t a standard operating procedure for a city or county default. So what do these municipalities do when they can no longer afford the debts that they have promised? Aside from saying screw you they turn to the states. As if the states are not in enough financial trouble themselves they are now being asked to step in and fund local school systems as well as other services.
According to Financial analyses Meredith Whitney some states are already spending at least twice what they are bringing in. States are required to keep balanced budgets but are finding ways to get around it. With no plan for the future, states are spending rainy day funds and pension funds as to appear to have a balanced budget and as states become further off balance they are forced to either cut services or raise revenue. This is bad for business and businesses move to other states. So states like New Jersey for example lose even more revenue. Less spending in the state equals less tax revenue for the state causing a detrimental domino effect.
So the states turn to Washington. State funding is a significant portion of the federal budget. Several states have already requested emergency funds this past year with California requesting $7 billion in emergency federal assistance. Most states are already running into financial trouble and turning straight to the federal government for help. As you know Washington isn’t doing any better.
How can anyone expect to work on any kind of debt problem if the revenue isn’t even coming in? The fresh unemployment rate for June is up once again to a whopping 9.2%. That’s up from last month and holding consistent overall rise for the last ten years. A more accurate look into unemployment numbers would be to examine the underemployment rate which is sitting at comforting 18.2% right now according to Gallup.
With talks of a third quantitative easing, inflation continues to rise. Ben Bernanke seams poised to pump more money into our failing economy raising interest rates even more and further devaluing the Dollar. With more money floating around prices are shooting up while the fed continues to lie to us about the inflation rate. The rates, which are used to determine these numbers, don’t take into account food and fuel. The real inflation rate is estimated to be around 12%. I won’t even go into the prices of precious metals and how the dollar continues to weaken in the world market today.
Lets not forget home repossession is continuing to rise the same time food stamps, social security claims, and other social programs are rising and you can’t get me to touch stocks with a ten foot pole. People will continue to vote themselves a raise and politicians will keep doing what they can to get votes. We are now witnessing the beginning of a change in the world. The system appears to be unsustainable and I urge you to not look away. It’s easier to hide and hope for the best but there’s still time to organize yourself. For now time is on your side. That gives you an advantage providing you with time to prepare yourself and your family but the longer we go on like this the more that time will work against you. We are not waiting for the crap to hit the fan, it has already begun. Learn everything you can so you can see trouble before it hits. Do what you can to be ready but remember to take it one day at a time.
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Below is a list of URL’s for citations.
http://money.cnn.com/2010/05/28/news/economy/american_cities_broke.fortune/index.htm
http://www.usdebtclock.org/
http://www.bls.gov/cps/
http://www.gallup.com/poll/127538/Workforce-Weekly.aspx
http://www.shadowstats.com/
