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With each passing day, new shocking events drive us closer to the next phase of this debt crisis.
EVENT #1: In New York, where the city is facing a $2.4 billion budget deficit, it’s getting nasty.
Mayor Bloomberg has called for cancelling holiday bonuses for police and firefighters — and the unions are mad as hell.
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In fact, just this past week, the presidents of the two unions vowed to fight Bloomberg’s budget-cutting plan tooth and nail, accusing the Mayor of spreading false information in an attempt to steal their members’ money.
At their press conference on the cuts, the union heads used the words “liar,” “lie” and “lying” at least 23 times when referring to the mayor.
EVENT #2: A few miles away in New Jersey, the state is reeling from last week’s Standard & Poor’s’ bond downgrade.
The S&P cited the fact that the state’s pension system has $54 billion LESS than it needs to meet future obligations. But now, the lowered credit rating makes a bad situation worse by forcing New Jersey to pay higher interest rates to borrow money.
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At a public forum in Union City last Wednesday, Governor Chris Christie said the Democrats, who control the Legislature, had compared him to Chicken Little. “The sky,” he said, citing S&P’s downgrade, “started to fall in today.”
EVENT #3: In Washington DC, Congress and the White House are once again proving their gross incompetence when it comes to dealing with the crisis:
First, the new Republican Speaker of the House — Representative John Boehner — called for budget cuts of $100 billion.
Then, Republicans slashed that target to about $50 billion even before they won the House.
Now, the Republicans are attempting to cut the budget by a mere $32 billion.
But it’s clear that even that paltry figure — an amount equal to just two one-hundredths (.02 percent) of the $1.5 trillion projected deficit for 2011 — can’t be passed because of opposition from the Democrats in the Senate and the White House.
Make no mistake: This nationwide meltdown of government debt is now inevitable. If our leaders have proven anything, it’s that they are still unwilling and unable to take the government debt crisis seriously.
As a result, a massive implosion of debt at all levels of government — from the smallest townships and counties, to many of our largest counties and states, and even to the federal government itself — is rushing towards us like a runaway freight train.
When it hits in the weeks and months ahead, it will crush the bond market and drive interest rates through the roof.
Our mission is to make sure you’re prepared. More than that: Our duty is to give you the investment recommendations you need to protect your portfolio and your retirement — and to actually grow your wealth even while millions of investors lose theirs.
So be sure to stay safe and pay close attention to our issues in the days ahead.
Good luck and God bless!
Martin
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If anyone in Washington is really serious about reducing gov spending and the deficit, they will start cutting the 800 lb gorillas in the room, miltary and medicare/medicaid entitlements. All the stuff they are talking about is fluff.
When you understand that Republicans and Democrats are deliberately trying to crash the economy then all their actions make sense. Also understand that the Net Neutrality, Health Care, Financial Reform controversies etc. are just distraction tactics. Knowing this one can predict markets and make good profits.
Their (meaning Progressives) game plan will be complete long before we can vote them out. So, if we want to change things for the better, we need to do an “end run”. I suggest that a viable secession effort will create such a PR nightmare that they will have to stop and deal with it. At minimum a secession effort, even if unsuccessful, will empower nullification so we can get at least parts of our country back and stop our economic free fall.
The Best,
Steve Morris
Very interesting report. With respect to Event #1, about the “holiday bonus” for NYC workers:
The Variable Supplement Fund (VSF) for retired NYC police officers and firefighters has indeed been a “holiday bonus”: a holiday bonus for the City of New York. Up until a few recent years, the City made more money from the VSF than it had to pay to retirees. There were no complaints then from the City about this “bonus.” The VSF is a payment that the City of New York agreed to make in return for the right to invest tens of millions of dollars of pension fund money as the City saw fit. This arrangement goes back to 1970, and was agreed to by Mayors Lindsay, Koch and Dinkins.
The VSF is like any annuity: it is a defined series of later payments that someone agrees to give you in return for the money that you give them now. If they make more money from the money that you give them than they have to pay you, they profit; if they make less money than they have to pay you, they lose. I’ve never heard anyone call payments from an insurance company annuity a “bonus,” and I wouldn’t call the VSF a “bonus,” either.
You can Google the site of the NYPD captains’ union, the Captains Endowment Association, which provides links to copies of actual City documents about the VSF. You can read them and reach your own conclusions about the VSF.
One reason the New York Mayor Michael Bloomberg has been treated to such colorful rhetoric from the city’s unions is that he actually *favors* large bonuses, as long as they’re for Wall Street personnel, and not city workers. MSNBC quotes Bloomberg as follows:
“If you want to worry about a few guys that got big bonuses, let me tell you, they will find some place to work in this country or elsewhere,” the mayor said last week.
Mayor Bloomberg also employs three chefs, at a cost to taxpayers of $245,000 per year, to cater events at Gracie Mansion, the mayor’s official residence (although he does not live there, preferring his own luxury apartment). Even the mayor’s pastry chef earns more than a starting NYC police officer or firefighter.
If you were an NYC police officer or firefighter, and the billionaire mayor, whose pastry chef makes more than you do, said that your retirement benefits should be cut, how would *you* feel about it?
(And yes, I am retired from the NYPD.)