1. Most Discussed
  2. Gainers & Losers

american states bankrupt??

  1. chris

    3,602 Posts.
    A respected columnist recently noted that in 2002, states and municipalities sold a record $356 billion in bonds and said, "the most important story of 2003 in Muni Land is going to be budget deficits, and how states and localities deal with them."

    Here's what the latest EWFF has to say:

    Take a look at this amazing chart of state and local government budget surpluses and deficits, which shows that their combined annual net deficit has just reached a record $112 billion. The deficit has doubled in a little less than 5 months.

    According to The Economist, one in four American cities is already worried about meeting debt-service requirements. State and local governments are clearly among the first victims of the developing deflationary depression.

    The reason is that over the last 23 years, corporations and consumers have absorbed the brunt of disinflation by cutting costs and narrowing profit margins. Because business was able to keep expanding, city and state tax bases continued to grow. Deflationary pressures have begun to bite, making wages, employment and profits fall faster than government can adjust.

    During much of the bear market of 1966 through 1982, the underlying problem was inflation, which helped push tax revenues higher. The chart reveals that during this period government always found ways to make ends meet.

    State and local governments are now leading the way into depression because they are two decades behind the times. This is clear by their initial response to the crisis, which was to borrow more money! Meanwhile, the federal deficit has now increased by about a third in the last four months.

    EWFF has been calling for a rapid rise in the national deficit since July 1999 when President Clinton announced a projected $1 trillion in additions to the surplus over 15 years.

    With the potential war tab rising fast and revenues shrinking, the deficit will climb even faster through the balance of the year. Since state and local governments, unlike the Federal government, actually have to balance their books, the crisis in munis is more imminent.

Before making any financial decisions based on what you read, always consult an advisor or expert.

The HotCopper website is operated by Report Card Pty Ltd. Any information posted on the website has been prepared without taking into account your objectives, financial situation or needs and as such, you should before acting on the information or advice, consider the appropriateness of the information or advice in relation to your objectives, financial situation or needs. Please be aware that any information posted on this site should not be considered to be financial product advice.

From time to time comments aimed at manipulating other investors may appear on these forums. Posters may post overly optimistic or pessimistic comments on particular stocks, in an attempt to influence other investors. It is not possible for management to moderate all posts so some misleading and inaccurate posts may still appear on these forums. If you do have serious concerns with a post or posts you should report a Terms of Use Violation (TOU) on the link above. Unless specifically stated persons posting on this site are NOT investment advisors and do NOT hold the necessary licence, or have any formal training, to give investment advice.


Thank you for visiting HotCopper

We have detected that you are running ad blocking software.

HotCopper relies on revenue generated from advertisers. Kindly disable your ad blocking software to return to the HotCopper website.

I understand, I have disabled my ad blocker. Let me in!

Need help? Click here for support.