Not in Africa or the Middle East… but here.
Illinois:
NJ:
http://cbs3.com/wireapnewsnj/NJ.s.new.2.1437756.html
Tennessee, NY, Texas, Cali, Minnesota… hell, every state is facing some massive budget problems.
My question is what happens? In the case of Illinois, what does a state do when they have to declare bankruptcy, and can’t pay their bills to winners of state contracts?
[quote]FightinIrish26 wrote:
Not in Africa or the Middle East… but here.
Illinois:
NJ:
http://cbs3.com/wireapnewsnj/NJ.s.new.2.1437756.html
Tennessee, NY, Texas, Cali, Minnesota… hell, every state is facing some massive budget problems.
My question is what happens? In the case of Illinois, what does a state do when they have to declare bankruptcy, and can’t pay their bills to winners of state contracts?[/quote]
Good thread, Irish.
No state has declared bankruptcy since the 19th century, though lots have come close.
What they do is simply stop paying interest on their bonds, though they all in the past did let interest accumulate. That made new loans impossible so they obviously had to cut their budgets drastically. This made the Great Depression, for ex, even worse.
Since the Feds are so deep in the red, I’d be surprised if they guaranteed state bonds. If they do, watch the dollar plunge.
I’m betting Michigan or California will go first, btw.
I would have expected that to happen in Europe first.
Oh well, with a little luck Greece goes belly up first.
[quote]FightinIrish26 wrote:
Not in Africa or the Middle East… but here.
Illinois:
NJ:
http://cbs3.com/wireapnewsnj/NJ.s.new.2.1437756.html
Tennessee, NY, Texas, Cali, Minnesota… hell, every state is facing some massive budget problems.
My question is what happens? In the case of Illinois, what does a state do when they have to declare bankruptcy, and can’t pay their bills to winners of state contracts?[/quote]
They either run to the federal government to pay the bills, thus causing the government to print the money to pay them causing inflation, and because just how many states are doing bad it would be instant hyperinflation. Or you don’t pay, let the businesses collapse, hitch the dollar to gold/silver/oil and never trust government for anything again.
No…
Deflation.
Feel like I’m talking to myself ;0
[quote]JEATON wrote:
No…
Deflation.
Feel like I’m talking to myself ;0[/quote]
Deflation doesn’t happen when you increase the money supply
[quote]JEATON wrote:
No…
Deflation.
Feel like I’m talking to myself ;0[/quote]
Good luck. lol.
And how is the destruction of the bond market increase money supply? It does not. It decreases it.
John, you are a smart man, but you do not have a deep enough understanding of the processes. You tend to focus on only one or two variables, when there are hundreds.
Every day I am more convinced that deflation is in our future. And every day I pray that it is not.
BTW, gold is only a knee jerk flight to safety for now. The US dollar will be the next large flight to safety (how sad is that?). May be in five or so years that will change. Until then. the dollar.
You have a day where international banking (HSBC, China developments) send a ripple of fear through the markets and is gold up strong? No, gold is down $28 an oz and the dollar is up strong.
As an aside, gold should be at a near term resistance level now. It should bounce. If not, it is definitely not a good sign.
[quote]JEATON wrote:
And how is the destruction of the bond market increase money supply? It does not. It decreases it.
John, you are a smart man, but you do not have a deep enough understanding of the processes. You tend to focus on only one or two variables, when there are hundreds.
Every day I am more convinced that deflation is in our future. And every day I pray that it is not.
BTW, gold is only a knee jerk flight to safety for now. The US dollar will be the next large flight to safety (how sad is that?). May be in five or so years that will change. Until then. the dollar.
You have a day where international banking (HSBC, China developments) send a ripple of fear through the markets and is gold up strong? No, gold is down $28 an oz and the dollar is up strong.
As an aside, gold should be at a near term resistance level now. It should bounce. If not, it is definitely not a good sign. [/quote]
You are ignoring the Commercial real estate bubble. once that pops in q2-q3 along with all the dollars being created people are going to make the flight to real money(gold/silver). People ran to the dollar today because America hasn’t begun to feel its real pain yet.
When these states go bankrupt the federal government will bail them out, Using printed money. Deflation is a good thing and needs to happen, but it won’t because the government would be unable to do all its entitlements so we are going to experience inflation and more then likely hyperinflation.
I am ignoring nothing. The commercial meltdown is a very big piece of my analysis. What happens when the notes on that commercial real estate are not renewed? What happens the the industries that support it? What happens to the price of the properties themselves when banks are forced to liquidate a fire sale prices to raise cash? Remember “the money supply” is the monetary base (coins, paper, and commercial banks reserves with the central bank) plus all the additional money created via credit through fractional lending. When the commercial market implodes, so too will this created money. The money supply will shrink. This is deflation.
You also need to get over this idea that the Federal Government can and will “just crank up the printing presses.” Remaining credit markets would implode so fast that they could not print the bills fast enough. It is a fairy tale.
I can tell you the ridiculous ideas California has tried…
IOU’s. No I am not kidding.
Increasing taxes, which we voted down last May. We were dealt a tax increase, but we defeated a tax extention for that increase. Those taxes included car registration fees, property tax, sales tax, and a reduction in tax exemptions for families with children. To give you an idea of the car registration fee, last year I payed $175, this year I paid nearly $400.
Furloughs for government workers, which a judge ruled was unconstitutional. We had courts and DMV offices close for 2 Fridays a month, and the media cried that the sky would fall, as if anyone gives a shit about a DMV worker.
The threat of teacher layoffs, until the unions went ape-shit and screamed that the classrooms would be filled beyond capacity (who cares), and oh the poor children (who rank 49th in performance nationwide, behind only DC). Just a side note, LAUSD pays more than any other school district nationwide, despite the pathetic performance of the school kids.
The threat of laying off and/or reducing both police and fire services, yes the sky is falling yet again. Our Governator would rather keep cubicle workers employed before cops and firemen.
The government has 680 billion just sitting there waiting for the crash to happen. when it crashes they will open the flood gates and its game over. Take a look at zimbabway. Unfourtunatly we dont get to experiance deflation. The government will also try and print money to pay off its debts. when that haapens everyone holding dollars will dump them. Congress right now is trying to add 1.4 TRILLION for next year. They have chosen their poison
http://www.foxnews.com/politics/2010/01/20/senate-democrats-propose-t-increase-debt-limit/
They are going to try and paper over this crash like they did the equity market crash back in march of last year.
There is a lot of deflationary forces out there, and we should go through deflation. but our government won’t allow that to happen.
[quote]JEATON wrote:
(coins, paper, and commercial banks reserves with the central bank) plus all the additional money created via credit through fractional lending.
[/quote]
which of these do you think is going to shrink?
All things in their own time…
Inflation will occur, but only after deflation has run its course. If I had to pull number out of the air…I’d say in four to five years.
They cannot maintain the money velocity necessary to bring about inflation or to avoid deflation.
To quote Paul Samuelson, “In terms of the quantity theory of money, we may say that the velocity of circulation of money does not remain constant. â??You can lead a horse to water, but you canâ??t make him drink.â?? You can force money on the system in exchange for government bonds, its close money substitute; but you canâ??t make the money circulate against new goods and new jobs.”
Cranking up the printing presses is a last act of desperation. It is the final bullet in the gun. Once fired, the party is over. The gov will do anything and everything else they can in the meantime, which in truth is much less than most people think. Controlling the economy is much like driving a great herd of cattle. As long as you can keep them calm, content and moving in the general direction, slight adjustments are possible. Let then get spooked or panicky, and you find out just how little control you actually have.
One man’s opinion.
[quote]dhickey wrote:
[quote]JEATON wrote:
(coins, paper, and commercial banks reserves with the central bank) plus all the additional money created via credit through fractional lending.
[/quote]
which of these do you think is going to shrink?[/quote]
You know the answer. The additional money created via credit through fractional lending.
Read the above post.
jeaton’s last paragraph was spot on, imo. i mean…when you think about it, fractional reserve banking ensures insolvency just as much as the incompetence of state treasuries. it truly is a house of cards we live in.
[quote]MaximusB wrote:
I can tell you the ridiculous ideas California has tried…
IOU’s. No I am not kidding.
Increasing taxes, which we voted down last May. We were dealt a tax increase, but we defeated a tax extention for that increase. Those taxes included car registration fees, property tax, sales tax, and a reduction in tax exemptions for families with children. To give you an idea of the car registration fee, last year I payed $175, this year I paid nearly $400.
Furloughs for government workers, which a judge ruled was unconstitutional. We had courts and DMV offices close for 2 Fridays a month, and the media cried that the sky would fall, as if anyone gives a shit about a DMV worker.
The threat of teacher layoffs, until the unions went ape-shit and screamed that the classrooms would be filled beyond capacity (who cares), and oh the poor children (who rank 49th in performance nationwide, behind only DC). Just a side note, LAUSD pays more than any other school district nationwide, despite the pathetic performance of the school kids.
The threat of laying off and/or reducing both police and fire services, yes the sky is falling yet again. Our Governator would rather keep cubicle workers employed before cops and firemen. [/quote]
It’s funny how much alike Cali and NJ are.
I fucking despise teacher’s unions more than anything in the world- and this stupid state caps what a board of education can put aside for the next year at 2 percent, all the while the teachers get 4 percent raises. And then people wonder why we have the highest property taxes in the country.
Teachers are ruining my state through their selfishness and single mindedness. I hope they go on strike and Governor FatFuck fires them all. That will teach them to strike…
[quote]John S. wrote:
[quote]JEATON wrote:
And how is the destruction of the bond market increase money supply? It does not. It decreases it.
John, you are a smart man, but you do not have a deep enough understanding of the processes. You tend to focus on only one or two variables, when there are hundreds.
Every day I am more convinced that deflation is in our future. And every day I pray that it is not.
BTW, gold is only a knee jerk flight to safety for now. The US dollar will be the next large flight to safety (how sad is that?). May be in five or so years that will change. Until then. the dollar.
You have a day where international banking (HSBC, China developments) send a ripple of fear through the markets and is gold up strong? No, gold is down $28 an oz and the dollar is up strong.
As an aside, gold should be at a near term resistance level now. It should bounce. If not, it is definitely not a good sign. [/quote]
You are ignoring the Commercial real estate bubble. once that pops in q2-q3 along with all the dollars being created people are going to make the flight to real money(gold/silver). People ran to the dollar today because America hasn’t begun to feel its real pain yet.
When these states go bankrupt the federal government will bail them out, Using printed money. Deflation is a good thing and needs to happen, but it won’t because the government would be unable to do all its entitlements so we are going to experience inflation and more then likely hyperinflation.[/quote]
Hey guys, you want to stay anywhere near the topic here? Every fuckin thread on this board ends up with a couple of loons wanting to go back to the gold standard again. Can we talk about the damn states for a minute?
[quote]FightinIrish26 wrote:
Hey guys, you want to stay anywhere near the topic here? Every fuckin thread on this board ends up with a couple of loons wanting to go back to the gold standard again. Can we talk about the damn states for a minute?[/quote]
The economic debate we are having has everything to do with the states. We are trying to explain what happens when one of the two options is taken. The fact that you can’t see what money has to do with it shows who the true loon really is.