33 States In Big Trouble….And Yes, It Can Get Worse!

Posted By on June 13, 2010

The cat is clearly out of the bag concerning the forthcoming bankruptcy of 33 states of the USA.
 
This moronic New York non-solution to borrow from state pension funds, which now cannot meet their pension requirements, screams bankruptcy. The Administration calling for $50 billion for states and cities would appear to be confirmation of this financial phenomenon. The sign that the financial problems of the states of the USA are going critical and will make the EU situation look like kindergarten, in market terms, will be a stronger euro and stronger gold, sort of like now (9:09 EST).
 
A shift in the recent relationship between gold and the euro would signal that recognition by markets.

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State Plan Makes Fund Both Borrower and Lender

By DANNY HAKIM
Published: June 11, 2010
 
ALBANY – Gov. David A. Paterson and legislative leaders have tentatively agreed to allow the state and municipalities to borrow nearly $6 billion to help them make their required annual payments to the state pension fund.
 
And, in classic budgetary sleight-of-hand, they will borrow the money to make the payments to the pension fund – from the same pension fund.
 
As word of the plan spread, some denounced it as a shell game and a blatant effort by state leaders to avoid making difficult decisions, like cutting government spending or reducing pension benefits.
 
“It’s a classic Albany example of kicking the can down the road,” said Harry Wilson, the Republican candidate for comptroller, who holds an M.B.A. from Harvard.
 
Pension costs for the state and municipalities are soaring, a result of enhanced retirement benefits for public employees and the decline in the stock market over the past two years. And, given declines in tax revenue and larger budget shortfalls, the governments are struggling to come up with the money to make the contributions.
 
Under the plan, the state and municipalities would borrow the money to reduce their pension contributions for the next three years, in exchange for higher payments over the following decade. They would begin repaying what they borrowed, with interest, in 2013.
 
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