Turn Out The Lights, The Party Is Over!
Posted By thestatedtruth.com on December 20, 2010
$2 Trillion Debt Crisis Threatens To Bring Down 100+ U.S. Cities
Way to go Meredith Whitney…..Logic says the states will be doing huge (really huge) cut backs and layoffs…..So inquiring minds want to know how the economy can grow in these circumstances. To all of the economists out there, it sounds like Meredith is one of the few that gets it!
More than 100 American cities could go bust next year as the debt crisis that has taken down banks and countries threatens next to spark a municipal meltdown, a leading analyst has warned.
Meredith Whitney, the U.S. research analyst who correctly predicted the global credit crunch, described local and state debt as the biggest problem facing the U.S. economy, and one that could derail its recovery.
“Next to housing this is the single most important issue in the U.S. and certainly the biggest threat to the U.S. economy,” Whitney told the CBS 60 Minutes programme on Sunday night.
“There’s not a doubt on my mind that you will see a spate of municipal bond defaults. You can see fifty to a hundred size-able defaults – more. This will amount to hundreds of billions of dollars’ worth of defaults.”
New Jersey governor Chris Christie summarised the problem succinctly: “We spent too much on everything. We spent money we didn’t have. We borrowed money just crazily. The credit card’s maxed out, and it’s over. We now have to get to the business of climbing out of the hole. We’ve been digging it for a decade or more. We’ve got to climb now, and a climb is harder.”
American cities and states have debts in total of as much as $2 trillion. In Europe, local and regional government borrowing is expected to reach a historical peak of nearly €1.3 trillion (£1.1tn) this year.
Illinois has spent twice as much money as it has collected and is about six months behind on creditor payments. The University of Illinois alone is owed $400 million, the CBS programme said. The state has a 21% chances of default, more than any other, according to CMA Datavision, a derivatives information provider.
“It’s all part of the same parcel: public sector indebtedness needs to be cut, it needs a lot of austerity, and it hit the central governments first, and now is hitting local bodies,” said Philip Brown, managing director at Citigroup in London.
U.S. states have spent nearly half a trillion dollars more than they have collected in taxes, and face a $1Â trillion hole in their pension funds.
More at: http://www.guardian.co.uk/business/2010/dec/20/debt-crisis-threatens-us-cities
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