The Next Greece May Be in the USA

Greece is NOT America.  The problems that have led Greece to collapse will NOT be the same problems that lead America into its ultimate collapse.

Greece is filled with corruption, an inability to collect taxes, inadequate infrastructure and massive underfunded government pensions.  When they joined the EU they suddenly found themselves in a position where they could borrow money at the same interest rates as Germany and that lenders from all over the EU would happily lend them money for whatever reason Greece gave.  Now that the payments are due the problems of corruption, inability to collect taxes and unfunded pension promises are ALL catching up to them.

But what about our US cities and some of our states?  Could we see a meltdown in California or Chicago?  Could the corruption in Chicago and their out of control spending lead to some type of collapse that Greece is currently experiencing?

The next Greece may be in the U.S.

When Chicago Public Schools announced on June 24 that it would borrow $1 billion to make a $600 million-plus pension payment due June 30 an eerie feeling spread across bond investors and taxpayers alike.

It was the same feeling that gripped investors when Moody’s Investors Service downgraded Chicago’s credit rating to junk based almost entirely on the city’s pension problems.

The fear was that elevated pension costs, in cities like Chicago, might push these public entities into insolvency, wiping out much of the holdings of municipal-bond investors.


Once a sleepy corner of the municipal bond market — often not even properly reflected on cities’ balance sheets — public pensions have recently turned into the biggest headache for taxpayers and municipal-bond investors, threatening to bring down the finances of U.S. cities and states.

In some places, like Puerto Rico, Illinois, New Jersey and Chicago, entire balance sheets of cities or states hang in the balance.

Detroit, as well as three Californian cities — Vallejo, Stockton and San Bernardino — had to declare bankruptcy because of their overwhelming pension costs.

In those cases, the courtroom turned into a brutal battlefield pitting bond investors trying to save the money they invested in those cities’ municipal bonds on one side. And on the other side have been public employees trying to save the dwindling pensions that were promised to them.

Recent cases have shown that bond investors are clearly losing this battle.

In the bankruptcies of Detroit, Vallejo, Stockton and San Bernardino, bondholders have faced losses of up to 99% of their holdings, according to a Moody’s report dated May 18. Meanwhile all three California cities chose to preserve full pensions for their employees, while Detroit only cut pensions by approximately 18%.

Many cities have turned to a special type of risky bonds called pension obligation bonds or POBs to fund their pensions without taking unpopular measures like raising taxes.

But these bonds only provide “short-term budget relief, a strategy to kick the can down the road and pass difficult choices on to future decision makers,” according to a Janney report dated May 1.

Oakland, Calif., was the first to sell $222 million of tax-exempt POBs back in 1985. Illinois issued $17.16 billion between 2003 and 2011, Puerto Rico issued $2.8 billion in 2008 and New Jersey issued $2.9 billion between 1997 and 2003.

Here;  http://www.marketwatch.com/story/these-lurking-debts-may-turn-us-cities-states-into-greece-2015-06-30?page=1

When nations worship wealth and money and begin to believe the lie that happiness can be measured in material goods....they are fully sliding down the slippery slope.  It will only be a matter of time before they have strangled themselves with overwhelming debt.

Why?

Because it's so fun to have stuff TODAY rather than work and save so you can pay cash for it TOMORROW....and FUN seems to be the secondary god we worship, following the primary god of Mammon.

Greece wanted to have fun.  Their leaders wanted to provide all the fun social programs and generous pensions that the rest of Europe was enjoying WITHOUT having to work or pay for them.  They just borrowed the money and decided to let some future leaders figure out how to pay for it.

It's the same story in Chicago or Detroit or the State of California.  The citizens all wanted to have fun today in exchange for someone else paying for it in the future.

So while the USA isn't Greece....many of our cities and states might be harboring the next bankruptcy and when the stock and/or bond market crashes again, the cracks in their balance sheets will be suddenly revealed.

And then USA will have the tough decision of WHO WANTS TO BAIL OUT CHICAGO?  Should all of us in MN give our hard earned dollars to bail out a bunch of Democrats who made their own beds in Illinois?

I, for one, don't think I should have to.

Should a bunch of Germans have to bail out a bunch of lazy Greeks who vacationed too much, worked too little yet still wanted to collect generous pensions?

Most Germans are going to say "NO!"