If anyone still thinks I have exaggerated the Sovereign Debt Crisis, you better wake up and smell the roses before the coffin slams shut. The mayor of the city of Scranton, Pa, has been faced with a devastating collapse in revenue creating a crippling cash flow problem. I have been warning the model for what has been taking place is the same as the collapse of the City of Mainz. They raised taxes, chased the rich out of town, and were left with those who did not pay taxes, and still had their hand sticking straight out.
Philadelphia will raise its property taxes and destroy what is left of its economy before the politicians there wake up and say – oh shit! Scranton has been one of Pennsylvania’s largest cities who chased worthwhile citizens out of town. Last week, it distributed paychecks to city workers that cut wages to the legal minimum. They are dead broke. Scranton’s 398 city workers were paid a reduced rate of $7.25 an hour. No doubt – they are overpaid now because they will do nothing at all.
The pay cut, which Mayor Chris Doherty has threatened since late June, was carried out even though a coalition of unions had been granted a court injunction that prohibited the mayor from slashing wage rates. The mayor simply said he had no choice and one has to ask – will the court come up with the money if the city can’t?
This of course has the local union critics contending it is never their fault for demanding so much, it is the taxpayer for not paying their “fair share” as they see it and the years of financial mismanagement by the city’s political leadership. Never do employee or unions ever have anything to do with anything. To beat the court order, use the Supreme Court Obamacare decision that say the taxing authority is unlimited. Pay the wages at the normal rate byt impose a surcharge tax of 85% on government workers. The court cannot overrule that thanks to the Obamacare decision and that will shut up the unions. – No charge for that political advice!
All governments are plainly operating on the assumption they can do as they like and pass the bill to the taxpayer and if he refuses to pay, seize their home, sell it and imprison them. This sort of perpetual structural deficit is self-evident in every level of government since World War II. The system is fundamentally unsound. There is never any planning, nor is there any realistic fiscal management.
The bond holders and lenders were no doubt spooked after the city council refused to make payments on debt issued by the city’s parking authority. A flurry of resignations followed, and the bond trustee has been replaced. But this is just the beginning. I have been warning – get the hell out of munibonds. Not ever one will default, but if the Feds go, as they will, you will get the short-end of the stick.
We are facing a massive round of tax increases and government at every level tries to keep the game going. There will NEVER be reform until the fat lady screams. We are beyond a mere song!
So be careful. We are trying to get the computer models full functioning by September. This is going to be a wild fall this year. Then we have 2013, and the rise in geopolitical tension begins in 2014. We then get the two year spike and the cliff for 2016 into 2020.
This is going to be one hell of a ride in both directions that will often appear to be even simultaneous. You just cannot forecast this kind of stuff by the seat of your pants. It will take a global computer monitoring everything worldwide 24hrs 7 days a week just to survive this one. Why do you think they have been trying to block the computer models with a sense of desperate frustration. They think if nobody forecasts anything, then it will not happen. Braindead!