You may want to sit down before reading this.
The fiscal crisis facing many states is about to go from bad to worse.
And the latest rumor coming out of Washington on how to “fix” the problem may have you seeing red. I’ll tell you why in a moment.
While the unrest happening in Wisconsin is spiraling out of control, the mayhem is just a symptom of a much larger problem.
The debt crisis in America is spreading. It’s becoming insurmountable.
At last count, 43 states are staring at monster budget deficits.
Last week New-York Governor Cuomo released a statement saying the state is “functionally bankrupt.” The projected budget shortfall? A mere $9 billion for fiscal year 2010.
It’s no better across the Hudson. The state of New Jersey recently revealed that its unfunded pension liability for state government employees reached a record $54 billion. An 18% increase from the prior year.
It’s been reported that state and local governments have more than $2.8 trillion of outstanding debt. In addition they are carrying approximately $3 trillion of unfunded public pension and health care liabilities.
Up until this year they solved the problem by borrowing more, refinancing their debt, and then incurring new debt to cover out of control pension and health care benefits for public employees.
But it looks like the party is about to end. The well has dried up.
Governors in states like Wisconsin, Ohio, Florida, and in many other Republican held states are slashing budgets like never before.
What’s happening in our country today is unprecedented. You have to go all the way back to the civil war to find a time when this many states defaulted on their debt obligations.
And even during the Great Depression in the early thirties, only the state of Arkansas defaulted on its debt!
So it appears the day of reckoning has finally arrived for states teetering on the edge of bankruptcy right? Well, maybe not.
Recent Rumblings Coming out of
Washington May Anger You.
Word is already starting to spread that states may consider bankruptcy as a way to wiggle out of their mess. They believe the Fed will bail them out as they are “too big to fail.” Just like the banks, GM, Fannie and Freddie.
In other words, you could be picking up the tab again!
But where is the money going to come from? Today our national debt is more than $14.3 trillion.
The Fed already holds more than $1 trillion dollars of U.S. treasuries—that’s more than 70% of all outstanding debt—making it the largest lender to the U.S. in the world.
No it’s not China anymore. Heck, they’ve wised up and don’t really have our best interests at heart anyway.
For every dollar the government spends about 50 cents of it is borrowed! Our debt is about 500 times larger than the size of our economy. That’s the real story.
But up until recently, most of the mainstream media seem to be missing this. They’re fascinated with the rallies, protests, political strategies and senators gone awol, but fail to see how this can seriously affect all Americans. Not only today, but generations down the road.
It’s no wonder gold is at an all time high, people are starting to stock pile food in their homes, and the dollar has lost more than 500% of its value since 2001.
Will the Fed once again ignore the will of the American people and bailout the states?