Check out the article to the right by Michael Lewis on the financial issues facing states, cities and towns. (Yes, this is the Michael Lewis that wrote The Big Short, Liar's Poker, Moneyball, and The Blind Side.) His level of anxiety is captured in the quote below:
"From 2002 to 2008, the states had piled up debts right alongside their citizens’: their level of indebtedness, as a group, had almost doubled, and state spending had grown by two-thirds. In that time they had also systematically underfunded their pension plans and other future liabilities by a total of nearly $1.5 trillion. In response, perhaps, the pension money that they had set aside was invested in ever riskier assets. In 1980 only 23 percent of state pension money had been invested in the stock market; by 2008 the number had risen to 60 percent. To top it off, these pension funds were pretty much all assuming they could earn 8 percent on the money they had to invest, at a time when the Federal Reserve was promising to keep interest rates at zero. Toss in underfunded health-care plans, a reduction in federal dollars available to the states, and the depression in tax revenues caused by a soft economy, and you were looking at multi-trillion-dollar holes that could be dealt with in only one of two ways: massive cutbacks in public services or a default—or both. Whitney thought default unlikely, at least at the state level, because the state could bleed the cities of money to pay off its bonds. The cities were where the pain would be felt most intensely."
A few other issues that Lewis explores: "Everywhere you turn you see Americans sacrifice their long-term interests for short-term rewards....What happens when a society loses its ability to self-regulate, and insists on sacrificing its long-term interest for short-term rewards?"
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'Kroft asked Whitney what she thought about the ability and willingness of the American states to repay their debts. She didn’t see a real risk that the states would default, because the states had the ability to push their problems down to counties and cities. But at these lower levels of government, where American life was lived, she thought there would be serious problems.' -
ReplyDeleteall the more reason why Newton should not join in the GIC state healthcare plan,
Ruthanne, thanx for article link.
Ruthanne:
ReplyDeleteMichael Lewis said, "you were looking at multi-trillion-dollar holes that could be dealt with in only one of two ways: massive cutbacks in public services or a default—or both."
This will only lead to a continuing spiral of more unemployment and more lost revenue.
And as a side note: No sovereign can default unless they want too!
So.... One more option (not yet in place...but gaining momentum) is a public bank for states, cities and municipalities....Public banking means public, honest, transparent, sustainable money for the public...not private money for the public to pay the private banks their unsustainable interest.
Two good reads:
Debt: The first 5,000 years by David Graeber, is a great place to start to understand, debt, money and credit.
Then, Web of debt by Ellen Brown.
Bottom Line: Any Nation, including the United States or Newton,MA for that matter, can and should and is, more or less, morally obligated to create it's own public, honest and transparent money or monetary system.... interest and debt free.
Currently we live in a toxic monetary system that is in urgent need of a transfusion.
Hope you are curious enough to still want coffee.
david snieckus