The collapse is assured!

Greetings,

(Note: Now they are all but telegraphing the economic implosion of America. You will have no excuses why you did not take heed and prepare. The time is growing troubling.

She thought because her currency was her power and was accepted globally that she would be able to sustain her power forever. She is quickly learning better though. In fact ,America thought that she was immune to the troubles and destructions which are going on in other nations.

You must awaken to the reality and that this is the divine judgment to bring vicious America to her knees. )

Which Cities/States Will Be the First to Default When the Economy Rolls Over?

Source: http://investmentwatchblog.com

by Charles Hugh-Smith

What happens to local governments when the economy rolls over?

Though we’re constantly reassured the “recovery” that’s stumbled for five years has years of strong growth ahead, history suggests the “recovery” is due to roll over. Few recoveries last longer than 5 or 6 years, and the business cycle is graying fast: subprime auto loans are not exactly the foundation of “strong growth.”

So what might push the economy over the cliff? The strong U.S. dollar is crimping overseas sales and profits, the global economy is already recessionary, mortgage applications have dried up, auto sales are being driven by subprime loans, and the valuation bubbles in stocks and real estate are due for a breather, if not an outright reversal. Retail sales are flat, and with all these headwinds, growing profits by 10% to 20% a year becomes impossible for the vast majority of enterprises.

So what happens to local governments when the economy rolls over? Tax revenues decline.

The consensus is that local governments are sitting pretty: sales and property values have risen smartly, pushing tax revenues higher, and the cost of borrowing money via tax-free municipal bonds has fallen. Nice, but these are all functions of expansion and rising tax rates.

The uneven nature of the “recovery” has left some cities and states more vulnerable to a downturn than others. Let’s catalog the various risk factors that might become consequential as the global and U.S. economies weaken.

1. Those dependent on foreign tourism. The weak dollar made America a bargain destination for the past decade. As the dollar strengthens and other currencies lose purchasing power, America is no longer a bargain–especially as job cuts decimate the number of people who can blow a few thousand dollars on overseas vacations to the U.S.

2. Auto manufacturing-dependent locales. Vehicle sales have been strong, and the cheerleaders claim sales will keep rising for years to come. Really? With what money? As soon as layoffs hit the marginal workforce and the subprime auto loan bubble implodes, vehicle sales will follow suit.

3. Cities and states that depend heavily on capital gains taxes. Once the current housing and stock bubbles deflate–or simply stop expanding–tax revenues from the enormous capital gains reaped in the past five years will wither.

4. Locales dependent on high income taxes. Given that most of the job growth of the past five years has occurred in low-wage sectors, adding jobs hasn’t boosted income taxes much. High income-tax states have jacked up rates on high-income earners, but there is no law of nature that says high-income jobs will survive a global downturn.

Rather, enterprises desperate to tighten operating costs will want to jettison high-cost employees first.

5. Local governments with enormous debt burdens. With interest rates low, municipalities and states went to the bond market over the past few years for “free money.” Once tax revenues plummet, the interest on all that “free money” will take a larger percentage of tax revenues, heightening the cost of new bond debt as buyers start adding in the risk of eventual default.

6. Locales with high fixed costs. These include high healthcare costs for homeless, elderly, government employees, etc., interest on all those bonds, government employee pensions, etc. The fixed costs only increase every year, regardless of tax revenues. Every local government with high fixed costs is in a tightening fiscal vice once tax revenues plummet.

7. Local governments with generous employee benefits and pensions. Once the stock market rolls over, the big capital gains that have funded public pension plans dry up, and the annual contribution has to be paid out of declining tax revenues….MORE HERE

 

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