Chris Mayer

While the private economy has done a good job adjusting during the recession and paving the way for the growth we see now, we can’t say the same holds true for the government. In fact, as fiscally irresponsible as the US government has been, the next big shoe to drop for the US may be the revealed insolvency of some of its big states.

Already, we hear the “B” word being tossed around. A San Diego County panel – faced with $2.2 billion in unfunded pension liabilities and $1.3 billion in unfunded health care liabilities – recommended, among a number of other possible actions, filing for bankruptcy. According to Grant’s Interest Rate Observer, four major American cities (Miami, Detroit, Los Angeles and Harrisburg) have all hinted at the same this year.

The big states are even worse. The Economist reports on Illinois: “By 2018, Illinois will be paying $14 billion a year in benefits, equal to more than a third of the state’s revenue, compared with $6.5 billion now.”

Plugging those kinds of gaps means getting creative with new forms of skullduggery. For instance, the State of New York, with its $9 billion budget deficit, is looking at a proposal to borrow $6 billion from its state pension fund in order to make a $6 billion payment due to that same pension fund. Yeah, you read that right.

The trials of Illinois and New York are not isolated incidences, either. Grant’s quotes from the Center on Budget and Policy Priorities: “At least 46 states face or have faced shortfalls for the upcoming fiscal year (FY 2011, which will begin on July 1 in most states). These come on top of the large shortfalls that 48 states faced in their current budgets (FY 2010).”

Yet incredibly – or maybe not – Moody’s maintains that “the credit profile of the US state and local government is very strong.” Huh? What are they looking at? That’s ridiculous. Why anyone should take what these ratings agencies say seriously is beyond me.

In any event, what I see happening is a great big bailout from Uncle Sam, which itself is broke – bleeding astronomical deficits and in hock for record amounts.

In order to do that, the government will simply print what money it needs. We all know what happens then. The value of the dollar goes south.

To protect your wealth, stay with things, as opposed to paper, like bonds. Own hard assets, things like gold and oil. Own the stocks of companies growing fast enough to beat inflation. And don’t be afraid to put your money outside of the US.

Regards,

Chris Mayer
for The Daily Reckoning

Chris Mayer

Chris Mayer is managing editor of the Capital and Crisis and Mayer's Special Situations newsletters. Graduating magna cum laude with a degree in finance and an MBA from the University of Maryland, he began his business career as a corporate banker. Mayer left the banking industry after ten years and signed on with Agora Financial. His book, Invest Like a Dealmaker, Secrets of a Former Banking Insider, documents his ability to analyze macro issues and micro investment opportunities to produce an exceptional long-term track record of winning ideas. In April 2012, Chris released his newest book World Right Side Up: Investing Across Six Continents

  • Inuvik NWT

    Web Search
    Results 1 – 10 of about 1,540,000 for Argentinean economics.

    Party until it pops.

  • therooster

    The solution to macro economic events is predicated on a major change in structure that sees the answers come from bottom-up events such as the monetization of gold by the grass roots. Real time digital gold backed currency is a new marriage of the measure and the weight. Give thanks for both.

  • http://bankruptcyrivers.bravejournal.com Maximina Fuhrman

    I truly enjoy how you write continue the truly amazing posts… Nothing beats a great read and awesome information… Thanks!

Recent Articles

The Awful Way Social Security Might Be “Saved”

Dave Gonigam

The US Social Security program is complete mess. The funds needed to pay these benefits are quickly drying up, and agreeable solutions are in short supply. But all is not lost... There actually IS a viable way to "save" Social Security. But as Dave Gonigam explains, you're probably not going to like it. Read on...


Important Facts You Need to Know the Ebola Outbreak

Stephen Petranek

This summer, the worst Ebola outbreak ever recorded hit sub-Saharan Africa. But the greatest danger, as Stephen Petranek explains, is that the virus will have a chance to mutate into a form that spreads more easily. And if that happens, there will be far reaching consequences - from both a health and an investment side. Read on...


Laissez Faire
A Free Way to Turn Your Unique Skill Into Real Money

Chris Campbell

Everyone in the world has a unique talent or skill that someone else might find useful. Whether it's editing video, speaking Spanish or even eating paper, chances are there is someone out there willing to pay for what you have to offer. Today, Chris Campbell shows you one way to find those consumers and how to make your skill work for you...


The End of the “Gun Control” Bull Market

Greg Guenthner

For the last few years, gun enthusiasts have been concerned that the Feds would find a way to block their access to firearms. Now those fears appear to be subsiding... and so do gun sales. Greg Guenthner explains how to navigate this market in the coming months and years. Read on...


The Most Important Trait of Any Successful Resource Investor

Henry Bonner

The gold mining sector is one of the most difficult areas of the market to navigate successfully. But there is money to be made here. Henry Bonner sits down with one of the giants of this industry and picks his brain about how to find winners in this market and the four things every great investment has in common. Read on...