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Global Economy Bursting?

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What is the problem here?

Lower leverage means lower money velocity, lower velocity means lower GDP growth.

Lower GDP growth means lower employment, lower employment means higher defaults on mortgages.

Higher defaults on mortgages means lower home prices.

The government is the source of income for about 25% of personal income.

Any guesses on cutting government spending?
 
Fitch Downgrades Natomas USD, California's GOs to 'BBB'; Outlook Negative

There is a significant ongoing structural imbalance and projections through fiscal 2013 include cash flow shortfalls attributed to a difficult state funding environment, misestimates by management, onerous labor agreements, and significant declines in student enrollment.
 
This is a short but an interesting read because of the way the story unfolds and soft peddles and skirts the issue of why the company is in bankruptcy. The bottom line is that A&P markets have been in business for 151 years and the unions busted them. Read how this writer handles this. Very politically correct but illustrates the basic problem facing this country-unions. He never addresses the underlying issue, he just casually mentions the issue of unions in passsing.

A&P bankruptcy may be opportunity for competitors


http://news.yahoo.com/s/ap/20101213/ap_on_bi_ge/us_a_p_bankruptcy_filing
 
Austin said:
This is a short but an interesting read because of the way the story unfolds and soft peddles and skirts the issue of why the company is in bankruptcy. The bottom line is that A&P markets have been in business for 151 years and the unions busted them. Read how this writer handles this. Very politically correct but illustrates the basic problem facing this country-unions. He never addresses the underlying issue, he just casually mentions the issue of unions in passsing.

A&P bankruptcy may be opportunity for competitors


http://news.yahoo.com/s/ap/20101213/ap_on_bi_ge/us_a_p_bankruptcy_filing
Click to expand...

A&P has been bleeding red ink for some time. In its most recent quarter, the company's loss doubled to $153.7 million as revenue continued to fall. The company is also coping with high pension costs.

Bottom line, the unsecured creditors, bondholders and equity holders will take a loss to reduce costs. Labor unions will not take any loss. With intense competition from the likes of WalMart and others, A&P will be back into bankruptcy. The biggest red light besides rising cost is falling sales.
 
Vallejo's Bankruptcy `Failure' Scares Cities Straight Into Cutting Costs

http://www.bloomberg.com/news/2010-...-failure-scares-cities-into-cost-cutting.html

The bottom line, cities have labor contracts with unions. When unions refuse to cut their wages, benefits and other cost adding perks, cities have to exercise the nuclear option.

This article promotes the idea that all that can be done outside of bankruptcy. Yes it can; lay off employees and reduce services. When the remaining employees get the idea that they are next to be laid off, they are more willing to negotiate. The retirees realize that as its contributing base of workers shrinks, the pyramid inverts and is totally unsustainable. The remaining employees will have to contribute more for their own retirement benefits plus those that are already retired. At some point, bankruptcy is the only option and even the dreaded disincorporation of the city.
 
UC regents seek to cut retirees' pension eligibility and health benefits

http://www.latimes.com/news/local/la-me-uc-pension-20101214,0,4030938.story

University of California regents approved rollbacks in pension and retiree health benefits, and raising the retirement age for future employees to 55. Unions represent about half of UC's 115,000 employees.

What's the problem? Neither the university nor its employees had contributed to the pension funds for two decades because the accounts were believed to be overfunded by the ridiculous assumptions made for the return on investments and that created (all of a sudden) a $21 billion shortfall.

Now, lets see if the unions go along with this. Outsourcing education to Mexico is always an option.
 
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