Global Economy Bursting?

[Terrel L. Shields]

I didn't live in the Great Depression but my parents and grand parents did. Sorry, guys but I see the present economic situation as a mere speed bump compared to what our fore fathers suffered.

Yep, times were hard Mike... but... from 1929 to 1939...both my grandparents went from a team and wagon to a car. One bought a model T to move to Colorado but the womenfolk and kids took the train. He pulled a wagon with the household goods and a neighbor drove a 1927 Chev truck with the horses. He claimed he spent the better part of 9 days sitting at a cross road waiting for the truck to catch up. 25 mph was top speed. My dad's dad even bought a 39' Intl tractor to farm in the dryland bean country of SW Colo. He sold his Belgian Studhorse in Colorado and drove back to Arkansas when they moved back.

The first of electricity was coming in and by WWII, several communities had running water, electricity, and central sewage in the smaller towns became a reality. The depression wasn't always dispair and destitution.

California...i think it is beginning to hit home that they are really in a pickle and Uncle is going to be asked to bail them out...what does the rest of the nation think about that?

 

[Randolph Kinney]

California's 'Unexpected' $16 Billion Deficit

http://news.investors.com/article/611378/201205141845/californias-16-bil-deficit-isnt-unexpected.htm

California now forecasts a budget deficit this year of $16 billion, not the $9.2 billion first estimated. The governor calls this "unexpected." But how can it be unexpected when it happens every year?

Brown is uncharacteristically modest in not mentioning his own role in California's continued meltdown. Just like his Democratic pals in the Golden State's legislature, the nation's worst, he refuses to accept reality.

The truth is, contrary to Brown's comments, California's economy is not recovering. It's suffering from a flood of departures of businesses and wealthy Californians seeking to escape the state's soaring taxes, burdensome regulations and dysfunctional, union-dominated state and local governments.

The "rich" that Brown and other Dems think can pay for everything happen to be the entrepreneurs and financiers of California's high-tech economy. They're leaving the state in droves, taking the economy with them.

 

[Randolph Kinney]

Brown Proposes $8.3 Billion in Cuts for California

http://www.nytimes.com/2012/05/15/us/brown-proposes-8-3-billion-in-cuts-for-california.html?_r=1

Struggling to contain mounting state budget shortfalls, Gov. Jerry Brown on Monday proposed $8.3 billion in spending cuts, including slashing state employees pay and spending on social programs and prisons. He warned that California would have to impose another $6 billion in cuts on public schools and higher education if voters fail to approve his initiative this fall to raise sales and income taxes.

Even as he proposed cuts, Mr. Brown proposed a 16 percent increase in funding for public schools. But he said they were contingent on voters approving a quarter-cent hike in the sales tax and an income tax surcharge on wealthy voters this year, hardly a sure thing.

If the tax increases are not passed, he said, another $6 billion or so in cuts would be imposed on schools and on the state’s higher education program. He suggested that, at the very least, that would result in a shortening of the school year.

 

[Randolph Kinney]

California Is the Canary in the Class-Warfare Coal Mine

http://finance.townhall.com/columni...a_is_the_canary_in_the_classwarfare_coal_mine

President Obama’s fiscal policy is a dismal mixture. On spending, he wants a European-style welfare state. On taxes, he is fixated on class-warfare tax policy.

If we want to know the consequences of that approach, we can look at the ongoing collapse of Greece. Or, if we don’t like overseas examples, we can look at California.

If the (formerly) Golden State is any example, it turns out that having high tax rates doesn’t necessarily translate into high tax revenues. Here’s a blurb from an editorial in today’s Wall Street Journal.

 

[Randolph Kinney]

High-speed spending: Bullet train may need $3.5 million a day

http://www.latimes.com/news/local/la-me-bullet-risks-20120514,0,4603595.story?track=rss

If California starts building a 130-mile segment of high-speed rail late this year as planned, it will enter into a risky race against a deadline set up under federal law.

The bullet train track through the Central Valley would cost $6 billion and have to be completed by September 2017, or else potentially lose some of its federal funding. It would mean spending as much as $3.5 million every calendar day, holidays and weekends included — the fastest rate of transportation construction known in U.S. history, according to industry and academic experts.

Over four years, the California High-Speed Rail Authority would need as many as 120 permits, mostly from a tangle of government regulatory agencies not known to rush their business. It would need to acquire about 1,100 parcels of land, many from powerful agriculture interests that have already threatened to sue. And it would need to assemble five teams of contractors with giant workforces positioned from Fresno to Bakersfield, moving millions of tons of gravel, steel rail and heavy equipment across the valley.

If the rail authority runs into technical problems, legal disputes, permit delays or political roadblocks, it could end up building less track and potentially leave an uncompleted project, according to warnings contained in its own business plan. If the project blows past the federal deadline, for example, the flow of money could be stopped. And the scramble to meet that deadline could lead to construction problems and drive up costs.

 

[Randolph Kinney]

Peter Schiff: Market-Crushing Treasury Collapse To Hit Around 2013

http://www.forbes.com/sites/afontev...rushing-treasury-collapse-to-hit-around-2013/

Peter Schiff, the divisive investor and commentator that predicted the subprime/real-estate bubble, is forecasting a U.S. dollar and bond crisis over the next couple of years. Schiff blames intervened bond markets, where rates are artificially and excessively low, and expects the coming crisis to blow the 2008-9 financial crisis out of the water.

There is little doubt that the Federal Reserve, with Chairman Ben Bernanke at the helm, is holding markets by the hand. Bernanke, himself a divisive figure, has done all he can to push interest rates lower, using quantitative easing and Operation Twist once nominal rates had hit the zero-range. While many believe ultra-loose monetary policy is dangerous, Schiff thinks it will lead to a catastrophic correction.

“The more you delay it, the bigger it will be,” Schiff tells Forbes in a phone interview Tuesday, “so we need to raise interest rates during the recession to confront the inefficiencies.” Schiff, who runs Euro Pacific Capital and is seen by many as permanently bearish, argues that government-intervened bond markets are leading to massive distortions in capital allocation that have only been exacerbated as the Fed reacted to the last couple of recessions.

Recent market behavior supports his thesis that massive dislocations in bond yields distort reality.

 

[Austin]

Tonight on Lou Dobbs Fox he did a piece on California. Here are some of his facts from memory some I don’t understand.
Total state debt $361 billion.
The Federal Government pays 40% of their budget. I don’t understand this.
Prisons cost $10 billion.
Illegal’s cost $10 billion.
3rd Worst education system in the country.
3rd worst budget crisis in the country or something similar.
Annual budget $96 billion
Annual Deficit as of this date $16 billion and growing by leaps.
You get the picture. The black hole is sucking them in. No conceivable tax increase can even slow this thing down. The straw that breaks the camel’s back will be when their credit rating reaches junk status and they are within weeks of that happening. With the Euro coming apart it makes the perfect storm.

 

[Restrain]

Yet Texas has three of the top 5 cities for growth, housing, and new businesses. The rest can have a depression, but we have decided not to participate.

 

[Randolph Kinney]

Bye bye unemployment benefits

http://money.cnn.com/2012/05/11/news/economy/jobless-unemployment-benefits/index.htm?hpt=hp_t1

More than 200,000 long-term jobless Americans will lose their unemployment checks this week, when eight states roll off the federal extended benefits program.

Nearly half of them live in California, and the rest reside in Florida, Illinois, North Carolina, Colorado, Connecticut, Pennsylvania and Texas.

The federal extended benefits program has provided the jobless with up to 20 weeks of unemployment checks after they've run through their state and their federal emergency benefits, which together last up to 79 weeks.

But the extended benefits program is expiring throughout the country as the economy improves. To be eligible for these benefits, a state must show that its unemployment rate is at least 10% higher than it was in at least one of the past three years.

 

[Randolph Kinney]

Fiscal Woes Boomerang for Brown in California

http://www.nytimes.com/2012/05/15/u...?_r=1&nl=todaysheadlines&emc=edit_th_20120515


Mr. Brown’s campaign to persuade voters in California, the birthplace of the antitax movement, to vote for tax increases to head off even more cuts seemed at one point to have a good chance of winning. But now it is threatened by a rival tax plan that went onto the ballot after Mr. Brown was unable to persuade its organizers to stand down.

And what is perhaps the most prominent nonbudgetary initiative on Mr. Brown’s docket — a high-speed rail line to whisk riders between San Francisco and Los Angeles, the kind of legacy project identified with his father, Gov. Pat Brown — is embattled as well, facing rising opposition and questions about its feasibility and cost.

The budget has proved to be the most troubling issue of Mr. Brown’s first years and it has hijacked much of his time, as his aides worried it would when he took office facing a $26 billion shortfall.

On Monday, Mr. Brown announced that the shortfall had shot up again, from $9.2 billion in January, blaming a drop in revenue caused by a bad economy and court rulings barring spending cuts the state had approved. He proposed $8.3 billion in cuts, slashing welfare, social services and health care for the elderly, and a 5 percent cut in hours for state employees.

“The fact is, California has been living beyond its means,” Mr. Brown said. “The United States of America and its federal government has been living beyond its means. This is a day of reckoning, and we have to take the medicine.”

To complicate things, relations between Mr. Brown and his Democratic colleagues have shown signs of strain, particularly after Mr. Brown said lawmakers should “man up” and begin cutting at the first sign of revenue shortfalls.

But after this troubled spring, the vote on the tax initiative is now assuming an outsize importance, both for the state and for Mr. Brown. A defeat would most likely curb Mr. Brown’s influence, and might even invite a primary challenge from a younger generation of Democrats who have been waiting in the wings.