Dear Extended Family,
I have to compliment LEAP 2020 for their astute observation that the present Management of Perspective Economics focuses on the Euro painting lesser member’s problems as a death rattle for the European common economic union. When comparing GDP of all these entities, none comes near the share of GDP that a bankrupt California means to the US dollar.
The point is that the dollar also represents a common economic union of states.
Because of this the following article is extremely important to your understanding of the future price of gold, as separating the dollar from gold is not possible.
The dollar value to the gold price can be skewed from time to time by standard inflation considerations, but in hyperinflation the relationship is super glued in the inverse.
The US dollar and Washington have no concept of the dollar as a common economic union of states, but take my word, the forex markets will.
This is another shortly pending and powerful fundamental negative that, due to the Formula of 2006, offers no possible bailout scenario because of its sheer size and continuing financial motion that requires more funds every day that passes.
States, municipalities, towns and villages are not run by business people with acumen.
There is no fundamental legs to the present dollar rally, period!
Regards,
Jim
Nightmare scenarios haunt states
By Daniel C. Vock, Stateline.org Staff Writer
Monday, December 14, 2009
One question keeps coming up as governors and legislators grapple with a seemingly never-ending stream of gloomy budget news that keeps getting worse: How bad can it get?
The answer, according to experts and a look through history, is probably that it could get worse than it has been in a generation — maybe even a lifetime — but not catastrophic.
“If revenues don’t pick up, states are going to be in a pretty tough spot when we get to 2011,” said Kim Rueben, a state and local tax policy expert with the Urban Institute. “Do I think it’s going to be the end of the world as we know it? No.”
Bankruptcy, at least the scenario where a judge would take control of a state’s finances, is off the table. Bond defaults, the cardinal sin of public finance, seem highly unlikely for states. Another federal bail-out is plausible. Some state governments may even be fundamentally overhauled. But the worst for most states will sound familiar: service cuts, tax hikes, IOUs, layoffs, furloughs and political gridlock.
In other words, Rutgers University public policy professor Carl Van Horn said, state budgets for next year will look a lot like those passed for this year — “only worse.”
In the halls of many state capitols, many others are repeating that same refrain.
California legislators spent the last year closing a $60 billion gap for the last two fiscal years. Already, though, legislative analysts predict the state will be short another $20 billion by June 2011. The bad news is expected to continue even after that, with gaps of roughly the same size persisting through at least 2015.
“The scale of the deficits is so vast that we know of no way that the legislature, the governor and voters can avoid making additional, very difficult choices about state priorities,” the report from the Legislative Analyst’s Office stated.
Outgoing Virginia Gov. Tim Kaine, a Democrat, is preparing a budget plan for the state’s next two years, when the state’s revenues are expected to drop $3.6 billion. Kaine said he is worried about the proposal, even though his successor, Republican Bob McDonnell, will determine the budget’s final form.
"The things that get put in front of me in terms of cuts are … tougher and tougher, and somewhere in whittling down that $3.6 billion number, I know I am going to get a cut that I don’t want to make," Kaine told The Associated Press.
The nuclear option: bond defaults
Believe it or not, things have been far worse for states. Consider, for example, Arkansas during the 1930s.
Arkansas was already in bad shape when the Great Depression hit. In 1927, the state took over the task of building highways from local authorities, because the locals built far more roads than they could pay for. The state takeover included new revenue for the roads, but it also authorized the state to build even more highways.
