Jim,

As you’ve been predicting, the U.S. media is waking up to the fact that the financial crisis in the US is almost identical to the crisis in Europe as evidenced by this article entitled, "Illinois: Our Very Own Greece?".

Among other drastic measures, Illinois is planning to turn to the debt markets to fund $3.7 Billion in pension obligations in December, in addition to the $2.4 Billion it sold in pension notes last January.

Remember when we used to think robbers were bad guys who wore masks and carried guns? These days they wear business suits and they’re voted into office by the very people they intend to rob!

I hate to think what the headlines will look like in another three or four years.

Click here to read the article… ^[1]

Best wishes,
CIGA Black Swan

Jim,

This will not last. It is another kicking of the can down the road to ruin.

CIGA BJS

States Dodge Defaults as California May Cut Worker Pay
By William Selway – Jul 14, 2010

Illinois let $5 billion of bills go unpaid. Washington closed state offices. California may cut 200,000 workers’ pay to the minimum wage. Minnesota is delaying tax refunds for a second year.

As fiscal 2011 budgets took effect July 1, state and local governments coping with revenue declines from an economic slowdown are fulfilling legal obligations to balance their books by shaving costs and raising taxes to protect a key constituency: owners of $2.8 trillion of municipal bonds.

“States have taken all measures so far to make sure they keep capital markets open by honoring their debt payments,” said Richard Ciccarone, a managing director for McDonnell Investment Management LLC in Oak Brook, Illinois, which owns $7 billion of municipal bonds. “They are doing everything they can.”

More… ^[2]

Dim retail sales hurt economy but offer bargains
CIGA Eric

No spin to refute here.

A second straight month of declining retail spending will likely keep unemployment high and help weaken the recovery.

Trend line breaks mark deceleration in "real" retail sales. This is important to economy in which consumption accounts for more than 70% of national income. Either the economy is accelerating or decelerating. Deceleration with extremely high debt burdens will be met with further stimulus.

Real or CPI-Adjusted Retail Sales (RRS) and YOY Change:
^[3]

Gold-Adjusted Retail Sales (RSGLDR) and YOY Change:
^[4]

Weakness in retail sales is confirmed by the ISM data.

ISM Prices Paid Index (PP) to National Purchasing Manager’s Index (PMI) Ratio:
^[5]

Source: finance.yahoo.com ^[6]

More… ^[7]

Members of the US Union face major shortfalls
CIGA Eric

Austerity or government spending? As C, I, (X-I) "net exports" or combined net decline within the three of GDP = C + I + G + (X-I) ^[8], once again falters, austerity will be long forgotten. G or government spending in the form of stimulus of all kinds will be used to absorb the decline national income. Austerity is hardly a new concept. Herbert Hoover, a firm believer in balanced budgets, did little to encourage massive stimulus and currency devaluation from 1929 to 1932. His austerity efforts did little to revive the economy or secure a second term (with emphasis on the latter point).

State Foresees Massive Financial Troubles ^[9]

The nonpartisan Legislative Fiscal Bureau reported today that a potential $2.5 billion structural deficit could be in place by the time next legislature convenes in January.

In a memo to members of the legislature, LFB Director Bob Lang wrote that “for 2011-12 the general fund would need to generate $1,232 million in order to meet current commitments, maintain the required statutory balance, and balance the budget for that year. In 2012-13, $1,279 million ($47 million over the $1,232 million in 2011-12) would need to be realized.”

N.J. Budget Cuts: Template or Trouble for the U.S.?

A possible preview of how the nation will deal with its financial future finished playing out in Trenton, N.J., this week, and the audience of Garden State voters isn’t exactly giving the show buffo reviews.

Their reaction to the steps to deal with New Jersey’s dire financial situation is somewhat sobering for those who think the country is ready to make sacrifices to achieve financial stability.

More… ^[10]