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Tag Archives: Unpayable Debt

What comes after the welfare state collapses?


WelfareState1ZeroHedge published an article entitled, “Now The Pain Begins: S&P, Moodys Cut Illinois To Near Junk, Lowest Ever Rating For A U.S. State.” The article dealt with Illinois’ growing financial problems.

Excerpts:

Today, in the span of a few hours, two credit-rating agencies (first S&P, then Moody’s) downgraded Illinois bonds to BB+ and Baa3, respectively—both just one notch above junk, the lowest rating ever given to a U.S. state. Both agencies cited Illinois’ long-running political stalemate over a state budget as showing no signs of ending.

S&P warned that Illinois is at risk of soon losing its investment-grade status, an unprecedented step for a state that would only deepen the government’s strain. Bypassing its traditional 90-day review, S&P said Illinois will likely be downgraded around July 1, when the new fiscal year begins, if leaders haven’t agreed on a budget that starts addressing the state’s chronic deficits.

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US Bonds: “Best House” in a “Bad Neighborhood”?


Best House is None Too Good [courtesy Google Images]

Best House is None Too Good
[courtesy Google Images]

The Associated Press recently wrote in “Stocks swoon, extending losses; Bond prices soar” that,

“U.S. stocks tumbled in midday trading Wednesday as investor fears of a global economic slowdown intensified, setting the Dow Jones industrial average on course for its fourth consecutive loss.  The Dow plunged as much as 369 points in the first 10 minutes of trading, following steep declines in Europe . . . .”

Insofar as EU stock markets are also declining, the US markets may be less likely to recover on their own.  So long as declines are seen in both US and EU markets, those declines may be viewed as systemic and based more on fundamentals than some recent news report about Ebola or a mathematical glitch in the stock indices.

“Traders dumped risky assets [stocks] and parked their money in investments seen as relatively safe, such as U.S. government bonds.”

If the “bow” (stocks) of the economic “ship” is sinking, short-sighted people may rush to the “relative safety” of the stern (government bonds).

However, if the bow (stocks) sinks, the stern (bonds) will follow.

Likewise, if the markets continue to decline, the public may increasingly understand that the “bow” (stocks) is composed of fiat dollars and the “stem” (bonds) is also composed of fiat dollars.  If so, the public may increasingly understand that the fundamental problem is not with stocks or bonds, per se, but with our fiat currency.   If that understanding begins to penetrate the national psyche, there’ll be a rush to avoid paper debt-instruments (like stocks and bonds) denominated in fiat dollars, and store people’s wealth in a tangible medium like gold or silver.

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Posted by on October 19, 2014 in Economic collapse, US Dollar

 

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