Greetings,
In the old days Grecian Formula was a tonic that was used to hide gray hair on men. In the new era 'Grecian Formula' is a fiscal concoction that creates gray hair on everybody. We should not be too smug in our comments about the debacle in Europe caused by inept bureaucracies and runaway public employee unions. It appears that a large number of US cities, counties and states have been using copious amounts of the 'new' Grecian Formula.
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Here is an excerpt from Mish Shedlock's recent blog
Miami Commissioner Says Bankruptcy is City's Best Hope;
Chris Christie Says New Jersey Careens Towards Becoming Greece
I keep waiting for some large city to take initiative and declare bankruptcy to escape the onerous burden of public pensions. Perhaps Miami is that city. NBC Miami reports Miami Budget Begging for Bankruptcy
The city of Miami is in such financial dire straits that commissioner Marc Sarnoff is using the "B" word, bankruptcy. "We are not the only city, municipality to be going through this. It looks like Los Angeles sometime next week or the week after will be going bankrupt. It looks like there will be 30 more cities following suit."
Increases in public worker salaries is one of the main reasons why the budget is so tight. The average salary for a Miami city employee is $76,000. The average salary for a Miami city resident is $29,000.
Employee pensions are choking the budget too. In 2000, pension payouts cost taxpayers $16 million. In 2009 that number spiked up to $70 million. Should the city go into bankruptcy, the commissioners and their politics would no longer be in charge of city finances, the judge would be. [Sarnoff] "You no longer have 5 people making political solutions. You now have one person who is looking after the best interest of the taxpayer of the city of Miami, without any politics getting into his or her way."
The Judge could order union contracts be renegotiated. He or she could decide what creditors get paid or not get paid.
Commissioner Sarnoff offers 3 options to avoid bankruptcy.
1. Renegotiate those union contracts
2. Layoff about 800 city workers
3. Raise your property taxes
In this economic climate that last option is not likely at all
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MIsh Comments .....
I see no indication Los Angeles is about to declare bankruptcy anytime soon as Sarnoff suggests. However, it is perfectly clear that Los Angeles is indeed in pathetic shape and bankruptcy is the best option. The same applies to Houston and many other large cities as well. I look forward to the day one of these big cities finally tells their public unions where to go. All it takes is one big city to start the ball rolling.
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New Jersey Careening `Toward Becoming Greece' as Costs Rise
Inquiring minds are reading New Jersey Careening `Toward Becoming Greece' as Costs Rise, Christie Says
New Jersey Governor Chris Christie said the state is "careening our way toward becoming Greece" and can't afford the cost of benefits and pensions for current workers.
The governor, speaking today to members of the Manhattan Institute, said his state must reduce its tax burden and control government spending. He has proposed a constitutional amendment to cap growth in property taxes, the main source of funding for schools and towns, at 2.5 percent a year. "Higher taxes are not going to solve the problem," said Christie, a Republican who took office Jan. 19. "We've got to change the course."
New Jersey, like Greece, has a high proportion of public workers who have been entitled to benefits such as free health insurance that outstrip taxpayers' ability to pay for them, Christie said. In the past decade the state added 11,000 public- sector jobs as it lost more than 120,000 private positions, he said.
Politicians in New Jersey have bowed to public unions for too long, failing to cut teacher benefits and enacting civil- service laws that have tied governments' hands in trimming workforces, Christie said. Over the last decade, municipal spending has grown by 69 percent, and property taxes have climbed by 70 percent, according to the governor's office. The average New Jersey household paid $7,281 in property taxes last year, the highest rate in the nation, according to the state Department of Community Affairs.
Senate Budget Committee Chairman Paul Sarlo, a Democrat from Wood-Ridge, proves he is mathematically challenged and unfit for office by stating "The governor's spending cuts may lead to property-tax increases of as much as 8 percent next year".
I salute Chris Christie. We desperately need more governors to follow his lead. I also salute commissioner Marc Sarnoff. Bankruptcy is the only option that makes any sense for Miami.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Personally, I think the problems are much more severe than the press is reporting. Los Angeles is a cog in the wheel of the California economy. The entire state is on the edge of a cliff and their brain dead politicians continue to use Grecian Formula to solve the dilemma created bu the Grecian Formula. Well, enough on that mess. Way too many states, counties and cities are in a similar situation on a smaller scale. Let's BAN THE NEW GRECIAN FORMULA!
WDH
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The real action on Thursday was in the Euro Currency market. Yes, our stock markets had a huge rally but the Euro Currency went parabolic in one day rallying from 1.2155 to 1.2397. THAT IS A HUGE ONE DAY MOVE. At 10:00 AM (Eastern US) a substantial short squeeze unfolded.
"We be rockin and rollin now, baby!"
(2,400 Volume chart of EuroCurrency Futures C.M.E)
OK, let's look at a larger time frame. The next chart is a 185 Minute chart of the EUR/USD Interbank currency pair. You can easily spot the new MAGINOT LINE at 1.21500 and you can also see the resistance at 1.2400.
Today, everybody is relieved that China didn't dump their Eurobonds and collapse the Euro currency. Who knows what tomorrow will bring. We can now forcast the next few weeks market tone based upon which way the Euro Currency breaks out. A break out above 1.24 would be bullish for our stock market. A breakout below 1.215 will be bad for Wall Street. Unfortunately, the fate of the Wall Street bulls is in the hands of the global currency traders.
Well, that's all for now.
Regards,
WDH
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