In California, tax income shortfalls have increase from 9 billion to 16 billion in 3 months. Governor “Moonbeam” Brown has proposed new bond issues to raise the revenue. Does anyone think that we are in a better position now to pay more in taxes than we were, when times were good? The logic escapes me. The State governments have to have a balanced budget. And the way to do that is by hook or crook—(Also known as creative financing). The trouble is, we have run out of hook and crook. Kind of looks like Moonbeam hasn't run out of rope to smoke - - yet.
If we shift to Greece, there is all of this doom and gloom. Why? If Greece repudiates its debs and gets off the Euro - - hey, we have another Iceland (A country that can now live within its means after telling the world to “go fly a kite”). Of course the people who loaned the money have a different perspective on this. The rich euro counties loaned money to their poor neighbors without regard to their ability to repay the loans. Mobilizing the military to get them to pay, would solve the European unemployment problem and bring in some cash--hmmm.
In the United States, the government has decided that if you bought a home with nothing down, you entitled to government subsidies to help pay it off. No Money down for a GSE home. And if you are upside-down they will forgive that part of the loan. Of course if you buy a Fannie or Freddie home, no money down, and need to sell right away, you’re already upside-down (with the 6 percent Realtor's fees). On the flip side, if you lose your job, you can live in the home rent free for two years while they go through the foreclosure process.
The debts are real, and the expectations that the debtors will pay back the loans, is nothing more than wishful thinking. The governments of the world have only postponed the final outcome. Reality is just around the corner. To quote Obama, “We are not out of the woods yet,” - - I wonder if he’s noticed that the smoke is getting thicker?
Copyright 2012 by Jim Brubaker