Before
you read the following news story out of imploding California, I offer the following excerpt
from our “New Normal” webpage at www.polestarcomm.com:
“… The very tangible and inevitable effects of the devolving dynamics of
this RE “Bubble Bursting” conundrum (until its eventual wash-out) will be the
primary causation of a years long interlinked series of psychologically
depressing events:#1 continued suppression of interest rates causing a continued punishment of savers (forcing the gullible ones to the equity markets) until they are totally wiped out when the “Bond Bubble” finally bursts, after the "Great Deception of 2012" has finally run its course,
#2 successive QE's will artificially inject capital into the equity markets fostering totally unwarranted rallies (which will wipe out all the bears, who are actually right) and congruently pull in all the disenchanted bond holders who will then be totally wiped out when the equity markets crash just before the 'Bond Bubble' bursts,
#3 continued inflation of food and energy prices and a continued deflation of all Real Estate prices in 'absolute' terms for the next 12 to 24 months and then a continued decades-long deflation of "Bubble" priced RE in 'inflation adjusted' terms into the 2022 to 2027 time-frame,
#4 continued inflation in the cost of and pricing of all professional services precipitating a continued deflation of quantity and quality of those very services,
#5 continued inflation of all taxes to raise money from the strapped middle classes that will not be sufficient to fund the US Government's expenditures in a period of contracting incomes and GDP, congruent with horrifically expensive Wars and planned Wars. So that, there will then be an accelerated deflation of the quantity and quality of all Government services and a near severance of the US Government’s Social Safety Nets installed in the 30’s by a once caring and socially responsive National political class of Democrats,
#6 continued inflation in the number of Corporate and individual bankruptcies caused by the continued inflation in the absolute numbers of the newly unemployable, as more and more jobs are outsourced or taxed and regulated into oblivion,
#7 all of the above will insure the US Government’s continued bailing out of the financial institutions and banks, which will be financed by the accelerating abandonment of individuals as the ‘Safety Nets’ of States and the US Government are shredded,
#8 the net effect will be a resurgence of the ‘Misery Index’ of the 70’s and a continued surge in all inflation hedges – most especially Gold and Silver!
The "Age of Frugality"
Any company that ignores the emotional impact of this “New Normal” on the average US consumer or investor will likely see their market share progressively shrink and their corporate visibility diminish….”
The
following horror story is from:
What Austerity Looks Like
Bankrupt San Bernardino’s new, skeletal government
Jeremy Rozansky; 22 October 2012
“Three interconnected forces brought the working-class, inland Southern
California city of San Bernardino
to insolvency:
a burst housing bubble and lethargic economic growth; high police and
firefighter salaries mandated by the city’s
charter; and compounding pension obligations. Bankruptcy should give San Bernardino leverage
to deal with the last two, but the big, structural changes required will not be
easy or pleasant. Absent such changes, though, salaries and pensions will
continue to grow faster than the city’s revenues, crowding out most other
government functions and services. San
Bernardino offers a telling illustration of
austerity’s causes and effects: a tragic failure to think beyond the short term
eventually necessitates painful reforms. We already know something of what San Bernardino’s government will look like in the age of austerity. The city, with a poverty rate equivalent to Detroit’s and a homicide rate that has quietly surpassed Chicago’s, declared a fiscal emergency in early July and officially filed for bankruptcy on August 1. Deferring payments to bondholders just to make payroll, the city has been forced to trim its budget radically.
As a bridge to the bankruptcy proceedings, interim city manager Andrea Miller attempted to reduce the deficit by proposing a new budget called a pre-pendency plan. Her austerity budget, which passed with only a few changes after much haggling, will form the basis of the plan submitted to the bankruptcy court. The city projects a $45.8 million budget deficit, which the pre-pendency plan would reduce to $7.5 million by making “draconian” and “catastrophic” cuts, in the words of some city council members. Even then, the budget wouldn’t be balanced, and the plan doesn’t address an $18 million cash deficit from the previous fiscal year. Approximately $7 million in deficit reduction comes from transfers, either from special funds—for, say, road work or sewer repair—to the city’s general fund or from the federal government. The city would save another $9.4 million by continuing a 10 percent pay reduction for some municipal workers. The remaining $21.9 million in reductions comes from drastic cutbacks to services or deferred payments, mostly to the pension fund.
In cutting overall expenditures nearly 25 percent, the city leaves virtually no department untouched—including city hall, which will operate with a skeleton crew. Since 2006, the mayor’s office has gone from ten employees to three, counting the mayor. The city eliminated six positions from its information-technology department, cutting to the point at which “core” functions would be threatened. The city has combined departments, contracted out services, and even closed down its successful Operation Phoenix program, an anti-crime initiative Mayor Pat Morris launched shortly after taking office in 2005. San Bernardino’s community-policing effort will thus lose its two headquarters, which also served as community centers. Three of the city’s four libraries will close, while layoffs will hit 32 parks department employees and one-third of the city’s code-enforcement officers.
These savings, however, won’t be enough to erase the deficit. San Bernardino spends about three-quarters of its budget on public safety—meaning police and firefighters. Very little in the police budget is devoted to non-personnel expenses, so the cuts inevitably affect staffing levels. The new budget leaves the department with 320 employees, down from 379. Most of the reductions were to civilian support staff, not sworn officers. But the police will have a great deal more work, especially now that the department will pick up the slack from laid-off code-enforcement officers. Residents can assume that crime rates will continue to climb, especially given the demise of Operation Phoenix.
The firefighters’ union has been the most stubborn and transparently self-interested in San Bernardino. The average firefighter earns about $150,000 per year, and the union has resisted making any salary concessions. The city manager’s initial proposal would have eliminated 20 positions and either closed down a battalion or implemented rotating brownouts (that is, temporary shutdowns) of stations. City council members, some elected with help from the firefighters’ union and many worried about angry constituents facing slower response times, postponed a decision to explore alternative proposals. According to the city, the San Bernardino Fire Department has among the highest call loads in the country for a department its size.
San Bernardino’s austerity plan leaves an atrophied city government, but essential functions remain in place. Crime will likely go up, but it won’t necessarily skyrocket. Greek-style looting and arson appear unlikely. Closing three of four libraries isn’t ideal, but it isn’t the end of civilization, either. At the same time, however, the deep cuts do make San Bernardino an even less hospitable place. Businesses will be even more skeptical about moving to a city where the government can’t afford to fill potholes or respond quickly to crimes because it has been compromised by decades of poor decision-making. Much of the city’s deficit reduction is in deferred payments that have recently earned the ire of the California Public Employees’ Retirement System and the Securities and Exchange Commission; under a “best-case scenario,” the budget is unlikely to be balanced even with these cuts and deferrals. San Bernardino can balance its budget only by boosting revenues, which requires more businesses, not fewer. It’s not clear how long the city can continue on this unsustainable path.
Perhaps bankruptcy will prove the ultimate salve, cutting away the structural inefficiencies (from pensions to high municipal salaries) that went unaddressed for years. The city’s options are now limited, because it waited too long to address these problems. The United States has many structural problems of its own—most notably Medicare—and, as San Bernardino shows, myopia is never recommended. San Bernardino is a tragedy—and a warning to the rest of the country.”
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