Doomsday politics

NY Post ^ | February 7, 2011 | Charles Gasparino

[Scanian]

High-profile Wall Street analyst Meredith Whitney's doomsday prediction that hundreds of billions of dollars in municipal bonds will evaporate in default over the next year has been condemned as improbable to irresponsible by just about anyone who knows anything about municipal finance.

Cities and states rarely default on their debt, and for her prediction to be accurate, the economy would have to be getting much worse rather than somewhat better, as most data show. It's hard to imagine even places like California, New York and New Jersey somehow deciding not to pay back bondholders this year; governors in each state want to issue more debt, and such a default would bar them from doing so for years.

Yet Whitney's speculation is being taken seriously by investors, who've dumped their municipal holdings in unprecedented numbers, suffering huge losses. Meanwhile, politicians of both the left and the right are using what Whitney herself has conceded is a guesstimate to advance a political agenda that in the end won't be good for investors or taxpayers.

Whitney's prediction became a political football about two weeks ago, when financier George Soros broadly agreed with her prediction during an interview. Then, a congressional subcommittee announced that tomorrow it would begin holding hearings on the municipal-bond-market tumult, the idea that states can file for bankruptcy and Whitney's effect on the entire bond-market mess.

[AvOrdVet]

The politicians with their blinders on, cheer and merrily chug the party train along... right off the cliff.

[SonOfDarkSkies]

And there is Soros, leading the way.

This is the nub of the war that the proponents of socialism are waging against the United States. They know full well that the greatest defense the U.S. has against socialism is the states themselves (i.e. if social programs are shoved down to the state level, their systemic failures will kill the employing states and its citizens will simply move to another state thereby requiring the state that had adopted socialism--like California--to abandon this silly, impractical idea.

Socialists like Soros and Obama know full well that socialism can only hide its deficiencies at the Federal level because (they wrongly believe) citizens cannot run when socialism fails.

Obama is too stupid to realize that citizens (individual and corporate) will run...to other countries. Soros know they will run, but he doesn't care because his goal was never socialism itself...he makes his living by destroying economies and then profiting by selling short the currencies on which they are based.

[Roccus]

But bankruptcy is a legislative cop out. It would relieve profligate state governments of the consequences of their actions, namely the difficulty of telling municipal workers and others living off the public trough that there isn't enough money to give them everything they want, and of making the unpopular choices of cutting budgets drastically or raising taxes.

"SNIP"

Plus, the municipal-bond investors who'd be getting burned aren't generally hedge-fund traders and other speculators, but individual investors and taxpayers who buy the bonds of the cities and states they live in to take advantage of the bonds' tax-free status. In other words, by upending the municipal-bond market, you're hurting real people.

Just like the "real people" that got hurt in the government sponsored melt down, the government "remedy" and the government take-over of the auto industry. IMO, the author's closing statement is the most telling and accurate..."Obviously, the politicians on both sides don't seem to care."

[brucek43]

If these profligate states are not bailed out it will be a short term mess. If they are it will be never ending...until the US is totally bankrupt.

[Lysandru]

I am a bit annoyed that Mr. Gasparino didn’t offer his own preferred solution. I obviously tend to agree with the “let them go bankrupt” option. But if that is unacceptable—and the Liberal alternative is unacceptable, then what is acceptable? What does Gasparino propose to do?

[mmercier]

Truck loads to tax free muni’s are held by the tax raising public officials that seek to shelter their income from the tax policies they implement on the peasant populations that summarily reelects them...

In effect, this is a real crisis.