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alstry (35.96)

Alert.....Municipal Meltdown!!!

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September 26, 2008 – Comments (8)

This is something I have been warning about that none of our politicians are addressing....yet

From the WSJ:

Debt investors are nervous lately. Borrowing is expensive and hard for cities, states, hospitals and turnpikes nationwide. Such extra costs will likely be met by raising taxes in coming months.

The yield escalation has been striking. According to a Securities Industry and Financial Markets Association index, high-quality municipal bonds rose to 7.96% Wednesday, from 5.15% in the prior week and 1.79% the week before that.

Municipal bonds have historically yielded less than Treasurys because investors don't have to pay taxes on munis. But now 30-year municipal bonds yield about 120% of 30-year Treasurys. That ratio is "about as high as it's ever been," says Matt Fabian, senior municipal analyst at Municipal Market Advisors.

The municipal bond market is about $3 Trillion dollars.  $3 Trillion dollars.  Do you really think a $700 Billion dollar Wall Street welfare package will have any impact on this much larger issue???

Where the f*^k are our politicians thinking?????  If cities with taxing authority are having trouble borrowing from the non banking markets.....this problem has spread much further than the limited nonsense package they are quibbling over.

Save the Federal Government....it is evident that much of the economy is now insolvent.

We must restructure and resturcture right now....or else the nation will systematically shut down....very very soon.  The municipal debt market is melting down and not a single politician is addressing the issue.

How many hundreds of billions will be required to bail out cities and states???  What about credit cards????  What about commercial real estate debt?????  Would about private equity bridge loans that have become bridges to nowhere????

The mortgage meltdown is morphing into a debt meltdown.....and our polticians are bickering how much money we should give Wall Street?????  My guess is that a much larger crisis arises next week......don't say you weren't warned.

Wouldn't it be nice if our politicians actually addressed the problem and simply not try to had over $700 Billion to their largest contributors?????

At this point, it has become clear that our President and many of our politicans on both sides don't give a damm about the American people and are simply acting in ways to enrich themselves and their buddies as our cities are about to implode financially.

Evil trimuphs when the good do nothing.

 

8 Comments – Post Your Own

#1) On September 27, 2008 at 9:11 AM, alstry (35.96) wrote:

The above is an example when others lose trust in ones ability to repay.

Right now our idiotic politicians are contemplating a plan to borrow $700 Billion dollars that will do nothing to pay down principal.

If the current plan goes through, it is very possible that the world will take a similar reaction to our Federal Debt.  That will be a $10 Trillion dollar issue and cause interest rates on many debt instruments to skyrocket.

If that happens, our economy will crash into the abyss as few will be able to service debt as incomes implode.

Until we begin restructuring our debt...expect the sprial downward to accellerate.

THIS WEEK WE JUST SCREAMED TO THE WORLD THAT WE CAN'T PAY OUR CURRENT DEBTS................

what do you think will happen if we borrow an additional $700 Billion.............oh!!!!!!!!!!!

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#2) On September 27, 2008 at 10:31 AM, jegr5347 (< 20) wrote:

I say borrow the 700bill and then have the fed default and restructure all national debt. If the world economy is going down the tubes, might as well ride it to the end.

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#3) On September 27, 2008 at 1:18 PM, mliu01 (< 20) wrote:

Alstry, no worry. Have you heard that printing press. I know  so many don't believe we will do it.

hahah, We will have to do it.  why should we pay interest on our own money anyway? The system does not work. It need a big change.

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#4) On September 27, 2008 at 8:05 PM, Nainara (< 20) wrote:

That's quite a jump in two weeks. It looks like this is as high as the yield has been since the early 90s.

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#5) On September 27, 2008 at 11:14 PM, dexion10 (27.74) wrote:

I've been thinking about the munis for some time. Taxes will go up and more municipalities will actually file for bankruptcy.

That said the current interest rate spread on munis is extremely stressed by the threat of a market crash next week.  If we don't crash the spread will shrink significantly.

That said I am EXTREMLEY concerned that the shrinking money supply will have and the potential for a eventual crash later if not sooner.

The failure of the wholesale banking  (hang it on someone elses book)  model means that the money supply will likely shrink. Further reduced leverage by Goldman and Morgan Stanley should affect many asset classes negatively. 

All this should mean that there is probably not enough money to repay the outstanding debts in the financial system. We should see massive defaults ... unless something changes - some innovation puts more money in play.

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#6) On September 27, 2008 at 11:15 PM, dexion10 (27.74) wrote:

I've been thinking about the munis for some time. Taxes will go up and more municipalities will actually file for bankruptcy.

That said the current interest rate spread on munis is extremely stressed by the threat of a market crash next week.  If we don't crash the spread will shrink significantly.

That said I am EXTREMLEY concerned that the shrinking money supply will have and the potential for a eventual crash later if not sooner.

The failure of the wholesale banking  (hang it on someone elses book)  model means that the money supply will likely shrink. Further reduced leverage by Goldman and Morgan Stanley should affect many asset classes negatively. 

All this should mean that there is probably not enough money to repay the outstanding debts in the financial system. We should see massive defaults ... unless something changes - some innovation puts more money in play.

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