A city in California on the brink of bankruptcy. Its police officers and firefighters want to retire to lock in retirement benefits. Pension plans around the country underfunded as millions preparing to retire. Now the municipal bond market locked up and people can't access their capital without taking huge losses.
Where is America today? On the surface everything seems fine. Below the surface debt instruments are crashing. Residential RE values are crashing. Commercial RE values are crashing. Pension funds are underfunded. Cities are levered up and now having trouble meeting debt obligations. Financial institutions are paying more than subprime borrowers in interest for equity injections. Retailers are shutting stores and going bankrupt(SharperImage today). Cities and states are slashing budgets around the country but seeming can't slash their debt. Teachers are being asked for paycuts. Police officers are being asked for paycuts. Firefighters are being asked for paycuts.
And inflation is heating up?
How do you think those drivers on that bridge in Minnesota felt about the strength of the bridge just before it collapsed?
The question is whether the integrity of credit on a financial system is the equivalent of a structural beam for an interdependant support system.