Just how bad is the US financial situation?
Is this a harbinger of things to come in the US. ZeroHedge is always watching the trends and seeing the next big thing, but this is one staring us in the face but not recognised. We have seen California issuing vouchers in place of cash. We have seen some strange things including firing police and teachers.
ILLINOIS TEACHERS’ PENSION FUND CUTS RATE OF RETURN TO 8% FROM 8.5%
It’s amusing because these are the same teachers who were demanding, and received, higher pay – 17% higher over four years in fact – following a several day strike. It is even more amusing considering that in a fiscal year in which we saw QE2, Operation Twist 1 and 2, and LTRO 1 and 2, the nation’s largest pension fund, Calpers, managed to eek out a measly 1% gain (and this is including the end of June surge following the then announced European bailout which turned out to be yet another dud). It is, however sadly, most amusing, because it may be a harbinger of something truly sad: the advent of the "PIIG bailout" to America, when a US state demands a Federal bailout. We have seen how eager Europe has been to bailout its insolvent nations. We are next about to see just how "united" the US is when its own solidarity is tested as state after state repeat the European bailout experience. But hey: at least we have the dollar so all should be well.
Relevance to Bankwatch:
ZeroHedge has his own colourful way of describing things, but the bottom line is that you can’t have costs increasing by a substantial amount and not expect some effect on funding costs, He is going further and saying that this approach will result in default and a request for bailout from the Federal Government. Now that gets interesting and something the Washington politicians do not want to see.