Deficits Push New York Municipalities to Desperation

Deficits Push New York Municipalities to Desperation

"...Even as there are glimmers of a national economic recovery, cities and counties increasingly find themselves in the middle of a financial crisis. The problems are spreading as municipalities face a toxic mix of stresses that has been brewing for years, including soaring pension, Medicaid and retiree health care costs. And many have exhausted creative accounting maneuvers and one-time spending cuts or revenue-raisers to bail themselves out..."

 "...New York City’s annual pension contributions have increased to $8 billion from $1.5 billion over the past decade..."

"...Three percent of New York property tax collections were used to pay pension costs in 2001; by 2015, pension costs are expected to eat up 35 percent of property tax collections..."

From John Mauldin's 'Print or Perish' post

From John Mauldin's 'Print or Perish' post (italics are mine):

"...Germany is in a game where the costs of leaving the euro, or a real euro break-up, are extremely high. But the costs of bailing out the profligate members of the Eurozone are also extremely high. Either way the cost is formidable. It is not a choice of whether they will bear a huge cost burden, but just what form that burden takes.

The Germans would like the rest of Europe to get their budgets and deficits under control BEFORE they have to accept those costs. Not getting those agreements means that there will be no end to the amount of money Germany will have to pay. It will all too soon be enough that it would put their own credit rating at risk. They can envision how that works out. Without real spending controls, what disciplines a nation to not spend as much as it can get away with?

What Germany wants is for some mechanism to insure (and assure their voters) that the rest of Europe will control their deficits. And that means some type of European-wide control on spending and for governments to give up their sovereignty in exchange for the backing of Germany and/or the ECB. Otherwise, go ahead and default and see how that works out for you.

That is a perfectly rational position. But it is a huge gamble, as allowing the crisis to go a “bridge too far” would mean an economic crisis of biblical proportions, from which the recovery would be long and brutal.

But what does Germany have to lose by pushing it? Simply giving in without some sort of real controls in place for national deficits is not a solution from the German taxpayer point of view. Allowing the ECB to print without real fiscal guarantees from the various beneficiary governments simply postpones the inevitable and means a great deal of cost in the meantime..."

Disclosure: Long FAZ.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***

Added to my FAZ position.

On Wednesday, my entry stop was triggered in the FAZ. I am now long 2 units (out of a possible 10), at $43.71.

I am offering out 1 lot in the high $60s and 1 lot in the high $70s. I will watch the chart and the headlines out of Europe for opportunities to add to or to lighten up my current position.

I will become interested in FAS in the $20s.

Disclosure: Long FAZ.
***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security...trade at your own risk...my positions my change at any time without notice***

Articles of Interest, 11/17/11

Words of a euro doomsayer have new resonance