Government

Illinois On Pace To Run $5 Billion Deficit

“Gaze upon the Illinois landscape today and things may seem OK. Schools opened last week, the roads are getting repaired, the state fair was held, the University of Illinois begins a new academic year tomorrow, the state government’s even paying its bills.

Enjoy this period of normality. It isn’t going to last much longer…”

-Tom Kacich, reporter/columnist at The News-Gazette (Champaign-Urbana), August 23, 2015

More bad news about Illinois’ fiscal health. Natasha Korecki reported on the Chicago Sun-Times website Monday:

Illinois is paying its bills – by court mandate — since Illinois lawmakers and Gov. Bruce Rauner were unable to reach a budget agreement. Rauner vetoed a Democrat-authored financial plan in June, saying it was out of balance by some $4 billion. The new fiscal year came and went July 1 without a new plan in place. Both sides say they’re willing to negotiate, but remain locked into their positions. Rauner wants a series of changes to benefit businesses and weaken unions in Illinois. Democrats oppose the proposals and say they shouldn’t be attached to a budget…

A recent analysis by Senate Democrats indicates that because of various contracts, decrees and court orders compelling spending, the state had already committed 90 percent of its revenues and was on pace to be $5 billion in the hole

(Editor’s note: Bold added for emphasis)

Kacich added from my old stomping grounds:

In May the Democrats who control the Legislature approved a budget that called for spending about $36.5 billion.

Republican Gov. Bruce Rauner vetoed it, calling it “unconstitutional” and “unbalanced.”

You want to see unbalanced?

Even without a constitutional budget in place, the state is still spending money, and eventually it could rise to a level of spending greater than the budget the Democrats sent him in May.

During a Senate hearing last week on an additional appropriation of $373 million for MAP grants for low-income college students — it passed and will go to the House for near-certain approval — Democratic legislators admitted the state is operating at a “spend rate” of 90 percent on a $38 billion budget

Anticipated revenue for the year, meanwhile, is the range of $32 billion, or $33 billion if the economy takes off.

Ugh…

(Editor’s note: Bold added for emphasis)

$36.5 billion was the proposed budget. It was vetoed. The state is currently operating at a 90 percent “spend rate” of a $38 billion budget. And anticipated revenue for the year is only $32-$33 billion.

Not good.

Kacich thinks a tax increase, “that may or may not be bigger than the one that was phased out on Jan. 1.,” is headed our way.

I think he’s right about that tax hike. And it’s something Illinoisans may want to take into account concerning their personal finances in the near future.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Kacich, Tom. “Tom Kacich: Enjoy the calm; the storm is on the way.” The News-Gazette. 23 Aug. 2015. (http://www.news-gazette.com/news/local/2015-08-23/tom-kacich-enjoy-calm-storm-way.html). 26 Aug. 2015.

Korecki, Natasha. “Comptroller: Illinois facing ‘severe cash shortage.’ Chicago Sun-Times. 24 Aug. 2015. (http://chicago.suntimes.com/news/7/71/903797/comptroller-illinois-facing-severe-cash-shortage). 26 Aug. 2015.

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Signs Of The Time, Part 87

It’s been interesting watching the run-up to the recent carnage on Wall Street.

For some time now, the “crash prophets” who correctly-called the housing market bubble and 2008 economic crisis have been warning the stock market was frothy, if not in bubble territory.

Meanwhile, the Pollyannas who didn’t see either of those events from the last decade convinced themselves that not only had the United States managed to get on solid footing again after the blatant “papering over” of the debacle that reared its ugly head seven years ago, but that U.S equities and their valuations were a fair reflection of an economic “recovery” that was charging “full-steam ahead.”

At the same time, the Pollyannas (with the assistance of the financial mainstream media) ridiculed the “prophets” at any chance they got.

Reminds me a lot of that time period from roughly 2004 to 2008, until the Pollyannas got spanked hard and many of their mouthpieces were put out to pasture.

Make no mistake about it, America’s financial crash is coming.

The powers-that-be can only “kick the can down the road” until the road runs out. And that time is almost here.

Is the recent stock market plunge the event that pushes us over the edge?

I’m not sure it is. That being said, the dive has resulted in some serious financial losses. Steve Goldstein, the D.C. Bureau Chief for the MarketWatch website, wrote this afternoon:

As of March 31, households and nonprofits held $24.1 trillion in stocks. That’s both directly, and through mutual funds, pension funds and the like. That also includes the holdings of U.S.-based hedge funds, though you’d have to think that most hedge funds are held by households.

Using the Dow Jones Total Stock Market index through midmorning trade, that number had dropped to $22.32 trillion.

In other words, a cool $1.8 trillion has been lost between now and the first quarter — and overwhelmingly, those losses occurred in the last few days…

(Editor’s note: Bold added for emphasis)

$1.8 trillion. Whew. After riding the bull for so long, it looks like the Pollyannas weren’t expecting the beast to pull an abrupt about-face… and gore them.


The White Stripes, Conquest (2007)
YouTube Video

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

Source:

Goldstein, Steve. “Households just saw $1.8 trillion in wealth vanish as stocks fall.” MarketWatch. 24 Aug. 2015. (http://www.marketwatch.com/story/households-still-hold-22-trillion-in-stocks-even-after-market-rout-2015-08-24). 24 Aug. 2015.

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My Thoughts On Chicago’s Financial Crisis

I know I’ve been blogging a lot about Chicago/Cook County/Illinois lately. Which should come as no surprise to regular Survival And Prosperity readers considering I’ve talked about how I was born on the West Side, was raised around that area, and lived on the Northwest Side until I moved to the northwest suburbs two years ago.

Both the Chicagoland area and Illinois have been on my mind a lot recently. I fear we’re on the verge of some major upheaval stemming from decades of fiscal mismanagement by policymakers from both sides of the political aisle (some might think this blog only targets Democrats- over the years I’ve demonstrated everyone’s “fair game”). And by verge, I mean in the coming weeks. Focusing on Chicago today, what might kick it off (regular observers have witnessed the crisis growing for some time now)? I suspect the following. From the Chicago Tribune website back on July 31:

At a news conference this week, the mayor would not rule out a politically unpopular property tax hike, saying he’ll wait to show his hand until September, when he rolls out “a full budget with all parts in there.”

(Editor’s note: Bold added for emphasis)

A good portion of the coming pain is going to be felt by the Chicago taxpayer. What kind of “pain” am I talking about? That which I’ve been blogging about for a couple of years now- new/higher fees, fines, and taxes, coupled with reduced government services. Last night’s post about potential revenue generators Chicago Mayor Rahm Emanuel and the City Council are mulling over (hat tip Fran Spielman of the Chicago Sun-Times) should give Chicagoans a better picture of what’s headed their way (a property tax hike and garbage collection fee look likely). Concerning cutbacks in government services, I think that’s already begun. For example, the manpower shortage in the Chicago Police Department (hat tip Second City Cop) that’s existed for some years now. Down the road, I predict the average Chicago taxpayer will find it increasingly difficult to afford living in the city, let alone doing it safely as local government struggles to provide effective, efficient services to constituents.

Now, it’s bad enough Chicago/Cook County/Illinois are in real financial trouble. But then there’s the legitimate concern of a slowing economy/recession being right around the corner, never mind that coming financial crash I started blogging about back on Memorial Day Weekend 2007.

So what’s a Chicago taxpayer to do? This former Chicago resident picked up and left the city limits in 2013. Concerned about future tax and public safety liabilities, my girlfriend and I reluctantly departed our “suburb in the city” and moved into a house in a not-too-far away authentic suburb. Granted, we’ll still be on the hook for county and state problems, but it’s what makes sense for us in the short-term.

As much as I blast Chicago on Survival And Prosperity (“tough love”), I’m not convinced the city’s going to go “belly-up.” I think there’s a good chance it could be run by something similar to the Emergency Financial Control Board in New York City from 1975 until 1986 (talked about here back in April), but even a setback like that won’t be the end of the “City By The Lake,” just like it wasn’t for the “Big Apple.” I do predict city life is going to get real hairy once the “balloon goes up,” but I think that will be the case in a lot of urban areas nationwide.

That’s my two cents on Chicago’s financial crisis- for now. Chicago readers of this blog- what are you planning to do about the crisis? Or, what are you already doing? Maybe you don’t think a crisis exists? Please share your thoughts or experiences in the “Comments” section of this post, as I’d really like to talk more about this going forward.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

Source:

Dardick, Hal. “Emanuel needs $754M more to make ends meet.” Chicago Tribune. 31 July 2015. (http://www.chicagotribune.com/news/local/politics/ct-rahm-emanuel-chicago-budget-shortfall-met-0801-20150731-story.html). 21 Aug. 2015.

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Chicago Taxpayers To Be Hit With Property Tax Hike, Garbage Collection Fee?

Chicagoans- think all the recent talk of new/higher fees, fines, and taxes is garbage?

You’re right, in a way.

I just finished reading some material from Chicago Sun-Times City Hall reporter Fran Spielman over on that paper’s website.

Chicago taxpayers had better be prepared for their pocketbooks to take a hit in the coming months.

Spielman talked Sunday afternoon about the City’s need for $754 million in new revenue, and the options submitted by City Council to Mayor Rahm Emanuel to help “generate” it. That included:

• Property tax hike
• Garbage collection fee
• Ride-hailing companies (Uber) surcharge
• Congestion fee
• Bicycle license
• Gas tax hike
• Sales tax hike
• City income tax

Which ones stand a good chance of being put into play by City Hall? Spielman wrote:

Ald. Carrie Austin, outspoken chairman of the City Council’s Budget Committee, put Emanuel on the spot during the mayoral campaign when she called a post-election property tax hike inevitable. But she was right — especially now that a Circuit Court judge has overturned Emanuel’s plan to save two of four city employee pension funds.

The only question is, how much will property taxes be going up?

Emanuel has already offered to raise property taxes by $225 million for the Chicago Public Schools, provided teachers accept the equivalent of a 7 percent pay cut and the state reimburses CPS for “normal” pension costs…

(Editor’s note: Bold added for emphasis)

In a separate Sun-Times piece from last night, Spielman added:

Ald. Pat O’Connor (40th), Emanuel’s City Council floor leader, said it’s no longer an issue of whether Chicago will have a garbage-collection fee. The question is, how much?

“That’s where the real discussion will take place. It will be around the cost, rather than the enablement. We need to see the numbers that show how much we’ll save and how much it would generate,” he said…

(Editor’s note: Bold added for emphasis)

Property tax hike. Check. Garbage collection fee. Check.

Waiting to see what actually transpires. In the mean time, Chicago taxpayers might want to check out those Spielman articles to get a better idea of what might be in store for them shortly.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Spielman, Fran. “Property tax hike, garbage fee, congestion tax all on the table.” Chicago Sun-Times. 16 Aug. 2015. (http://chicago.suntimes.com/news/7/71/876236/chicago-budget-revenue-tax-ideas). 20 Aug. 2015.

Spielman, Fran. “Chicago homeowners likely to pay for garbage pickup soon.” Chicago Sun-Times. 19 Aug. 2015. (http://chicago.suntimes.com/news/7/71/891070/garbage-collection-fee-looks-likely-chicago-homeowners). 20 Aug. 2015.

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Survey: Illinois Runner-Up State For ‘Worst Climates For Small Business’

Continuing Tuesday’s discussion about Illinois not being business friendly, I spotted a piece last night on the MarketWatch website entitled, “The best state and city for small business are…” Caitlin Huston reported yesterday afternoon:

The best state for small business owners is Texas and the worst is Rhode Island, according to an annual survey revealed Tuesday.

The survey, conducted by technology marketplace Thumbtack, contends that the friendliest states and towns for small businesses offer easier or non-existent licensing requirements. On a city basis, the report called Manchester, N.H., the best and Hartford, Conn., the worst for small-business climate…

Huston noted that survey responses came from 17,633 small businesses, with most having 5 or fewer employees.

As for Illinois? It’s the state runner-up under the “Worst Climates for Small Business” category, losing out to Rhode Island but ahead of Connecticut, California, and New York, in that order.

From the Thumbtack.com survey web page:

Small business owners gave California, Connecticut, Illinois, and Rhode Island an “F,” while Massachusetts, Maryland, and New York earned a “D” grade…

(Editor’s note: Bold added for emphasis)

Digging deeper into the Thumbtack.com Small Business Friendliness Survey, the “Land of Lincoln” received an “F” for “ease of starting a business” and “overall friendliness.”

Nice. Real nice. Congratulations Illinois policymakers (not Rauner’s fault)- local and at the state level- on a “job” well done.

Then again, what would one expect from folks (not all of them, to be fair) who have never started/run a business in their lives?

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Huston, Caitlin. “The best state and city for small business are…” MarketWatch. 18 Aug. 2015. (http://www.marketwatch.com/story/the-best-state-and-city-for-small-business-are-2015-08-18). 19 Aug. 2015.

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Wednesday, August 19th, 2015 Business, Government, Main Street No Comments

Exit Of Illinois Businesses Picking Up Steam?

Illinois companies are leaving the state for more business-friendly environments.

A tale I come across on a regular basis these days, despite all the sustained propaganda to the contrary.

Marissa Bailey reported on the CBS 2 (Chicago) website Monday regarding the situation of Chicago-based Hoist Liftruck, which just announced they’re departing for Indiana:

Gov. Rauner ran his campaign on what he could do to keep small businesses in Illinois. On Monday, he was begging small businesses to stay in the state.

CBS 2’s Marissa Bailey talked with a business owner who is leaving Illinois for a better deal.

Its 300 employees — most in a trade – work hard in a warehouse the size of two city blocks. But it’s the company’s home for only a few more months.

“I think if anyone looks at the numbers, they would make the same decision I did,” President and CEO Marty Flaska says.

He’s moving his company to East Chicago, Ind. early next year. Flaska says being a manufacturer in Illinois just got too hard. His biggest reasons involve the worker’s compensation system here, the cost of property taxes and lastly, he says, “the uncertainty about income tax in the state and where it may go.”

Flaska estimates that by moving he can save $6 million upfront and $2 million each additional year, thanks to property incentives, state grants and tax cuts in Indiana…

(Editor’s note: Bold added for emphasis)


“Chicago Business Bailing On Illinois”
CBS 2 Video

On the heels of that Hoist Liftruck announcement, Bob Adelmann added over at The New American magazine website:

On Thursday, Hoist Liftruck’s announcement that it was moving more than 500 manufacturing jobs to Indiana was just the latest in a long and almost fevered list of other companies seeking to escape Illinois’ outrageous workers compensation costs and high taxes.

On July 14 machine-maker DE-STA-CO said it was moving 100 jobs to Tennessee. The next day energy processor Bunge North America said it was shutting down its plant in Bradley, Illinois, and laying off 210 workers. The day after that General Mills pulled the plug on its manufacturing plant in West Chicago, terminating 500 workers.

A week later Mitsubishi Motors announced it was closing its production facilities that made its Outlander, ending 918 jobs there, even though there was the threat it would have to return some of the $9 million Illinois paid to get them to move there a few years ago.

Five days after that Mondelez (makers of Oreos and Chips Ahoy) said it was laying off 600 manufacturing jobs at its Chicago South Side facilities.

On August 12 Kraft Heinz, within weeks of their merger, announced its goal of saving $1.5 billion by the end of 2017. First to go were 700 jobs at Kraft’s Northfield facility. The very next day Motorola Mobility announced it was cutting its workforce in Chicago by 25 percent, eliminating another 500 jobs…

Adelmann also noted:

Chief Executive Magazine’s “2014 Best and Worst States for Business” report ranked Illinois 48th out of 50…

I dug up the most recent edition of that same report. The results of Chief Executive’s 11th annual survey have Illinois ranked again as the 48th “worst state for business” in 2015, following New York and absolute “worst state” California.

California, New York, and Illinois. What could those three possibly have in common that might account for such low marks?

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Bailey, Marissa. “For One Chicago Business, Illinois Became Too Inhospitable.” CBS 2. 17 Aug. 2015. (http://chicago.cbslocal.com/2015/08/17/for-one-chicago-business-illinois-became-too-inhospitable/). 18 Aug. 2015.

Adelmann, Bob. “Trickle of Companies Leaving Illinois Turning Into a Flood.” The New American. 14 Aug. 2015. (http://www.thenewamerican.com/economy/sectors/item/21405-trickle-of-companies-leaving-illinois-turning-into-a-flood). 18 Aug. 2015.

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Tuesday, August 18th, 2015 Business, Government, Income, Taxes No Comments

Chicago Public Schools Budget: Property Taxes Hiked To The Max

“Property tax hikes.” Something Chicagoans better get used to hearing in the coming years. Hal Dardick, Heather Gillers, and Juan Perez, Jr., reported on the Chicago Tribune website last night:

Chicago Public Schools unveiled a budget Monday meant to pressure Gov. Bruce Rauner and state lawmakers into providing nearly a half-billion dollars in pension relief, a gambit school officials warn will bring painful cuts if help doesn’t arrive by Jan. 1.

In addition to help from the state, the $5.7 billion operating budget relies on extensive borrowing, an influx of tens of millions in dollars in surpluses from special city taxing districts and an increase of the district’s property tax

To help patch over a budget gap the district said exceeds $1.1 billion, CPS will raise its property taxes to the maximum amount allowable — resulting in a $19 tax bill bump for the owner of a $250,000 home, the district said — while pushing $200 million in debt into the future…

(Editor’s note: Bold added for emphasis)

$19 here, a few bucks there, and pretty soon all these “bumps” start to add up, leading to mass frustration among Chicago taxpayers. And’s this particular increase isn’t a one-off either. From the Tribune piece:

And if Springfield does comes through — which is far from a sure thing — [Chicago schools chief Forrest] Claypool said the district would still need concessions from unions and larger tax hikes in years to come to keep up with the cost of ballooning pension payments…

(Editor’s note: Bold added for emphasis)

Like I said, “mass frustration.”

At what point does it all boil over?

Chicago taxpayers should probably read this article in its entirety to get a clearer picture of what looks to be in store for their pocketbooks in the near future and farther down the road. You can find the piece on the Tribune website here.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Jeremy Grantham: Stock Market ‘Ripe For Major Decline’ In 2016

Jeremy Grantham, the British-born investment strategist and founder/former chairman of Grantham, Mayo, Van Otterloo & Co. (oversees $117 billion in client assets as of June 30, 2015), is the last “crash prophet” I’ll be talking about this weekend. Regular readers of this blog know Grantham, whose individual clients have included current Secretary of State John Kerry and former Vice President Dick Cheney, has warned for a year now that he believes bubble territory for the S&P 500 is about 2,250 (Friday it closed at 2,078).

However, Grantham has now offered up a potential timeframe for a “major decline” in equities.

Robin Wigglesworth reported on the Financial Times (UK) website Thursday:

A well-known fund manager who foresaw the Japanese crash, the dotcom bubble and the global financial crisis has predicted that markets will be “ripe for a major decline” some time in 2016, potentially triggering government bankruptcies.

Jeremy Grantham , founder and chief investment strategist of GMO, a $118bn investment house based in Boston, expects the stock market to continue to march higher in the coming year, eventually sucking in retail investors and setting up a serious decline around the time of the US elections in late 2016.

The famously bearish and often prescient money manager said this could trigger a “very different” type of crisis, because many governments had become considerably more indebted and much of the liabilities had shifted to the balance sheets of central banks.

Given that central banks were able to create money to recapitalise themselves, this “could be a crisis we could weather”, Mr Grantham said. “If not, then we’re talking the 1930s, where you have a chain-link of government defaults.”

(Editor’s note: Bold added for emphasis)

A disturbing piece by Wigglesworth, which you can read in its entirety on FT.com here.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

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Chicago Police ‘Stop-And-Frisks’ To Plummet After ACLU Agreement?

“Pro active policing is now dead in Chicago. Put on the blinders boys and girls and just handle your calls. No more stops on the street or hand wavers. Give Chicago the police department they deserve.”

-Comment on the popular Chicago police blog Second City Cop, August 8, 2015

ABC7 News (Chicago) reported on its website Friday night that the Chicago Police Department has reached “an agreement with the ACLU over so-called ‘stop-and-frisks.’” From the piece:

In March, a report from the ACLU of Illinois found Chicago police officers disproportionately targeted blacks and other racial minorities in hundreds of thousands of stop, question and frisk encounters. The ACLU accused the Chicago Police Department’s policy of feeding racial profiling and threatened a lawsuit.

The agreement avoids litigation and will lead to a change in CPD procedures, including more record-keeping, police officer training, and public disclosure on traffic stops…

The city and department have agreed to collect additional data about investigatory stops. That includes officers’ names and badge numbers, the race, ethnicity and gender of the person stopped, the reason for the stop, the location, date and time of the stop and other details.

That information will be given to the ACLU and Former U.S. Magistrate Judge Arlander Keys, who will oversee the agreement’s implementation and release a public report twice a year. Judge Keys will be able to look at where the stops are occurring and who is making them, down to the individual officer

(Editor’s note: Bold added for emphasis)

Will Chicago be heading down the same path as New York City as a result of this new “stop-and-frisk” agreement with the ACLU? Consider the following from the CBS2 News (New York City) website back on March 4:

New guidelines for the stop, question and frisk policing method were released to NYPD officers this week, and the patrol union said the guidelines will make the officers’ jobs more difficult.

The Patrolmen’s Benevolent Association is not happy.

“It’s confusing police officers where it’s coming to a point where we’re going to have to travel with legal counsel to articulate what we’re supposed to do,” said PBA President Patrick Lynch.

The new policy said in order to conduct a stop, an officer “must have individualized, reasonable suspicion that the person stopped has committed, is committing, or is about to commit a felony or penal law misdemeanor.”

A “mere suspicion or a hunch” is not enough for a stop, the memo said.

A conclusion that someone is acting suspiciously based on “furtive movements,” or a person’s mere presence in a “high-crime area,” is not enough to warrant a stop by an officer under the new guidelines. Stops and frisks were permitted for such reasons alone in the past, according to published reports.

The guidelines also forbid stops by an officer based on a generalized description of a suspect – such as one that includes only a race and an age range.

“A person may not be stopped merely because he or she matches a generalized description of a crime suspect, such as an 18- to 25-year-old black male; if physical description is the only factor relied on by the officer, it must be more specific than that to form a sufficient basis for a stop,” the guidelines said.

The guidelines further said that a frisk is not always automatically acceptable whenever an officer stops someone.

“The officer must have an independent basis to reasonably suspect that a person who has been stopped is armed and dangerous in order to frisk that person,” the guidelines said.

Officers will also have to write a narrative explaining what justified the stop, question and frisk…

On June 5, Kerry Burke, Larry McShane, and Rocco Parascandola reported on the Daily News (New York) website:

A dramatic drop in stop-and-frisk encounters has emboldened criminals and made cops more reluctant to take proactive police action, even as murders and shootings are on the rise in the city.

The frightening message — echoed by police supervisors and union leaders — comes as stop-and-frisk encounters are on pace to plunge by 42% this year, with 20,000 fewer street stops.

There were 11,652 stops across the city through June 3 — projecting to roughly 28,000 for the year, records obtained by the Daily News show. As the number of stops fell, the number of murders spiked 19.5% during the first five months of the year, the number of people shot is up 9.2% and the number of shooting incidents jumped 9%.

“What you’re seeing now are the perps carrying their guns because they’re not afraid to carry them,” said Ed Mullins, head of the Sergeants Benevolent Association. “We’ve created an atmosphere where we’ve handcuffed the police. We are sitting back, taking a less proactive approach.”

Mullins said the city’s criminal element has been operating without fear while cops have been somewhat neutered in the last two years — and he wasn’t the only one to raise the issue…

City cops, citing increased scrutiny from the NYPD’s inspector general, the state attorney general and City Hall, say the cutback on stops is about self-preservation.

“Everyone is afraid to make stops,” said one Brooklyn police supervisor. “No one wants to get jammed up. They’re telling us the stops have to be quality stops. But if you make a stop, and you think it’s a good one, and the guy has nothing on him, is that a good stop?”

(Editor’s note: Bold added for emphasis)

Time will tell if the “Windy City” goes the way of the “Big Apple” concerning “stop-and-frisks.”

If it does, Chicago blog readers shouldn’t be surprised if there’s also a corresponding jump in crime.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

“CPD agrees to ‘stop-and-frisk’ reforms, avoids ACLU lawsuit.” ABC7 News. 7 Aug. 2015. (http://abc7chicago.com/news/cpd-agrees-to-stop-and-frisk-reforms-avoids-aclu-lawsuit/909740/). 8 Aug. 2015.

“PBA: New Stop-And-Frisk Guidelines Will Confuse Officers, Make Jobs Harder.” CBS2 News. 4 Mar. 2015. (http://newyork.cbslocal.com/2015/03/04/pba-new-stop-and-frisk-guidelines-will-confuse-officers-make-jobs-harder/). 8 Aug. 2015.

Burke, Kerry, McShane, Larry, and Rocco Parascandola. “EXCLUSIVE: Huge drop in stop-and-frisk as NYC crime increases raises fear that cops are reluctant to confront criminals.” Daily News. 5 June 2015. (http://www.nydailynews.com/new-york/nyc-crime/exclusive-big-fall-stop-and-frisk-criminals-bolder-article-1.2247406). 8 Aug. 2015.

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Sunday, August 9th, 2015 Crime, Government, Public Safety, Self-Defense No Comments

Jeremy Grantham Identifies 10 ‘Potential Threats To Our Well-Being’

Jeremy Grantham, the British-born investment strategist and founder/former chairman of Grantham, Mayo, Van Otterloo & Co. (oversees $117 billion in client assets as of June 30, 2015), just released his latest investment letter on the GMO website. Writing about the second quarter of 2015, Grantham, whose individual clients have included current Secretary of State John Kerry and former Vice President Dick Cheney, focused on ten “potential threats to our well-being” (echoing a Morningstar piece I blogged about on July 14). These threats are (in his own words):

1. Pressure on GDP growth in the U.S. and the balance of the developed world: count on 1.5% U.S. growth, not the old 3%
2. The age of plentiful, cheap resources is gone forever
3. Oil
4. Climate problems
5. Global food shortages
6. Income inequality
7. Trying to understand deficiencies in democracy and capitalism
8. Deficiencies in the Fed
9. Investment bubbles in a world that is, this time, interestingly different
10. Limitations of homo sapiens

Grantham talked about each threat in detail. I’ll be focusing on those items I think would interest Survival And Prosperity readers.

Regarding pressure on U.S./developed world GDP growth, Grantham wrote:

Factors potentially slowing long-term growth:
a) Slowing growth rate of the working population
b) Aging of the working population
c) Resource constraints, especially the lack of cheap $20/barrel oil
d) Rising income inequality
e) Disappointing and sub-average capital spending, notably in the U.S.
f) Loss of low-hanging fruit: Facebook is not the new steam engine
g) Steadily increasing climate difficulties
h) Partially dysfunctional government, particularly in economic matters that fail to maximize growth opportunities, especially in the E.U. and the U.S…

On “plentiful, cheap resources” being gone:

All in all I am still very confident, unfortunately, that the old regime of irregularly falling commodity prices is gone forever…

On oil:

Oil has been king and still is. For a while longer… Now, as we are running out of oil that is cheap to recover, the economic system is becoming stressed and growth is slowing…

Grantham added:

The good news is that with slower global growth and more emphasis on energy efficiency and a probability of some carbon tax increases, global oil demand may settle down to around 1% a year for the next 10 to 15 years. At that level of increase in demand, even modest continued increases in recovery rates will keep us in oil even if no new oil is found for the next 15 years.

Beyond 15 years, the resource and environmental news gets better because cheaper electric vehicles and changes in environmental policy will enable steady decreases in oil demand…

On global food shortages, Grantham referred to some recent research. He wrote:

I was completely gruntled by a report last month from the Global Sustainability Institute of Anglia Ruskin University in the U.K. This unit is backed by Lloyds of London, the U.K. Foreign Office, the Institute of Actuaries, and the Development Banks of both Africa and Asia – a grouping with a very serious interest in the topic of food scarcity and societal disruptions to say the least. The team of scientists used system dynamic modeling, which uses feedbacks and delays, to run the business-as-usual world forward 25 years. Without any new and improved responses from us, the results are dismaying: Prices of wheat, corn, soybeans, and rice were all predicted to be at least four times the levels of 2000. (They are currently about double.) The team concluded, “The results show that based on plausible climate trends and a total failure to change course, the global food supply system would face catastrophic losses and an unprecedented epidemic of food riots. In this scenario, global society essentially collapses as food production falls permanently short of consumption.” And you thought my argument on food problems of the last three years was way over the top!

Grantham is still not impressed with the Federal Reserve. He predicted:

And what of the current Fed regime – the Greenspan-Bernanke-Yellen Regime – that promotes higher asset prices and lower borrowing costs, which facilitate stock buybacks amongst other speculative forces? Well, this regime, too, will change. Regression of regime, if ou will. Painfully, politicians, the public, businessmen, and possibly even some economists will recognize the current regime as a failed experiment.

And on the “limitations of homo sapiens”? Grantham observed:

Not only does our species have a strong predisposition to be optimistic (or bullish) – it is probably a useful survival characteristic – but we are particularly good at listening to agreeable data and avoiding unpleasant data that does not jibe with our beliefs or philosophies. Facts, whether backed by 97% of scientists as is the case with man-made climate change, or 99.9% as is the case with evolution, do not count for nearly as much as we used to believe. For that matter, we do a terrible job of planning for the long term, particularly in postponing gratification, and we are wickedly bad at dealing with the implications of compound math. All of this makes it easy for us to forget about the previously painful market busts; facilitates our pushing stocks and markets on occasion to levels that make no mathematical sense; and allows us, regrettably, to ignore the logic of finite resources and a deteriorating climate until the consequences are pushed up our short-term noses.

The take-away from all of the above?

• Grantham forecasts U.S./developed world GDP growth to slow to 1.5 percent
• Investment opportunities may exist in commodities, agriculture, and other things food-related
• The outcome of the Fed’s current monetary policies will be painful
• Human nature- in particular, our unbridled optimism and focus on short-term gratification- will continue to result in asset bubbles and longer-term problems outside of the financial markets/economy/larger financial system

You can read Grantham’s latest investment newsletter on the GMO site here.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

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Chicago Requires $754 Million In New Revenue, Cuts To Balance Books

For a couple of years now, regular readers of Survival And Prosperity have witnessed me blog about higher fees/fines/taxes and reduced government services as Chicago’s financial reckoning day draws closer.

I fear the pace of all this is about to pick up.

Hal Dardick reported on the Chicago Tribune website late Friday afternoon:

Mayor Rahm Emanuel must come up with at least $754 million in new revenue and budget cuts to balance the city’s books, according to preliminary 2016 budget estimates the administration released Friday.

A little less than half — $328 million — would cover increased payments to the police and fire pension funds that Emanuel and aldermen did not account for in this year’s budget. That number could be even higher if the mayor doesn’t get the pension relief he’s seeking from Springfield.

In addition, City Hall must figure out how to close a projected $426 million hole in next year’s budget, an annual financial analysis showed. The shortfall comes as Emanuel has been borrowing at high interest rates to keep the city afloat.

Unlike previous years, Emanuel is not taking a property tax increase off the table. At a news conference this week, the mayor would not rule out a politically unpopular property tax hike, saying he’ll wait to show his hand until September, when he rolls out “a full budget with all parts in there.”

(Editor’s note: Bold added for emphasis)

Chicago property owners are probably hoping for an endless summer- considering what could be in store for them next month.

A significant property tax hike in and of itself might not be enough to make Chicagoans think about moving out of the city. However, sustained pressure on household finances from all applicable fees, fines, and taxes could do it, particularly if government services (public safety comes to mind here) steadily erode.

You can read the entire piece on the Tribune website here (registration required).

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Crain’s Chicago Business: Pension Reform Ruling Could Cost Taxpayers Extra $200 Million A Year Through End Of Decade

In my Sunday post about Chicago’s pension reform legislation being ruled unconstitutional, I blogged:

Chicagoans- let that last line from Dardick and Pearson sink in real good:

“Taxpayers could eventually be on the hook for hundreds of millions of dollars more in annual payments to those city funds — before the even worse-funded police and fire retirement accounts are factored into the taxing equation…”

How many hundreds of millions are we talking about here?

Greg Hinz wrote in his blog on the Crain’s Chicago Business website Monday:

The court decision throwing out a deal to refinance two Chicago pension funds appears to be among the most costly in the city’s history, in some ways ranking right up there with the Great Chicago Fire.

Exact figures are not available and vary some depending on who’s doing the estimating. But based on statements by city officials and documents filed by the pension funds themselves, it’s likely that the decision by Cook County Circuit Court Judge Rita Novak will cost city taxpayers around $200 million a year through the end of the decade—and will keep rising for decades thereafter.

“You’d have to go back to either the Depression or the Great Fire to find a comparable situation in which the city faced either greater challenges or more painful decisions,” Civic Federation President Laurence Msall said. “It’s clearly going to result in increased taxes and reduced services.”

(Editor’s note: Bold added for emphasis)

Remember, that additional $200 million hit to Chicago taxpayers would come on top of addressing fire and police pensions. And bailing out the Chicago Public Schools, which had its credit rating reduced to junk status today by Fitch Ratings. In May, I noted Moody’s downgraded the Chicago Board of Education (the primary debt issuers of CPS) three notches to junk.

You can read Hinz’s entire blog post on the Crain’s Chicago Business website here. If I were still a Chicago resident, I’d probably find it disturbing. But at least I’d be clued in as to what could be coming down the line.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Cook County Gun Violence ‘Czar,’ Task Force Proposed

Why do I have the suspicion the following will result in yet another push for more gun “control” in Cook County? Michael Romain reported on the Austin Weekly News (Chicago) website last Thursday:

Cook County Commissioner Richard Boykin (D-1st) has proposed an ordinance establishing the appointment of a Cook County gun violence czar and the establishment of a Cook County Gun Violence Task Force…

According to the proposed ordinance, the gun violence czar and task force “will serve as an investigative and fact-finding body with the objective of recommending a set of policies to the president and County Board designed to reduce gun violence in Cook County over a period of six months.”

The nine-member task force — which the ordinance notes will comprise members appointed by the Cook County board president, the Cook County state’s attorney, the Cook County sheriff and the chief judge of the county’s circuit court — will hold public hearings chaired by the gun violence czar.

The hearings — which will take place “over a period of time not to exceed six months” — will gather testimony and data from a variety of professionals about the “economic, social and cultural causes of gun violence” in the county and will “culminate in a written set of policy recommendations […] designed to reduce gun violence in Cook County effective January 1, 2016.”

(Editor’s note: Bold added for emphasis)

“Czar” or “tsar.” Russian take on the Latin “caesar.”

Yeah, nothing suspicious about something so authoritarian sounding, right?

Still, I hope I’m wrong here, and that any resulting policy recommendations aren’t merely additional gun “control” measures.

Guess we’ll find out soon enough.

You can read the full article on the Austin Weekly News website here.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Judge Rules Chicago’s Pension Reform Legislation Unconstitutional

Here’s the latest on Chicago’s public pension crisis. Hal Dardick and Rick Pearson reported on the Chicago Tribune website last night:

Mayor Rahm Emanuel’s administration said it will appeal a Cook County judge’s decision Friday that ruled unconstitutional a state law reducing municipal worker pension benefits in exchange for a city guarantee to fix their underfunded retirement systems.

The 35-page ruling by Judge Rita Novak, slapping down the city’s arguments point by point, could have wide-ranging effects if upheld by the Illinois Supreme Court. Her decision appeared to also discredit efforts at the state and Cook County levels to try to curb pension benefits to rein in growing costs that threaten funding for government services.

The issue of underfunded pensions, and how to restore their financial health, is crucial for the city and its taxpayers. The city workers and laborers funds at issue in Friday’s ruling are more than $8 billion short of what’s needed to meet obligations — and are at risk of going broke within 13 years — after many years of low investment returns fueled by recession and inadequate funding.

Without reducing benefits paid to retired workers, or requiring current workers to pay more, taxpayers could eventually be on the hook for hundreds of millions of dollars more in annual payments to those city funds — before the even worse-funded police and fire retirement accounts are factored into the taxing equation

(Editor’s note: Bold added for emphasis)

Chicagoans- let that last line from Dardick and Pearson sink in real good:

“Taxpayers could eventually be on the hook for hundreds of millions of dollars more in annual payments to those city funds — before the even worse-funded police and fire retirement accounts are factored into the taxing equation…”

And the City’s response to the ruling? Mayor Emanuel’s Press Office countered Friday:

Statement of City of Chicago Corporation Counsel Stephen Patton on SB1922

“While we are disappointed by the trial court’s ruling, we have always recognized that this matter will ultimately be resolved by the Illinois Supreme Court. We now look forward to having our arguments heard there. We continue to strongly believe that the City’s pension reform legislation, unlike the State legislation held unconstitutional this past spring, does not diminish or impair pension benefits, but rather preserves and protects them. This law not only rescues the municipal and laborer pension funds from certain insolvency, but ensures that, over time, they will be fully funded and the 61,000 affected City workers and retirees will receive the pensions they were promised.”

As to the City of Chicago’s credit rating possibly getting whacked after the decision? Timothy W. Martin reported on The Wall Street Journal website Friday afternoon:

Moody’s said Friday’s ruling had no effect on Chicago’s bond grade. But rival Standard & Poor’s Ratings Services, which currently has an investment-grade rating for the city, said that “regardless of the ultimate outcome” of Mr. Emanuel’s pension law, it “will likely lower” its Chicago rating in the next six months, unless city leaders chart out a solution to address its pension problems.

(Editor’s note: Bold added for emphasis)

Like I’ve been saying for a couple years now, that proverbial brick wall keeps approaching for Chicago.

Since City Hall can’t get its affairs in order, Chicagoans might want to look at straightening out theirs if they intend to stick around for the long haul.

Sources:

Dardick, Hal and Pearson, Rick. “Judge finds city’s changes to pension funds unconstitutional.” Chicago Tribune. 24 July 2015. (http://www.chicagotribune.com/news/local/politics/ct-chicago-pension-ruling-met-20150724-story.html). 25 July 2015.

Martin, Timothy W. “Chicago’s Pension Overhaul Plan Tossed Out by Judge.” The Wall Street Journal. 24 July 2015. (http://www.wsj.com/articles/judge-rules-2014-law-to-reduce-chicago-pension-shortfall-unconstitutional-1437754525). 25 July 2015.

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Guns & Ammo Publishes ‘Best States For Gun Owners 2015’

Yesterday I happened to come across an article entitled “Best States for Gun Owners 2015” on the Guns & Ammo website. Keith Wood wrote Tuesday:

For the third consecutive year and first time in print, Guns & Ammo presents our assessment of each state’s gun laws in a format that ranks them from worst to first for gun owners…

G&A has conducted a thorough review of each state’s laws and considered initiatives pending in state legislatures. Every effort has been made to create a ranking system that is fair, equitable, accurate and objective. States were ranked numerically in each of five categories: right-to-carry, right to own “black rifles” (i.e., firearms possessing a tactical appearance), presence of the Castle Doctrine, subjects relating to the National Firearms Act (NFA) and a catchall miscellaneous column…

Interesting. Considering the amount of activity in the state recently as it concerns gun rights, I was real curious to see where Illinois ranked on this list. From the piece:

43. Illinois

Illinois has gone from one of the worst states for gun owners to “not so bad as long as you don’t live in Chicago” these last few years. The state’s “shall issue” concealed carry permit system is up and running for both residents and nonresidents, and the sky did not fall. Illinois’ Firearm Owner’s Identification, or “FOID,” requirement remains in effect for all residents wishing to touch a firearm or ammunition except for those possessed by nonresidents in accordance with state law. Suppressors are not permitted in Illinois, though a bill to change that is currently before the legislature. Short-barreled rifles are not allowed. At the point of sale, there is a three-day waiting period before picking up a handgun, and a 24-hour waiting period is applied to all long guns. The state has strong use-of-force laws, and all tactical rifles are legal outside of municipalities such as Chicago and Highland Park…

To expand on that bit about “all tactical rifles are legal outside of municipalities such as Chicago and Highland Park,” Don Babwin reported on The State Journal-Register (Springfield, Illinois) website back on July 20, 2013:

According to the Illinois State Rifle Association, at least 16 municipalities – including Chicago – enacted ordinances banning or regulating assault weapons. Every one of them was in the Chicago metropolitan area. Around 30 other municipalities took up the issue but voted down the bans.

The list of towns that took action includes places such as Evanston, Highland Park, Hazel Crest and Calumet Park…

So that’s Illinois. How about north of the state line where I pursue the bulk of my outdoor activities (when I have the time, that is)? From the article:

25. Wisconsin

Life improved markedly for gun-owning Wisconsin residents when former Gov. Jim Doyle was replaced by Gov. Scott Walker. Wisconsin’s hard-won CCW law gets good marks for strong reciprocity and very limited “gun-free zones.” The state has a Castle Doctrine statute on the books and doesn’t restrict NFA items or tactical-looking firearms. A bill to repeal the state’s 48-hour waiting period on handgun purchases was recently signed by Gov. Walker, yet another step forward for gun owners. Milwaukee County Sheriff David Clarke is about as outspokenly pro-gun as it gets, which is a rare thing in a major metro area…

Nearby Indiana, by the way, actually placed 16th in this year’s rankings. Nice job.

Where does your state fall in the 2015 list? Head on over to the Guns & Ammo website here to find out.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Babwin, Don. “By deadline, few Illinois towns pass assault weapons bans.” The State Journal-Register, 20 July 2013. (http://www.sj-r.com/article/20130720/News/307209909). 23 July 2015.

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