Meredith Whitney

Martin Armstrong: ‘The United States Will Most Likely Break Apart By 2036’

Back on January 27, 2016, I asked:

Do any readers follow Martin Armstrong, economist at Armstrong Economics (and former chairman of Princeton Economics International Ltd.) and the creator of the Economic Confidence Model? While the jury’s still out on him (for me), I do read his blog almost daily…

I still “read his blog almost daily.” And something Armstrong wrote last week really caught my attention. From “The Termination of Cash Approaching Rapidly”:

I am becoming deeply concerned that the United States is headed into its version of a communist revolution under the label “progressive” and the bankers, who Larry Summers has always supported, will be used as the scapegoat for Wall Street and the “rich” who have to be stripped of their liberty and their money for the “good of the people” as they always say. The United States does not look like it will be a country we can recognize by 2032 if we can even make it past 2024. The United States will most likely break apart by 2036. There are separatist movements rising in many areas from Vermont and Texas to California, who reasons they voted for Hillary not Trump justifying their departure.

The entire purpose of eliminating cash is to strip us of our assets, liberty, and to prevent bank runs. The youth, who have been brainwashed by Bernie Sanders and people like Elizabeth Warren, will turn against the older generation and enslave them if at all possible. This threatens our future with outright civil war. They will not be satisfied until they destroy the freedom of their opposition. It is starting to appear that 2036 is our date with destiny

(Editor’s note: Bold added for emphasis)

America kaput by 2036- if not earlier?

That’s a pretty disturbing thought. And reading that blog post reminded me of an article I pulled up almost eight years ago on The Wall Street Journal website (my how time flies) by Andrew Osborn, who discussed a similar prediction made by Russian academic Igor Panarin, a former KGB analyst and Dean of the Russian Foreign Ministry’s school for future diplomats (then and now). On December 29, 2008, Osborn wrote:

Mr. Panarin posits, in brief, that mass immigration, economic decline, and moral degradation will trigger a civil war next fall and the collapse of the dollar. Around the end of June 2010, or early July, he says, the U.S. will break into six pieces — with Alaska reverting to Russian control…

California will form the nucleus of what he calls “The Californian Republic,” and will be part of China or under Chinese influence. Texas will be the heart of “The Texas Republic,” a cluster of states that will go to Mexico or fall under Mexican influence. Washington, D.C., and New York will be part of an “Atlantic America” that may join the European Union. Canada will grab a group of Northern states Prof. Panarin calls “The Central North American Republic.” Hawaii, he suggests, will be a protectorate of Japan or China, and Alaska will be subsumed into Russia…

(Editor’s note: Bold added for emphasis)

Obviously 2010 came and went… and the good ol’ U.S. of A. remains intact.

But I can’t help but wonder if Panarin’s prediction might not be in the same category as an infamous forecast made by the American financial analyst Meredith Whitney about a wave of municipal defaults. I wrote back on December 22, 2010:

Last night Whitney, now CEO and founder of Meredith Whitney Advisory Group, appeared on CNBC and warned that a wave of defaults by state and local governments in the coming months will cause a sell-off in the municipal bond market, hurting U.S. economic growth and stocks- and causing social unrest

I blogged a year-and-a-half later:

Whitney will eventually be vindicated about the wave of defaults (her timing was just off)…

“Her timing was just off”

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

(Editor’s note: A qualified professional should be consulted prior to making a financial decision based on material found in this weblog. If this recommended course of action is not pursued, then it must be understood that the decision is the reader’s and the reader’s alone. The creator/Editor of this blog is 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 contained herein.)

Sources:

Armstrong, Martin. “The Termination of Cash Approaching Rapidly.” Armstrong Economics Blog. 24 Nov. 2016. (https://www.armstrongeconomics.com/world-news/taxes/the-termination-of-cash-approaching-rapidly-the/). 1 Dec. 2016.

Osborn, Andrew. “As if Things Weren’t Bad Enough, Russian Professor Predicts End of U.S.” The Wall Street Journal. 29 Dec. 2008. (http://www.wsj.com/articles/SB123051100709638419). 1 Dec. 2016.

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Bill Introduced To Permit Illinois Municipalities To File For Bankruptcy

Since I started blogging about a U.S. financial crash back on Memorial Day Weekend 2007, I’ve believed one casualty will be municipal government. Particularly in Illinois. So imagine my non-surprise when I spotted an article on the Chicago Tribune website a couple of days ago about proposed legislation at the state level granting Illinois towns the authority to file for bankruptcy. Nick Swedberg of the Associated Press wrote on March 26:

Stressed by pension debt, other financial issues and the possibility losing a chunk of their state aid, some Illinois cities want the option to file for bankruptcy. They’ve found an ally in a Republican lawmaker, who’s proposed legislation to allow municipalities to follow in the footsteps of Detroit and other cities in restructuring debt and paying back creditors…

Rep. Ron Sandack is sponsoring legislation that would grant authority for communities to file for bankruptcy under Chapter 9 of the federal code. The Downers Grove Republican says it’s a “measure of last resort,” especially with Gov. Bruce Rauner’s proposal in next year’s budget to cut in half the local governments’ share of state income taxes by 50 percent.

“It’s just giving time and space to do things right,” he said…

Swedberg added later in the piece:

Municipal bankruptcies are rare, NCSL data shows. Of 37 local government filings since 2010, only 8 were cities, with the majority filed by utilities and special districts.

Detroit filed for the nation’s largest municipal bankruptcy in July 2013, looking to restructure $12 billion of debt…

It’s true. Municipal bankruptcies haven’t happened too often. But keep in mind what Eric Weiner wrote on the NPR website back on February 28, 2008:

For most of U.S. history, cities and towns were not eligible for bankruptcy protection. But during the Great Depression, more than 2,000 municipalities defaulted on their debt, and they pleaded with President Roosevelt for a federal bailout. “All they got was sympathy,” reported Time magazine in 1933. Instead, Roosevelt pushed through changes to the bankruptcy laws that allows towns and cities to file for bankruptcy. They even got their own section of the bankruptcy code: Chapter Nine…

(Editor’s note: Bold added for emphasis)

There’s also this from Robert Slavin on The Bond Buyer website back on January 14:

For the municipal bond industry, 2015 marks the midpoint in what may turn out to be the decade of the bankruptcy.

Four of the five largest municipal bankruptcy filings in United States history have been made in roughly the last three years, a trend analysts attribute to the aftereffects of the 2008 credit crisis and Great Recession, as well as changing attitudes about debt.

“The crash of 2008 and five years of stagnation preceded by years of escalating wages, pensions and Other Post-Employment Benefits set the stage for our recent Chapter 9 filings,” said Arent Fox partner David Dubrow.

Chapter 9 municipal bankruptcy was adopted in 1937 but had been rarely used, particularly by large governments. However, since November 2011 San Bernardino, Calif., Stockton, Calif., Jefferson County, Ala., and Detroit have filed four of the five largest bankruptcies as measured by total obligations.

(Editor’s note: Bold added for emphasis)

Could the specter of Meredith Whitney, the “Diva Of Doom,” be returning to take revenge on the municipal bond industry?

I’m not surprised Illinois municipalities would be interested in House Bill 298. From Patrick Rehkamp and Andrew Schroedter on the website of the Chicago-based Better Government Association back on December 6, 2014:

Reasons for filing vary but often include troubled public development projects, unanticipated hefty legal judgments against a taxpayer-backed entity, or massive pension and bond debt payments that leave a municipality cash-strapped and unable to cover operating costs of employee salaries, vendor payments and other expenses.

(Editor’s note: Bold added for emphasis)

The public pension crisis in Chicago and Illinois has been well-publicized for some time now. And while such entitlements are supposedly protected by a provision in the 1970 Illinois Constitution, the BGA noted in their piece:

In Illinois, public employee pensions are guaranteed by the state constitution. But in the Detroit and Stockton, California bankruptcy cases, federal judges have ruled that pension benefits can be adjusted, the same as other debts, despite a constitutional guarantee.

(Editor’s note: Bold added for emphasis)

You can track the progress of HB 298 on the Illinois General Assembly website here.

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

Sources:

Swedberg, Nick. “Bill pushes for possible municipal bankruptcies in Illinois.” Associated Press. 29 Mar. 2015. (http://www.chicagotribune.com/news/sns-bc-il–closer-look-bankruptcy-20150329-story.html). 3 Apr. 2015.

Weiner, Eric. “What Happens When City Hall Goes Bankrupt?” NPR. 28 Feb. 2008. (http://www.npr.org/templates/story/story.php?storyId=60740288). 3 Apr. 2015.

Slavin, Robert. “Why So Many Big Bankruptcies?” The Bond Buyer. 14 Jan. 2015. (http://www.bondbuyer.com/news/markets-buy-side/why-so-many-big-bankruptcies-1069539-1.html). 3 Apr. 2015.

Rehkamp, Patrick and Schroedter, Andrew. “Next Up: Illinois Municipal Bankruptcy?” Better Government Association. 16 Dec. 2014. (http://www.bettergov.org/next_up_illinois_municipal_bankruptcy/). 4 Apr. 2015.

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Three California Cities File For Bankruptcy In Less Than Two Weeks

Stockton, Mammoth Lakes, now San Bernardino.

Three California cities that have filed for bankruptcy in less than two weeks.

Is the prediction by Meredith Whitney, aka the “Diva of Doom,” about a wave of municipal defaults finally coming to fruition?

From NBC Los Angeles on the MSNBC website this morning:

San Bernardino became the third California city in less than two weeks to file municipal bankruptcy protection Tuesday night when the city council voted to make the move in the face of a $45-million budget shortfall…

Officials in Stockton said their June decision to seek federal bankruptcy protection was the “only choice” for the city that was unable to reach finance agreements with creditors to address a $26 million budget shortfall…

On July 4, Mammoth Lakes sought bankruptcy protection from a $43 million court judgment, according to Bloomberg News.

NBC Los Angeles staff pointed out:

In the six decades since Congress created bankruptcy protection for cities, fewer than 500 municipal bankruptcy petitions have been filed, according to the United States Courts website.

As much as I hate to say it, it’s my belief there will be a lot more local governments filing for bankruptcy before this ongoing economic mess is all sorted out. And Whitney will eventually be vindicated about the wave of defaults (her timing was just off). I come across stories about distressed municipalities on a daily basis out in cyberspace. The city that’s grabbing the headlines the last couple of days is Scranton, Pennsylvania. From Perry Chiaramonte on the FOX News website Monday:

Employees of a Pennsylvania city, who have all seen their salaries cut to minimum wage as the mayor grapples with budget problems, are hoping a judge restores their paychecks in full.

Scranton Mayor Chris Doherty cut everyone’s pay — including his own — on Friday, saying the state’s sixth-largest city is broke because the City Council blocked his proposed tax increase. Doherty, a Democrat, warned nearly 400 police officers, firefighters and public works employees about his doomsday plan, prompting a Lackawanna County judge to order the city to pay full wages to all employees, citing that it is a violation of their contracts. Hours later, the payday envelopes went out, and, despite the judge’s order, they were light…

The city of Scranton has battled budget woes for years, but the problems reached a boiling point after the City Council blocked Doherty’s plan to raise taxes to cover a $16.8 million shortfall, opting instead to borrow money to cover the budget gap.

More to come (I’m sure)…

Sources:

“San Bernardino becomes 3rd Calif. city in 2 weeks to file for bankruptcy protection.” MSNBC. 11 July 2012. (http://usnews.msnbc.msn.com/_news/2012/07/11/12675262-san-bernardino-becomes-3rd-calif-city-in-2-weeks-to-file-for-bankruptcy-protection?lite). 11 July 2012.

Chiaramonte, Perry. “Pennsylvania city workers to take mayor to court over across-the-board minimum wage salaries.” FOX News. 9 July 2012. (http://www.foxnews.com/politics/2012/07/09/political-statemate-leads-to-city-workers-salaries-cut-down-to-minimum-wage-in/). 11 July 2012.

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Wednesday, July 11th, 2012 Bankruptcy, Defaults, Deficits, Government No Comments

Meredith Whitney Warns Of States, Cities Defaulting, Muni Bond Market Chaos, And Social Unrest

Back when the global financial crisis was still in its infancy, I used to call the former managing director at Oppenheimer & Co. Meredith Whitney the “Diva of Doom” for her gloomy predictions concerning the U.S. banking sector. Last night Whitney, now CEO and founder of Meredith Whitney Advisory Group, appeared on CNBC and warned that a wave of defaults by state and local governments in the coming months will cause a sell-off in the municipal bond market, hurting U.S. economic growth and stocks- and causing social unrest.

Scary stuff.

CNBC Video Link

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‘60 Minutes’ Spotlights Local Government Finances

I wonder how many times the following was uttered last night during this “60 Minutes” segment:

Honey, change the channel. I don’t want to hear all this bad news.

“State Budgets: Day Of Reckoning”
YouTube Video Link

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