The dire financial condition of many state and local governments around the country is getting worse.
And my colleagues Larry Edelson and Mike Burnick have repeatedly warned about this kind of carnage – caused by years of our governments’ mismanagement and hollow promises.
Even worse, they have warned how this kind of behavior leads to drastic cuts in education programs and social services as well as higher taxes to fund increasing debt levels.
The latest example is Puerto Rico going into bankruptcy protection last month after racking up $74 billion in debt and a crushing $45 billion in underfunded pension liabilities.
Unfortunately, that pales in comparison to the current debacle happening in Illinois: Mike Burnick talked about how the Pain Train Stops in Illinois earlier this month.
But the news concerning Illinois is getting worse by the minute.
In fact, the financial situation in Illinois has gotten so bad that lottery ticket sales for Mega Millions and Powerball were halted earlier this week because of the state’s insolvency.
What’s worse is that lottery ticket sales were a profit-generator for the state, bringing in around $90 million each year.
But here again, that’s small potatoes when considering the state …
♦ Amassed nearly $15 billion in unpaid bills, with interest and late fees on those bills at $800 million and growing.
♦ Has unfunded pension liabilities estimated at $250 billion, according to Moody’s.
♦ Issued $25 billion in debt, and that’safter mutual funds liquidated $2 billion worth of government bonds since late 2016.
States cannot file for bankruptcy protection like Puerto Rico just did or like the City of Detroit did in 2013. That means Illinois legislators must come together and overcome a $6 billion budget deficit.
Land of Lincoln lawmakers on both sides of the isle are jockeying for political position. But the fact is they look like they can agree on only one thing …
You guessed it: Raising taxes!
In fact, they want to hike taxes by more than $5 billion or roughly $1,125 per household per year.
Talk about big government finding another way to dig into your pocket.
And it’s no wonder that Illinois leads the country in the number of residents leaving the state for the third year in a row: Uncertainty and fear of higher taxes is driving them out in droves.
Can you blame them?
But it’s not just Illinois and Puerto Rico: New Jersey and Connecticut are not far behind in seeing their credit ratings fall deeper into the trash can.
At this rate, the federal government may not be too far behind.
And that’s why it’s more important than ever to protect yourself and to invest carefully.
For a start, limit your exposure to government bonds. And if you must own them, limit the duration of risk.
Plus, look to add exposure to best-of-breed blue-chip companies on market corrections and to accumulate safe-haven assets like gold when the time is right.
Attractive sectors I’m watching now include energy and pharmaceutical names with large amounts of cash on hand.
Cheers,
John Isaacson
jamesy July 5, 2017
You mentioned “lawmakers on both sides of the aisle”… Sorry but the 2 Repubs elected in the last 30 yrs were absent the day they voted on raising taxes.
steve July 3, 2017
why is the silver price being hammered repeatedly , and how much paper silver is out there right now.
Duane Reidy ex Illinois resident June 30, 2017
Goodbye! Illinois it’s been nice knowing you and continue your tax increase way to oblivion. Term Limit all these tax increase factions from Madigan & Co all the way down to the Local dogcatcher
Randy June 30, 2017
Years of mismanagement, and no real incentive to balance a budget. Easier to kick the provebial can down the road and get what you want today. At best it’s irresponsible, and maybe some of this money scheeme is illegal. The people need to audit the books and square them away. But it looks like it’s easier to get away from Illinois… RUNNNNN ! The whole country is headed in this same direction. The ecomomy will collapse again, more bad banking policy, and the Working Class will get screwed again!
Mike c June 30, 2017
What makes the Illinois debt worse is that, constitutionally, some public sector employees are protected from pension cuts, for example, judges(that I am aware of). The state is in a royal mess now, and I wouldn’t be surprised if some vendors just quit doing business with the state, unless it is in cash(or check), and never in credit.
Jim June 30, 2017
More thoughts on Gold and the Fed unwind
bagster53 June 30, 2017
because the only solution they have is raising taxes , cutting wages and benifits for government employees never crosses their mines, eventually you can’t tax enough to pay for it
LOUIS PICHE June 30, 2017
I guess one of the main problem of our modern capitalistic societies is that authorities manage collective revenues against individual groups of expenses. I mean, taxes are collective revenues, but, pensions funds for firemen or police or else public group are treated individually. Consequently,individual groups make the public authority kneeing and consider taxpayers as infinite-money providers. Bad consequences are linked to that bad of management which will be paid by everybody.
jerry June 30, 2017
nobody’s ever explained the K wave. what is it??
KJ June 30, 2017
You are right……….
The hey hey days of Wall St. are numbered too.
Good luck
N. Cognito June 30, 2017
Would leave Illinois toutsuite and NEVER look back.