Friday, February 26, 2010

Good post on municipal bankruptcies

Sovereign and semi-sovereign default.

Here is another tidbit on Federal deficits and debt:

WASHINGTON (AP) -- The federal government fell further into the red in 2009, with its financial position hitting a deficit of $11.46 trillion.

That figure is 12.3 percent higher than the previous year, according to a new report issued by the Treasury Department on Friday.

The annual report shows that the government's big entitlement programs such as Social Security and Medicare are facing a deficit over the next 75 years of $45.88 trillion, an increase in that deficit of $2.9 trillion in just one year.

My take:

The problem here is that state and municipalities have begun their delever process, but Congress still hopes to inflate the government sector. We end up with a mis-match that has to be resolved, and the debate becomes centered around local government funds vs federal entitlements. Government, as a production system, is readjusting the deliverables in terms of frequency and quantity. I takes two or three years, and will likely extend the recession.

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