For some communities, there is a perpetual winter of discontent due to bad fiscal decisions made years ago. The result is municipal debt that is becoming increasingly difficult to service.
Westgate Entertainment District (Glendale, AZ)
Credit: About.com
Gambling on gambling has not paid off for some cities, meaning bankruptcy may be in the cards. Municipal debt doesn’t care where the money isn’t coming from…
Las Vegas, NV
Even Chicago’s big shoulders can’t bear the weight of their current pension crisis.
Chicago, IL
Like many cities across the US, Chicago is having trouble meeting its fiscal obligations. It has unfunded liabilities of over $27 billion, which is even worse than Detroit, and has to start making some difficult choices to close the gap. Some combination of higher taxes and lower services will be necessary in order to keep the city solvent. In the end, fiscal reality will dictate the terms of what the Chicago is able to do going forward.
Even if you don’t live anywhere near financially strapped cities like Chicago, Detroit, or San Bernardino, this situation will have an impact. The bond market will charge cities higher interest rates due to the increased risk of default, meaning a higher cost of borrowing for other cities. Municipal bonds will no longer be seen as safe investments due to recent bankruptcies, which will cause capital to flow to other investment instruments. This in turn can impact the prices of stocks, mutual funds, bank interest rates, and other financial products.
Expect the municipal debt situation to get much worse before things improve.
Everything is not OK.
An Actual Trainwreck
Despite what you see on Main Stream Media (MSM) outlets, most of us know the truth about the economy. The fact is, the US and most other countries are struggling due to the combined effects of slow growth and high debt. For the past five years this has resulted in economic stagnation as higher taxes and greater regulation take their tool. As this post over at Zero Hedge states:
The percentage of Americans that have a job has stayed remarkably flat since the end of 2009, median household income has fallen for five years in a row, and the rate of home ownership in the United States has fallen for eight years in a row. Anyone that claims that the U.S. economy is experiencing a “recovery” is simply not telling the truth.
All this has an impact on preparation activities. A comprehensive preparation plan will include economic and personal disasters along with the others that we discuss. Job loss, reduction in hours, unexpected expenses, and other disruptive events are an ongoing reality for millions of people. The first step in preparing for them is to understand that such events can happen to you with little to no warning.
Here are a few steps you can take to help insulate yourself during these difficult times:
The good news is that bad times don’t last forever, eventually things will change. However, we are still in an economic storm that will continue to wreak havoc for years to come.
If you live in a small town and think that your local government is immune from the threat of bankruptcy, you may want to rethink that assumption. Municipal debt is a pervasive problem, not just in big cities.
Credit: America The Beautiful
Desert Hot Springs, CA is the latest municipality facing Chapter 9 Bankruptcy due to salary and pension costs. In what is becoming a familiar refrain, the city discovered that it had underestimated its expenditures while overestimating its revenues. The result is a $3 million shortfall that will have to be met early next year. No matter what ends up happening, there will be adjustments that the municipal bond holders, city workers and retirees, and residents will have to make.
The likely outcome is less services at a higher cost. This will mean less police protection, degraded infrastructure, and lower quality of service. Citizens will be compelled to do more as essential services are cut or simply wait longer for things to get done. Hopefully the citizens of Desert Hot Springs are prepared…
By the way, this wouldn’t be the first time the town of 25,000 went into bankruptcy (the first time was in 2001). Expect more small towns like Desert Hot Springs to join Stockton, San Bernardino, and Detroit in bankrupty court in the coming months.
I remember reading an article a while back that highlighted the issue of information security and how it can be circumvented. In this particular case, it was a NYPD officer abusing his access to department data systems to illegally obtain information about his fellow officers, including his ex-girlfriend. However, there are many other cases where governments, departments, agencies, and bureaus abuse the power that is entrusted to them by the citizens. At that point, Constitutional Rights become subject to the whims of unelected and increasingly unaccountable officials.
The point is, there is no such thing as true information security, no matter who has the data. Even ostensibly trustworthy organizations like police departments can compromised by corrupt officers. Ditto for credit card companies, banks, insurance companies, hospitals, and others entrusted with your data. In future posts I’ll discuss steps you can take to address some of these vulnerabilities, for now just know that your data is not as safe as you think it is.
Keep in mind that abuse of power is not a new thing, after all there is nothing new under the sun.
Yeah, you know me!
It may not be exactly like OCP from RoboCop but private policing is becoming more prevalent. As cities struggle to provide basic services, some communities are looking to corporations to supplement their law enforcement departments. In the case of Oakland, California private security firms are being crowdsourced to fund extra security in high-crime neighborhoods. Expect this to continue as the economy continues to experience little to no growth, resulting in lower revenues for municipalities.
I’ve written about this before but it bears repeating, when governments can’t provide essential services private citizens and companies will step in. While the circumstances that compel this response may be discouraging, the rise of private policing and greater community involvement shows an encouraging trend. This trend is that corporations and citizens are taking on greater responsibilities while increasing community involvement. Down the road this points to greater civic involvement and engagement, which are good outcomes.
Yes indeed, preparation is going corporate.
Credit: Christopher Wink
Today, there was an emergency preparedness event where I work that featured a handful of exhibitors. This was a part of National Preparedness Month which is a part of FEMA‘s effort to get more Americans better prepared. Overall it was a modest event with a handful of participants, but the more important aspect of the event was the fact it was taking place.
The company I work at is a large (>18,000 employee) investment brokerage company headquartered in…San Francisco. Normally one would associate financial firms to be more concerned with golf, fine arts, and feel-good commercials about investing in the future. However, issues like business continuity are a major concern for large Fortune 500 companies, so having prepared employees makes sense. After all, businesses can’t run for very long without people.
This shows that being prepared for disasters is not just for loners who live in rural counties. Everybody can benefit from being better prepared, especially those of us who live and work in major cities.
How fast does it take for societal collapse to take place?
Credit: Getty Images
If the recent history of Libya is any guide, the answer is very fast.
Think about it, less than three years ago Libya was relatively stable and a major oil exporter. Its former leader had given up supporting terrorism and foreign investment was starting the flow back in. Libya was in decent shape for an African country, all things considered. However, the combination of an Arab Spring, simmering tribal disputes, and deep social divides produced a civil war that exploded with almost no warning. The results are a collapsed society, destroyed infrastructure, and lingering violence that has no clear end in sight.
With this in mind, how prepared are you for a descent into chaos?
While the media has focused much of its attention on Anthony Weiner and his sexting problem, I think the case of Eliot Spitzer is a more interesting one.
Credit: NY Daily News
Until he got caught in a prostitution scandal while serving as Governor of New York, Eliot Spitzer was considered a rising star in the Democrat Party. Now that he is running for City Controller (NYC), the spotlight is shining on him once again. Apparently, Mr. Spitzer’s ambition and drive remains, albeit on a smaller stage than before. What’s ironic is that his former Madame is running for the same office.
Is it any wonder people don’t trust politicians?
You see, Eliot Spitzer got caught and was forced out of office for his transgressions. There are many more corrupt, deceitful, dishonest politicians in office all over the country who are responsible for their states, counties, cities, or districts. These men and women are the ones placed in charge of emergency planning along with other important governmental duties. Given the lack of discretion and honesty displayed by men like Eliot Spitzer, is it reasonable to doubt their abilities as leaders?
Putting one’s trust in dishonest politicians is misplaced, the better option is to practice self-reliance and make preparations that are either independent or complimentary of governmental efforts. Leaders will fail their constituents through incompetence, corruption, laziness, or a host of other human frailties. Depend upon yourself to be ready and be ready to be pleasantly surprised if elected officials effectively carry out their duties.