Sunday, November 14, 2010

Municipal Bond Market is Coming Apart

The U.S. municipal bond market started to come apart last week.  I think this is being led by the big California Muni Bond funds, but it has dragged all of them into the vortex.

This bears close watching.  As I have said many times before... California absolutely, positively does not make it to the end of the 2nd quarter, 2011 without needing a massive Federal bailout... a bailout that, given the new makeup of Congress, I do not think is forthcoming in the way we typically define "bailout".
How this shakes out - inflationary, deflationary, good/bad for Gold et al... I just have no idea at the moment.

Do not believe for ONE SECOND any of the planted propaganda that this is going to "work itself out", or "muddle through", whatever silly BS the folks that need to manipulate the masses come up with.  Many of these bonds are going into default, and many of the non-G.O. bonds are going to end up settling for pennies on the $, and considering the costs of future borrowing, states like Cal and NY are particularly bad shape... given they cannot pay their debts now with surreally low interest rates... what do you think happens when they have to pay a rate commensurate with the risk?  Are you listening U.S. Treasury Bond investors?

There is a significant political aspect here, too.  California has 55 members in its Congressional delegation, with 40 of them Democrats.  New York, the other cluster f**king disaster big state, has 31 members in its Congressional delegation, with 29, or 93%, Democrat.  This is NOT A COINCIDENCE.  The same lame-brained, nit-wit, jag-off believers in something-for-nothing, the Left, have destroyed their very seats of power - both New York and California are at the mercy of the Federal Government... if you look at the House of Reps WITHOUT THE NEW YORK AND CALIFORNIA representatives, the House is something like 70% Republican and 30% Democrat, and those non Cal & NY Dems (other than the completely out of their mind's Mass. Caucus) Dems are going to have a hard time voting for a Cal & NY bailout and remain employed as Representatives (Oh, and in 2012 out of 34 seats in Senate up for election, its 12 Republicans and 22 Dems running for re-election... the Dems have a better shot at holding a tiger by the tail than holding the Senate... EVEN IF Obama gets re-elected, and that is by no means assured, either).

It would appear to me that the individual State's financial crisis is here, with California, New York, Massachusetts, and Illinois (all very BLUE STATES) going up in mushroom clouds.

18 comments:

PioneerPreppy said...

What is to stop the Fed reserve from buying the State bond debt as well as US?

I agree with your political thoughts on this issue. For several flyover conservatives the prospect of a dem controlled legislature bailing out these progressive bastion states was a huge factor in voting repub. In wargaming the situation using a repub dominated house I can only come up with two possible ways the dems can bail out these states.

1. Fed res. buying the state debt.
2. Executive power of some kind ordering the fed to give them money.

I believe 2 is non-Constitutional but then again 1 is as well and Obama doesn't seem to care.

I think it is likely Obama and his ilk will use some form of civil rights reason to bail out Kalifornia. But who knows.

Greg T. Jeffers said...

PP:

I don't relish the idea of disagreeing with you in this area... but I really don't think Obama would do anything... he wins Cal either way in 2012, might as well not make it too easy for his opponent by doing anything of the sort, me thinks.

BTW... I think the social control conservatives are just as dead as the social control liberals... If the repubs want to hold on and flourish they are going to have to get rid of some baggage, and they are going to have to find their way into being pro-life by helping women have their babies rather than trying to use force to prevent them from having abortions (and, as you know, I am rabidly anti-abortion). This issue cannot be won the way the pro-life folks have been fighting it... and it only helps the Left with their true agenda.

The Repubs need to be THE party of the U.S. Constitution... and stop harming themselves.

Greg T. Jeffers said...

The pro-life movement (folks like me) need to stop seeing this as political issue to be won, and instead as a sin to be prevented... overturning roe-v-wade won't do a damn thing to save the lives of the unborn... it is to get after this by another strategy... because what we have been doing has failed the 55 million lives that have been lost.

PioneerPreppy said...

Greg

Not much to discuss really. You are more than likely correct if Obama wishes to be re-elected he will not bail out Kalifornia. If he doesn't care he might try and bail em out. Alot will also depend on how well the repubs fight back. He gave the states he won more stim cash than those he didn't so he does like to stroke his sure win supporters.

Morally as a Christian I am in full agreement with you on abortion. As a man I also oppose the abortion laws as being gender biased by expecting men to live with a decision they have no say in other than to say yes to sex while giving women all the choices they can conceive (pun intended) of along the way.

Dan said...

There is a good chance the banks are going to bail out the states via the MERS debacle. CA. is already suing MERS for $120B in back taxes, filing fees, and penalties. If they can pierce the corporate veil... Since the sole purpose of MERS appears to be to avoid filing, they have a pretty good shot.

Also, every one of those falsified affidavits is perjury against the court. Penal codes typically specify no more or less than so many years in the state penitentiary OR a fine between $$$ and $$. It’s not hard to figure out which the attorney generals will go for. 100K fines at $25K each add up quick.

Anonymous said...

Correct, PP, the Fed will bail out any state before default. Republicans and Democrats in Congress will go along, despite some pissing and moaning.
Too many of the oligarchs own the bonds. Too many of the oligarchs own the senators and congressmen.
That was the whole reason that Republican Bush and Paulson did the Republican TARP original bailout in the fall of 2008.
They wanted to and did bailout the Oligarchs.
Obama is just a wimp who will do exactly what they want.
And you are deluding yourself if you think the Oligarchs care about abortion. That is just a ruse to keep the rubes stirred up. Works every time,too.
The real time bomb is the MERS fraudclosure clusterfuck. That is aimed at destroying the orderly transfer of private property (real estate) in this country and keeping it recorded at the local level. That has cost local governments hundreds of millions in filing fees and turned US property records over to MERS, a private corporation with 40 employees.
It's just starting to get fun, ain't it?
Rational Liberal

Anonymous said...

And sorry Dan, if Obama signs a law from Congress giving retroactive immunity for MERS activity, the bailout will not happen through state lawsuits. The banks will suffer no harm.
The Fed will probably buy the debt as PP says.
http://emptywheel.firedoglake.com/2010/11/12/are-obama-and-congress-set-to-screw-homeowners-and-give-wall-street-mortgage-banksters-a-retroactive-immunity-bailout/
Rational Liberal

Greg T. Jeffers said...

Rational:

No, I don't think TPTB care about abortion... it IS a ruse to keep the Left's biggest contingent fired up...
but I reject your assertion that the big states will be bailed out Wall Street stye... we shall have to see.

I don't know how long you have been reading here.... While I am very anti-abortion, I reject the use of armed force by government thugs against women and doctors as a means of preventing it. What we have been doing is failing and we in the Pro-Life movement have to find a better way... one that will work on a practical level... this is not a game or political issue or campaign to be won... these are innocent lives to be saved.

I also have come to reject the terms Repub and Dem... either you support and respect the Constitution or you do not. We need opposition parties.... what we have in the anti-Constituion party is more than opposition...

Dextred1 said...

Jeffers,

What you get out of making it illegal is the closing of Planned Parenthood. You could make it a high class misdemeanor or even a fine. The interesting thing about abortion is that the resulting lack of population growth is directly related to the lack of money for government outlays. There is not only a moral side to debate (which I could talk about for hours) ; but the financial will soon be seen to be even a bigger nemesis. The problem is giving the federal government powers never intended. I think abortion would be illegal in 45-48 states if the just allowed the states the rights that the constitution granted them through the principle of federalism. This would do two things. The first is that it would make national elections about financial issues which the conservative/libertarians would win ever time. The second is it would take a scare tactic away from dems. The gay marriage situation is the same. Not a federal issue, a states issue. Do away with the ancillary issues and let the federal government do what it should do (regulate trade, defense, postal, etc)

K said...

If Roe v. Wade was reversed, it could split the union, due to unforeseen legal and economic conscequences. I think the USA as we know it will end due to other factors.

It looks like retroactive immunity for MERS and or the banks would also give them a license to steal more houses in the future. If that is the case, only fools would be stupid enough to continue making mortgage payments or buy a house.

Maybe some brave Americans will think of a way to get the banks to steal the politicians' homes. Maybe impersonating lawyers for MERS and the banks and then going to court and foreclosing on the politicians' homes would work.

I guess a future step in MERS fraud would be to hire unemployed conmen to impersonate dead-beat home owners in court for fraudulant foreclosings.

Joseph said...

...the good news keeps coming

Dan said...

The Interstate Recognition of Notarizations Act of 2010, H.R. 3808, already passed and Obama vetoed it.

Apr 27, 2010: Bill passed in the House of Representatives by voice vote.
Sep 27, 2010: Bill passed in the Senate by Unanimous Consent.
Oct 10, 2010: Vetoed by President

The odds of this passing again are slim, after January 20 they will be slimmer still. The opportunity to slip something like this under the radar has come and gone; which is not to say it will still not eventually pass, it just isn’t very likely.

Full text; aprox 1 page.

Dan said...

Errr. January 20th should be January 5th

Dextred1 said...

Looks like earmarks are going the way of dodo bird. Too bad it was after the federal earmark bill of 787 billion was passed.

Anonymous said...

Thank you Mr. Obama. I didn't think you had it in you, considering the campaign funding you received from that pack of &*%#ing %@$tards.

Regards,

Coal Guy

Dextred1 said...

K,

If protecting children leads to a split so be it.

K said...

Dextred,

I would like to see a split in the union. Such a split would also likely disrupt the military operations of the American empire and save the lives of civilians outside of America.

Greg T. Jeffers said...

Dex & K:

Agreed on both goals... would very much like to see the Republic thrive AND achieve those goals.... and it can be done.