Moody's Downgrades Municipal Bonds - Are You Scared Crapless Yet?
Regardless of your amount of education, your current job status or your political leanings, THIS MATTER IS OF DIRE IMPORTANCE TO YOU. Let us begin with some quick excepts from two different news articles relating to this matter. (Also provided are the links to the articles) These excepts and links are provided to lend credibility to the call to action contained herein and to provide an understanding to persons who may be new to, or less informed on, this topic. Before we go further, Municipal Bonds are methods of borrowing used by City, County, School Districts and a few other local government entities.
On April 8, 2009, the New York Times printed this less than alarming spin on the matter at hand; Moody’s Investors Service assigned a negative outlook to the creditworthiness of all local governments in the United States, the agency said Tuesday, the first time it had ever issued such a blanket report on municipalities.
On April 8, 2009 The Business Insider was for more straight forward on the issue: For the first time ever, the ratings agency placed all munis on negative outlook, a precursor to potential downgrades. Historically, the agency looked at munis individually and considered them to be too diverse to make blanket statements about. But it seems overspending and the hollowing out of the revenue base is a nationwide phenomenon affecting cities and states everywhere. and further; ...we think the (Federal) government's revenue expectations remain wildly optimistic...
WHAT DOES THIS MEAN TO THE AVERAGE CITIZEN AND TAXPAYER?
Historically, Municipal Bonds as a group have been second only to Treasury Bills as instruments of low risk investment in the USA. And According to sources, the only reason T-Bills have not been Down Graded yet is the Federal Government's ability to print money. After T-Bills are down graded, the safest investment is going to be precious metals like gold. Moody's sites the slowing economy, overspending and the use of financial instruments (remember Enron) that have wildly increased borrowing costs for all municipalities. To simplify, this means that based on generally accepted accounting practices, Moody's believes that it is likely that various Cities, Counties and Schools, etc will be unable to pay the holders of their bonds when they come due. This means your local politicians have failed to meet their fiduciary responsibilities and have been overspending and utilizing "Bailed out Bank/Enron-like Creative" Financial Instruments. As a result now your local governments are on the verge of financial collapse, which will begin with inability to pay off bonds as they come due. CALL TO ACTION TO ALL TRUE AMERICAN PATRIOTS! Tea Parties and other political protests are a great long term means of addressing corrupt and/or inept politicians but this crisis requires something more immediate. IF YOU ARE A TRUE AMERICAN PATRIOT, YOU WILL GATHER YOUR LIKE MINDED FREINDS AND FELLOW CITIZENS AND HEAD TO YOUR LOCAL COUNTY GOVERNMENT, CITY COUNCIL AND SCHOOL BOARDS AND DEMAND THEY CUT SPENDING NOW, NOW ,NOW. Yes, I have seen the commercials to not cut money on education and a host of other services. But when you have more money out than you have coming in you might as well prioritize so that you can pay for the things you really need and/or want. Your Local Leaders should think of this the same way a family has to think about it... If you have are paying for 15 things and can only afford 10, you have to figure out which five are you going to cut, mortgage payment? (no), Electricity? (reduce use, but not cut) , heat? (reduce but not cut) food? (reduce but not cut), clothes? (postpone but not cut} car payment? (no) gas for car? (reduce but not cut), water? (reduce but not cut) Cable TV? (gone), summer camp for kids? (gone), cigarettes? (gone) , phone? (reduce, but not cut) , dining out? (gone), movie theater (gone)?, out of town vacation?(gone) PAINFUL YES, BUT PREFERABLE TO EXPLAINING TO YOUR KIDS, WIFE OR SIGNIFICANT OTHER WHY THEY HAVE NO FOOD OR ELECTRICITY... And those things will just happen if a family does not make the hard choices. The world is relentless.... We will find ourselves living in third world conditions if we allow a significant number of Cities, Counties and Schools default on their Bonds. Are you going to buy bonds if you know your local government has defaulted on its existing bonds? No. The same goes for anyone else smart enough to have money to invest; They are not going to throw it away on a bad investment. And faced with shortfall that they cannot make up by borrowing, your local politicians will start cutting things..... the wrong things. Remember how schools cut sports and foreign language classes instead of middle management in the past. How the DMV cuts service so it takes 2 months to get a title instead of cutting waste? How the courts cut counter personnel instead of waste in a budget crunch? Instead acting like a normal business and cutting expenses that will least affect the citizens, they cut the things that most affect citizens on the theory that the inconvenience will cause the citizens to vote for a tax increase. Do you really want to wait to the point where local politicians hold local government services ransom until we pay more taxes? Do we really want up like Argentina in 2002? YOU NEED TO GO DOWN AND TELL YOUR LOCAL POLITICIANS TO BALANCE THE BUDGET BY CUTTING SPENDING AND NOT BORROWING MORE. We need to stop passing these deficits off to future generations because eventually they will become tax burden will become unbearable and the Government will collapse. You need to respectfully but firmly get in their face because they will not yield their power and kickbacks without a fight. And if those politicians in office refuse to make the hard choices and balance the budget without more borrowing, fire them... Next election, fire all of them for not balancing the budget. Fire them all for not convincing their fellow politician that cutting spending is the right thing to do. Fire them all regardless of political affiliation or personal loyalty. IF THEY WONT BALANCE THE BUDGET BY CUTTING SPENDING, VOTE THEM ALL OUT. If you always do what you have always done, you will always get what you always got. Please Visit Kick Them All Out! or, if you are in Minnesota, attend the 2009 Jason Lewis Tax Cut Rally on May 2nd 2009 on the Capital Steps In St. Paul Minnesota. It is time to start paying attention to the man behind the curtain Patriotically Yours, Don - The Cynical Patriot
Portions of this article from Don Mashak's Political Ponderings.