Friday, March 30, 2012


The picture on the front page of the NYT this morning was nasty.  Riots in Spain over the austerity program proposed by the government and its effects, just as Massimo suggested yesterday.  Will it come to this in certainly could.  And still there remains the call for a massive "firewall" to protect the "contagion" from spreading from country to country.  In sems to me when activities like this become rampent within individual countries it's not contagion...I'm not sure what to call it but it isn't that.  Spain is an interesting country to look at, however, because of it's autonomous regions...a bit like the individual states in the U.S. which have had, historically, some considerable control over their finances...or lack thereof if you will.  As a result, the reported numbers on Spain's debt have never really told the entire tale, much like Argentina whose financial collapse in 2002 was not as many would have one believe due intirely to their dollar peg but contributed to mightly by the reckless spending of certain states one of whose governors became the President and whose wife is presently overseeing another impending financial mess despite high commodity prices and a fortunate energy position.  And much like the United States as well.

I was way out in front of events latein 2010 when I was writing about the state of municipal financing in this country which never reached the critical point that I thought it might.  And while the elections of 2010 resulted in a whole new wave of fiscal austerity in some states and promises of the same in others, the existing proble has not greatly improved and in some states actually gotten worse as a result of the recession; to wit, Illinois.  Unless economic conditions make a goodly advance this year we are unfortunately looking at a possible mirroring of the front page scenes of Europe in the not too distant future.  We have already seen a few municipal bankruptcies which, while not unheard of, are certainly not the norm but in addition, there are clearly many more entities "on the brink" so to speak and that IS unusual.

This week the country has been consumed with the arguments in the Supreme Court over "ObamaCare" which might seem amusing to you readers living in countries with singal payer systems but trust me, this is deadly serious business here.  If the Court reaches the conclusion that all or part of this act is unconstitutional the financial consequences of that ruling could be devestating on the country as the law planned for a vast overhaul of the funding of what we call Medicaid--a plan administered by the states but funded by the federal government--the consequence of which might force the states to self finance (which none of them could do), vastly cut back on services, suspend Medicaid alltogether or declare bankruptcy...a condition which, by the by, is believed not to be possible under our law.  So, message from Charlie:  be not amused.  This is a really big deal financially and an enormous deflection point in a civic and political sense.  Ours is a complex democracy not easily understood or appreciated (or not--as the case may be) by the casual observer.  The effect on the municipal entities should The Leader's most important (only?) legislative success be overturned is just now beginning to be discussed.
As for me, I have no idea of the coming result which should be known in June.  Watch this closely; it bares watching.

Have a great weekend.

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