Tuesday, June 26, 2012

Financial Armagaddon Headed Our Way?

Don't think a financial tsunami is not coming our way? Tonight at midnight, the Stockton City Council will be voting on a "pendency budget plan" drafted by the city manager, Bob Deis, which essentially means that the third largest city in Northern California will be declaring bankruptcy by Wednesday morning. 

For those of you not familiar with Stockton, Calfornia, the city with a population of approximately 300,000, lies some 90 miles Northeast of San Francisco and is neighbors with the State's Capitol, Sacramento.  Stockton is a port city that is supported by the unique California Delta, a sprawing waterway that winds its many fingers throughout the San Joaquin valley.  The valley, with its rich vertile soil, produces much of the western United States's population with vegetables, nuts, and fruits (with the exception of San Franciso of course). 

If the city council adopts Deis's plan, Stockton will not honor $10.2 million in debt payments to it's creditors under Chapter 9 Bankruptcy protection which is sure to come according to Gregory Lipitz, vice-president and senior analyst at Moody's Investor Services.  But Deis's plan doesn't stop there, it also calls for reducing retiree benefits by $11.2 immediately and another $7 million by reducing medical benefits for the 2012-2013 fiscal year and then discontinuing medical benefits all together by 2014.

Stockton, whose bonds are now "junk" status is at this very moment "one notch above its 'D' default rating" according to the Drudge Report.

Stockton's financial Armeggadon began with the collapse of the housing market.  Stockton, like Las Vegas, overbuilt when lenders began giving home loans under the Fed's 'Community Reinvestment Act' to anyone with a pulse and respirations.  Now its estimated that nearly half of the homes built during the housing boom are now abandoned. 

I can attest to this personally since I live only a hour away and  recently had the opportunity to be up Stockton's way.  I must tell you that I was flabbergasted by what I observed in the downtown area.  Foreclosure signs dot the landscape like campain posters during the Presidential election.  Businesses are boarded up and lie vacant as if a contagin has plaged the city.  Its a damn shame and if you plan a trip up that way, you should stop and see for yourself, it is quite sad.

Like San Jose and many other cities in the once 'Golden State', Stockton has underfunded their pension plans by raping the property taxes that were supposed to be slated for essential public services and stashed the money into their personal piggy banks called Redevelopment Agencies. That along with the financial mess we and the rest of the world are in at the moment, and you have financial disaster.

And to rub salt into their wounds now the State's governor, Jerry Brown, has said "no-no" to the over 400 Redevelopment Agencies and has made the pirates cough up the booty and redistribute it back into education and emergency services. 

So,what does this mean for the State and the Nation?  There is an old saying that has been around for years, "So goes California, so goes the Nation".  But what I fear most is that people are just not listening to the storm that approaches us all.  

We as a nation are at a crossroads in our history, and the direction we take from this point on is so crucial to our very way of life and existence.  It is time for the American people to wake up from their slumber before we reach a point of no return.  If we don't in time, the American Dream is going to become a sure nightmare. 

Better look up my fellow Americans, There is a "Bad Moon Rising".  


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