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Illinois Bankruptcy Coming… State Out of Money

Posted by on June 17, 2017 4:05 PM
Tags: , , , , , , , , ,
Categories: US Economy

An Illinois bankruptcy is likely coming after Comptroller Mendoza says more is being paid out each month than the state receives in revenue. According to an AP report (link above) the Comptroller says the state is out of tricks.

If the state running out of money isn’t bad enough, the Chicago Path reports that 15 Illinois retailers are on the verge of bankruptcy. That’s a lot of people on the verge of being out of work and hence less tax revenues for the state.

Illinois Bankruptcy Due To Unfunded Pension Liabilities

Let’s be clear, it’s currently impossible for a state to declare bankruptcy but that could change with a vote in Congress. What put Illinois in this mess was unfunded pension liabilities.

Illinois Bankruptcy

Pensions carried overly optimistic assumptions of annual yields at 7% and above. The Federal Reserve has kept interest rates low for so long that bond yields, the primary holdings of pension funds, have failed to get anywhere near the 7% and above assumptions. The state’s general assembly wasn’t required to fully fund pensions and so they spent tax money on other things like schools and infrastructure.

Thetruthdamit posted this video below about why an Illinois bankruptcy is being discussed and how California is going down the same path.

While there’s some truth to what Thetruthdamit says, the bigger reason for Illinois problems is because of the Federal Reserve keeping interest rates low for so long.

The Keiser Report did one of the best explanations of how the Federal Reserve basically transferred money away from pension funds and into bank bailouts via the mechanism of interest rates.

The people of Illinois and this country should be angry at the Federal Reserve more than state elected Democrats IMO. Instead, corporate mainstream media will unfairly point the finger at Democrats who will shoulder most of the blame in the event of an Illinois bankruptcy. This should preserve the tradition of federal government agencies never getting blamed for anything, you know, because it’s always the state’s fault when something goes terribly wrong.

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Lance Jepsen

For ethical purposes, I try not to hold any position in any stock I profile on unless specifically stated in the article. Owner of Seasoned entrepreneur, investor, and writer. I love God, family, country, stock trading, economics, and helping people learn how to trade.
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