Municipal Bonds on the Chopping Block?

From Zero Hedge:

While the impact on Treasuries as a result of the downgrade may be limited (after all the other side of the Atlantic is about as ugly as the US, so where could $8 trillion in marketable USTs practically go… at least for now), the same may not be said about the far smaller, $2.9 trillion municipal market, which is about to see a blanket downgrade tomorrow as S&P warned on Friday night, and of which Matt Fabian of Municipal Market Advisors earlier said that “There will be hundreds and hundreds of municipal downgrades, which will not do well to bolster investor confidence.” The scary bit: “Treasuries may be able to shake off a real impact from the downgrade. Munis I’m less sure about

This could be devastating to the already stressed budgets of municipalities – many of them, burdened under bloated pension budgets and other foolhardy spending, are just an ace away from bankruptcy, as it is.  Put a bit more pressure on them and a lot could fail.  And even if they manage to scrape through, this will mean less money for police, fire and schools…and likely further rounds of government worker layoffs (which, in a macro sense, aren’t bad, but are plain and simple lousy for the people losing their jobs).

Learn the lesson – debt is poison.  No government should ever carry any of it – certainly not for anything less important than fighting a World War.  To mortgage the future under the best of circumstances is mortgage it in order to keep up a bloated, wasteful government entity is criminal.  The change must come, and we might as well get over the worst of it right away…slash budgets until no more bonds need to be sold, and then rebuild from there.

5 thoughts on “Municipal Bonds on the Chopping Block?

  1. Green Mountain Boy August 8, 2011 / 12:12 am

    The crash is not coming. We can afford to pay more welfare. We can afford to start busing in folks from Mexico City to work here. We have enough money for more studies of homosexual mens penis sizes. All is well you conservative drones. I now return you to the regular scheduled programming 🙂

  2. bardolf August 8, 2011 / 12:49 am


    Instead of talking about pensions you might want to talk about actual municipal bond projects. Typical is the desire to have sweet buildings and attractions for the locals.

    “A gleaming new Southern California high school that cost more than $100 million to build will sit empty and unused, because the local school district doesn’t have enough money to run it. In 2007, voters approved approved bonds to finance the building of Hillcrest High School in Riverside, which was intended to relieve overcrowding at a nearby high school. But thanks to major cuts in state education funding, the local school district can’t afford the $3 million it would cost to pay administrators, teachers, and other staff, and to handle the other expenses that come with operating a school.”

    • Green Mountain Boy August 8, 2011 / 1:21 am

      Ok then, so the rest of the state should pay? Why those filthy money mongering jerks!! Here we have a 100 million dollar school and it is going to sit empty. Hmmm maybe the taxpayers of that school district could raise thier property taxes to cover the yearly operating budget of thier own school?? Naw, makes too much sense. Besides why should they alone pay for it when they can get the rest of the state to help?

  3. Jeremiah August 8, 2011 / 2:01 am

    5000 years ago, Moses said, “Pick up your shovels, mount your asses and camels, and I will lead you to the Promised Land.” When Welfare was introduced Roosevelt said, “Lay down your shovels, sit on your asses, and light up a Camel, this is the Promised Land.” Today, the government has stolen your shovel, taxed your asses, raised the price of Camels and mortgaged the Promised Land to China.

    • neocon1 August 8, 2011 / 7:57 pm


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