There is no gold rush in Illinois. The important question is, “Why Not?”
- “Illinois is in serious financial trouble.”
- “Illinois has no current budget.”
- “The reality is Illinois is flat-out broke.”
The State Comptroller estimates that the backlog of unpaid bills will exceed $10 Billion by December. Worse, “In January , Illinois’ total cumulative liability was $159 Billion.”
“Pay-Later Budgeting” has not worked. “… the state of Illinois has run deficits in every fiscal year since 2001.” The state borrowed, sold assets, underfunded retirement plans, borrowed even more money to fund retirement plans and yet pretended all was well.
Borrowing today increases the strain on future budgets and reduces available funds for future pensions, salaries, benefits, general expenses, and payoffs. Eventually the “piper will be paid.”
Mish has more to say but the message is clear.
- Illinois is in deep trouble and getting worse each year.
- Politicians are not addressing structural issues.
- The current and unfunded liabilities are far too large to be paid.
- Retiree pensions and benefits will eventually be reduced.
- Taxes are already high and increasing taxes will not solve their problems.
It is worth noting that the members of the Illinois legislature increased their wages in the midst of this management disaster, and are paid, even without passing a budget.
Back to the important question: Where is the gold rush? Retirees, future retirees and current state workers should realize that they will inevitably lose benefits and jobs while their taxes and expenses increase. Gold, not the legislature nor the politicians, will protect their purchasing power.
But strangely, there seems to be no gold rush in Illinois for protection against their legislature, pension underfunding and loss of purchasing power.
MORE PARALLELS BETWEEN ILLINOIS AND SOVEREIGN GOVERNMENTS:
There are similarities between the state of Illinois (and others) and the US government, Greece, Spain, Italy, the EU, the UK and Japan.
- Massive government deficits every year. Check!
- Unpayable unfunded liabilities that will damage or destroy the currency, the economy, taxpayers, and the middle class. Check!
- Politicians unwilling to address structural problems. Check!
- Extend and pretend – let the next governor, mayor, president, or prime minister address the consequences of current inaction. Check!
- Retirees will be disappointed when promised benefits are either reduced or paid in a currency with such devalued purchasing power that the retirees feel robbed. Check!
- Wealth was transferred from the middle class and the state to the political and financial elite. Check!
- It will not end well. Check!
Where is the gold rush? Apparently the only rush to buy gold in any large quantity exists in Russia, China, and India, but not Illinois, the UK or the US. That will change as the consequences of bad policies are realized.
Illinois (like many other states) is facing an ugly financial future. Illinois can’t “print” money to pay their bills so eventually horrible adjustments will be made. Sovereign nations such as the US, Japan, and the UK can “print” their currencies until others refuse to accept payment in those currencies. This delays, but does not eliminate, the inevitable consequences and implosion.
- A state salary or pension in Illinois (and many other states and countries) may be at risk. An alternate plan is needed.
- Politicians will “extend and pretend” instead of addressing structural problems, so those problems will become worse.
- Unpayable liabilities will not be paid.
- Consequences will be ugly and may arrive soon. Be prepared!
- Buy gold (and silver) to protect your purchasing power.
Charles Hugh Smith: “Here’s Why the Status Quo is Doomed”
The Deviant Investor