The $4 Trillion Money Printing Press

“One pandemic, two great depressions, 11 major wars, and 44 recessions. Four U.S. presidents were assassinated while in office. Hundreds of thousands of businesses went bankrupt; tens of millions of Americans lost their jobs.  Did the U.S. government respond to many of these events with countermeasures? Of course.  But never once had the U.S. government resorted to such extreme abuses of its money-printing power as it did in 2008-10. Now, all that tradition of leadership and discipline was abandoned — all for the sake of perpetuating America’s addiction to spending, borrowing, and speculative bubbles.”

“It Could Never Happen Here”

“Of course, not everyone in Greece is hurting. Many people saw this coming and took action. They took all their money out of the banks, put it under the mattress, or maybe stored it in a safe. Maybe they bought gold, or diamonds, or something else. These people aren’t standing in lines at ATMs. They aren’t going to go homeless or hungry.  But these people get a pretty bad rap—at least here in the US, where we call them ‘doomsday preppers.’ Or ‘bunker monkeys.’ Or ‘conspiracy theorists.’ Or ‘gold bugs.’ They take a beating.  Jim Rickards tweeted the other day, ‘I’ll bet there a lot of Greeks saying, ‘I wish I had bought some gold.’’ Truer words have never been spoken.”

Drug cops took a college kid’s savings; 13 police departments want a cut

“Like Joseph Rivers, Charles Clarke is a young black man. And like Rivers, he lost his cash at a so-called ‘cold consent’ encounter — that is, a warrantless search voluntarily agreed to — at one of the nation’s transportation hubs. Clarke didn’t have any marijuana on him or in his baggage, so he hasn’t been charged with any drug crimes.  He was charged with resisting arrest and assaulting an officer, however, after he tried to prevent the agents from seizing his money by yelling at them and struggling with the agents when they grabbed the cash, according to the agent’s affidavit. The charges were subsequently dropped, according to his lawyers at the Institute for Justice.”

The Police State and Property Taxes

“Once a video of the Dent incident became public, the officer lost his job. He’s now on trial, facing charges of mistreatment of a prisoner.  Dent also decided to sue the city of Inkster, Michigan, where the incident occurred. Surprisingly, he won. The city of Inkster settled for $1.4 million.  The problem is, Inkster doesn’t just have an extra $1.4 million laying around. So what did the local politicians do? They decided to raise property taxes.  A local media source estimates the new property tax will amount to about $179 on a home valued at about $55,400.  Now that doesn’t sound like a lot. But consider that the median income in Inkster is just $26,500 and that 40% of its people live below the poverty line.”

Chicago Public Schools’ pain is these financial firms’ gain

“Struggling to make payments for pensions and pay down billions of dollars in debt, the Chicago Public Schools last week announced 1,050 layoffs and $200 million in spending cuts to keep the school system afloat.  Dozens of financial and legal firms have been paid $18.1 million in fees from CPS borrowing and debt-refinancing deals since 2011, according to records obtained by the Chicago Sun-Times.  CPS still owes billions on borrowing deals dating to the mid-1990s, when then-Mayor Richard M. Daley took formal control of the school system, which then began renovating and building schools using borrowed money.”

Economic exodus means two-thirds of Puerto Ricans may soon live in US

“Unable to pay its $73bn debt, Puerto Rico has begun rationing water,closing schools and watching its healthcare system collapse and 45% of its people living in poverty. Emigration to the mainland has accelerated in recent years, activists say, and data shows that from 2003 to 2013 there was a population swing of more than 1.5 million people. As a US territory, the semi-autonomous island does not have the same authorities that allow others to file for Chapter 9 bankruptcy, as Detroit did to cope with its own disastrous finances. Today, 60% of Puerto Ricans live in the States and 40% on the island according to a 2014 Pew report, with most moving to Florida.”

Is your bond fund invested in Puerto Rico?

“Some of the top-performing municipal bond funds over the past five years have held huge stakes in Puerto Rican debt. Now that Puerto Rico’s governor has said the island’s roughly $72 billion in debts are ‘not payable’ and asked for U.S. bankruptcy protection for the commonwealth, investors in those funds may take a big hit.  U.S. bond funds have an $11.3 billion total exposure to Puerto Rican debt as of June 29, according to mutual fund firm research Morningstar.  See a list of 20 bond funds with the most exposure to Puerto Rican debt below.  U.S. mutual funds are only required to disclose their holdings quarterly.”

Trouble Could Be Looming for Puerto Rico Bond Insurers

Assured Guaranty Ltd., MBIA Inc. and Radian Group Inc. have ‘substantial’ exposure to Puerto Rico bonds that in some cases outstrip the assets available to cover unexpected losses, according to Moody’s.  A 2028 bond without bond insurance recently traded at about 74 cents on the dollar, according to the Electronic Municipal Market Access website.  Some municipal-bond investors questioned the value of bond insurance following the financial crisis, when bond insurers suffered losses after guaranteeing risky mortgage-backed securities and lost their top credit ratings. The number of new municipal bonds that carry bond insurance has fallen in recent years.”

Puerto Rico’s Crisis Deals a Blow to Municipal-Bond Funds

“In a low-interest rate world, Puerto Rico’s bonds have offered investors juicy yields over the past several years. Puerto Rico’s $3.5 billion in general-obligation bonds issued in 2014 initially had a yield of 8.7%. The yield on 10-year U.S. Treasury notes, by contrast, hovered between 2% and 3% last year.  But now investors are getting a fast lesson on the risk that comes with those sorts of high yields. More than half of all U.S. municipal-bond funds, or 298 of 565, have invested in Puerto Rico’s debt, according to the most recent fund holdings compiled by Morningstar.”

Puerto Rico’s Governor Says Island’s Debts Are ‘Not Payable’

“Puerto Rico’s governor, saying he needs to pull the island out of a ‘death spiral,’ has concluded that the commonwealth cannot pay its roughly $72 billion in debts, an admission that will probably have wide-reaching financial repercussions. It is a startling admission from the governor of an island of 3.6 million people, which has piled on more municipal bond debt per capita than any American state. A broad restructuring by Puerto Rico sets the stage for an unprecedented test of the United States municipal bond market, which cities and states rely on to pay for their most basic needs, like road construction and public hospitals.”