Don't Let The Paper Shenanigans In Gold Obscure Reality

A big reduction in benefits for the public sector is inevitable. States lack the ability to print or devalue their currency to meet their obligations. States either receive federal assistance to meet their obligations or reorganize in bankruptcy, similar to GM, as a means of reducing past and present obligations. The two options, the former indirect through currency devaluation and the later direct through reduction and elimination of benefits and employment, imply a substantial reduction in standard of living within the public and to a lesser degree private sector. The secular uptrend in gold, despite the short-term paper shenanigans driven by fear and doubt, continues to reflect this growing reality.

Headline: A Path Is Sought for States to Escape Their Debt Burdens

Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.

Unlike cities, the states are barred from seeking protection in federal bankruptcy court. Any effort to change that status would have to clear high constitutional hurdles because the states are considered sovereign.

But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid.

Source: nytimes.com

From Bob