Vicious Downward Cycle Intensifying

The vicious downward cycle (see Jim's formula) that started that started in 2001 and rematerialized in 2008 is beginning to intensify in 2011. This suggests an acceleration in the trend toward a lower standard of living for Americans as the shockwaves of public spending cuts negatively impact local, state, and eventually federal coffers. The public sector, contracting under the weight of a massive debt burden, has few options without the bankruptcy protection or ability to devalue. The message from national municipal bond market reflects this “damned if you do, damned if you don’t policy quandary. Expectations calling for an end of quantitative easing will once again be proven premature.

US Federal Budget (Surplus or Deficit As A % of GDP, 12 Month Moving Average) and Gold London P.M. Fixed:


Headline: Wis. governor proposes deep cuts for schools

Even though Walker isn't ordering immediate layoffs, his budget will put tremendous pressure on schools and local governments, which will be asked to shoulder huge cuts without raising property taxes to make up the difference.

Walker's budget includes a nearly 9 percent cut in aid to schools, which would amount to a reduction of nearly $900 million. The governor also proposed requiring school districts to reduce their property tax authority by an average of $550 per pupil.

Source: news.yahoo.com