Rattling Some Cages
Meredith Whitney. You remember her. We wrote about her in our Vol. XVII, Art. 30 commentary back on December 8th, 2008 – a few days before Christmas. We called her “a rare exception among the many analysts and economists writing about our economic woes”, and we noted that she was one of the very few who correctly understood the relationship between cause and effect.
“The credit card is the second key source of consumer liquidity,” she said, ” the first being jobs.” She was the first one who got it right. Jobs, we said, were the “sine qua non” in our downward spiral, because without a job (the cause) there’s no money to be spent (the effect).
And just before Christmas this year we heard once again from Ms. Whitney. According to a story in Business Insider, Ms. Whitney predicted that 2011 will be the year of the municipal default. The report went on to say that bond investors will begin to flee the market because it has become difficult for cities to raise funds, and because “city revenues are crashing and keep getting worse.”
“High joblessness is cutting into city revenues, while increasing costs for services. The next default could be a major city like Detroit, or it could be one of the hundreds of small cities that are on the brink.”
She’s a “rare exception”, alright. Singapore’s Business Times revealed yesterday that “municipal bond investors are trying to unload holdings at the fastest pace in at least 14 years amid increasing mutual fund redemptions and rising US Treasury rates …
“States’ fiscal stress may trigger a ‘spate’ of defaults among municipalities, said Ms. Whitney, who correctly predicted Citigroup Inc’s. dividend cut in 2008, during a segment on CBS Corp’s 60 Minutes.”
That’s not all she correctly predicted. This morning’s New York Times included a report by Monica Davey with the headline, “Strapped Michigan city considers radical plan: bankruptcy”.
“HAMTRAMCK, Mich. – Leaders of this city met for more than seven hours on a Saturday not long ago, searching for something to cut from a budget that has been cut, over and over …
“The political leaders of this old working-class city perched on the edge of Detroit are pleading with the state to let them declare bankruptcy – a desperate move the state is not even willing to admit as an option. “The state is concerned that if they say yes to one, if that door is opened, they’ll have 30 more cities right behind us,” said the city manager.
Joblessness, credit card defaults, bond dumping and municipal bankruptcies … Ms. Whitney predicted all of it. The “experts”, however, can only talk about a phony economic “recovery”.
Maybe we should talk to Ms. Whitney about shipbuilding. She’d rattle some cages.