San Bernardino California became the latest American city to declare bankruptcy. Meanwhile the mayor in Scranton Pennsylvania has defied a court order and vowed that all municipal employees will have their pay slashed down to minimum wage.
The political elites may not dare to admit this publicly, but these dramatic actions are a continuation of the 2008 financial crisis.
The 2008 financial crises has proven unique because it has struck in various waves. The original wave revolved around the banking and financial sectors. This crisis then extended itself over the housing market, and has now spread to municipal governments.
These crises are bound together by the commonality of a lack of capital.
The banks couldn’t weather the financial crisis because they didn’t have enough capital and needed bailouts, homeowners were underwater when mortgage rates adjusted because they didn’t have the income to make the adjusted pavement, and now governments made these big promises to employees when everything was good, but find themselves into draconian cuts because the good times died.
Yet neither presidential candidate would dare to admit that the 2008 financial crises is still going on because they want to talk about recoveries or what we need to do to speed up said recovery.
I don’t know how were supposed to recover when we have unusually high foreclosure rates and municipal governments are slipping further into the toilet.
Perhaps Obama and Romney should focus less on this dubious recovery thing and focus more on how they propose to get us out of this great four year financial crisis.