Are we about to see a Greek style implosion in the United States? The outlook for US municipalities is not good and there's every likelihood they will need a Federal bailout which will come with all sorts of strings attached to cut services.
Reuters reports that municipalities in California are talking about getting bankruptcy protection. It's a tradition that started with Orange County back in 1994 but this time it's worse because California has the third highest unemployment rate in the US with a rate of 12.6% which means municipalities will have massive shortfalls in their collections.
Earlier this year, I did a blog entry looking at how analysts now regard California as a bigger risk than Kazakhstan and warned that various US states are facing bankruptcy, resulting in a Greek style bailout.
This is why economists are now warning that America faces its own version of the Greek crisis with Federal debt as a percentage of the Gross Domestic Product now standing officially at around 60% and likely to hit 150% in 10 years, and 300% by 2050. Economists are comparing the US to Argentina which was one of the most prosperous nations in the world before the Second World War with a strong industrial base and thriving middle class. Within 15 years, it went from one of the richest nations to one of the poorest.
Was Argentina a dress rehearsal? It's not inconceivable the same could happen to America.
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