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The Mike Church Show World HQ

Mandeville, LA – Exclusive Transcript – If you think of yourself as a sow and you’re a major city and you actually had to withdraw yourself from the federal trough and had to pay and manage and take care of your own finances the old-fashioned way, most of this stuff would not happen.  Many of the things that occur in major cities would not happen because there would not be the underlying promise there that the federal government is always there with a hand out with programs.  Check out today’s transcript for the rest…

 

Begin Mike Church Show Transcript

Mike:  Yesterday Moody’s downgraded Chicago’s credit rating from Aa3 to A3 because of the city’s pension problem.

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Moody’s Investors Service says it’s making the move because of “formidable legal and political barriers to pension reform” in the state. The downgrade affects $8.2 billion in debt and means it will cost the city more to borrow money.

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road-to-independence-BH-RTIDE2-detailMike:  Good.  Municipalities need to stop borrowing money.  They’re broke.  They’re gonna get a bailout, aren’t they?  No, they’re not going to get a bailout.  We’re broke.  Everyone is broke.  There is no money.  Then if I go back to Mish’s report on this:

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With the bankruptcy of Detroit and numerous cities in California, it will not be long before the rating agencies downgrade city debt en masse.

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Mike:  Here’s a list of zombified cities.  These are cities of the walking financial dead.

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Zombified Cities [Mike: These are recent headlines you might have missed.]

Philadelphia: 5th Largest City in US is Effectively Bankrupt; Mayor Holds Closed Meeting with Wall Street to Discuss Asset Sales

Founders TV – The Stock Market is Down Except for Two Sectors: Government and More Government

Houston: CPAs state Houston is Bankrupt

LA: Mayor of Los Angeles Says “Bankruptcy is Not an Option” (Of Course It Is)

New York Cities: Public Pension Ponzi Scheme – New York Cities Borrow From Pension Plan to Make Contributions

Baltimore: Time for Baltimore to “Pull a Vallejo” and Declare Bankruptcy

Miami: Miami Commissioner Says Bankruptcy is City’s Best Hope; Chris Christie Says New Jersey Careens Towards Becoming Greece

Chicago: Chicago’s Mayor Daley Discusses Bankruptcy For City Pensions

america-secede-or-die-t-shirtScranton: Scranton Mayor Slashes All Public Worker Wage to $7.25 per Hour, Including Police, Fire, His Own; City Effectively Bankrupt

Harrisburg: Pennsylvania State Capital Files For Bankruptcy

There is absolutely no way Chicago, Oakland, Baltimore, Philadelphia, LA, Houston, and numerous other cities can meet pension obligations without a major restructuring of promises.

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Mike:  You know, folks, the unions don’t compromise.  They don’t bargain on these things.  The only way you’re going to get anything done is to declare bankruptcy.  This is on the radar screen. This story and issue is not going away anytime soon.  There are a couple other points on this.  Did the borrowers who recently loaned Detroit, Michigan money, did they know the status that the city was in?  Was that disclosed?  Ditto that for all the other major cities.  Are cities disclosing how bad things are?  We did the story on Friday about how Detroit is floating the idea of building a $640 million hockey arena, for crying out loud.  You’ve got money for a hockey arena but you can’t meet your pension obligations?  Something’s gotta give here.  Something has to give.

There are other assorted stories out here.  For example, the president was asked on Friday whether or not the City of Detroit was going to get a bailout.  Obama’s response was “I don’t believe that that is going to happen.”

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While automakers begged for a bailout in 2008 and 2009, Kevyn Orr, the emergency manager appointed to oversee Detroit’s finances, told CNN that he never asked the White House for help before deciding to go ahead with the bankruptcy filing.

“We have to solve these problems ourselves. [Mike: You heard the governor of Michigan saying the same thing.] The concept that someone else is going to come in and solve problems of our making isn’t exactly productive,” he said.

Founders TV – Mark Kreslins: Bernanke’s Pretend Economy Could Come Down at Any Moment

White House Press Secretary Jay Carney wasn’t about to promise any help when asked about the bankruptcy Friday.

“You have heard leaders in Michigan say, and we believe they’re correct, that this is an issue that has to be resolved between Michigan and Detroit and the creditors,” he said.

There are a couple of differences between the automakers and their hometown.

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article-v-pamphlet-adMike:  I’m going to tell you another reason why Obama is not going to bail out the City of Detroit.  Number one, he’s the president and he doesn’t have a checkbook, despite the fact that Nicolas Cage found one underneath the president’s desk in National Treasure 2.  Number two, there are no votes to be had in this.  The only reason that General Motors got a bailout — and if you’ve been listening to this show for any amount of time, you know that back in 2009, I analyzed the first bailout and told you people that the reason Obama had sided with General Motors and with the UAW unions was not because he was a union hack, although he may be; it was to buy votes in Ohio.

It was to make sure that when the 2012 election came up, he could campaign in Ohio.  Ohio was always the battleground state.  Sure enough, when it came time to pull that lever in Ohio on that fateful day in November last, Ohioans, many of them buoyed by the fact that Obama had bailed out several companies that did business in Ohio for General Motors, Ohioans voted for Obama.  The strategy worked.  He’s not going to run for reelection.  There’s no need to bail out Detroit.  There are no votes to get here.  Nothing is to be gained here by this.  Maybe Mrs. Clinton can talk him into it so that she can say, [mocking] “We bailed out Detroit and we gave that city support when it needed it most and it worked.”  It’s not going to work.  If you’ve got bad debts, the bad debts have to be liquidated.  They have to be liquidated and your assets have to be liquidated.  The only process by which you can do this in an orderly fashion is through a bankruptcy. Whether you like it or not, Judge Aquilina, bankruptcy is coming Detroit’s way and the people of Detroit, the 18 of them that are going to stay there, are going to be far better off.

Mike Church Show Transcript – The Media Won’t Tell You But The Numbers Don’t Lie, The Recession Is Back

If you think of yourself as a sow and you’re a major city and you actually had to withdraw yourself from the federal trough and had to pay and manage and take care of your own finances the old-fashioned way, most of this stuff would not happen.  Many of the things that occur in major cities would not happen because there would not be the underlying promise there that the federal government is always there with a hand out with programs.  I’m sure there are creative ways that guys like John Conyers and other Michigan area libs can funnel money into the City of Detroit through the federal trough and not make it look like a bailout.  There are all kinds of grants and remunerations and programs and what have you that they could try and earmark and get through.  That doesn’t mean that they’re going to make it through.

One more piece of economic news here.  You’ll find this at Mises.org today, “Capital Requirements Won’t Save Us.”  There’s a lot of talk about what’s going on with Ben Bernyankme and the Federal Reserve, and that the Fed chairman seems more committed than ever to making sure that the only barometer of economic activity that is measured that he has direct control over, seems to have direct control over, is not going to suffer the correction that it needs to suffer.  That’s the stock market.  You may wonder: Mike, if you and your Austrian buddies’ theory is correct, how come the market hasn’t corrected yet?  Oh, it’s going to.  They’re trying to change and rig some of these rules up to say that banks have to have more reserve in their coffers and this is going to save the banks.  Well, according to Frank Shostak at Mises.org, that is not the case.

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Fractional reserve banking can however be supported by the central bank. Note that through ongoing monetary management, i.e., monetary pumping, the central bank makes sure that all the banks can engage jointly in the expansion of credit out of “thin air” via the practice of fractional reserve banking.

The joint expansion in turn guarantees that checks presented for redemption by banks to each other are netted out, because the redemption of each will cancel the other redemption out.

By means of monetary injections, the central bank makes sure that the banking system is “liquid enough” so that banks will not bankrupt each other.

The consequences of the monetary management of the Fed are manifested in terms of boom-bust cycles. [Mike:  Mr. Shostak then gets into what’s going to happen.]

Once the economy enters a new economic bust, banks are likely to run the risk of experiencing a new financial crisis, the reason being that so called current good quality loans could turn out to be bad assets once the bust unfolds.

A visible decline in the yearly rate of growth of banks’ inflationary lending is exerting a further downward pressure on the growth momentum of our “Austrian Money Supply” (AMS) monetary measure.

Year-on-year, the rate of growth in AMS stood at 7.7 percent in June against 8.3 percent in May and 11.8 percent in June last year.

We suggest that a visible decline in the growth momentum of AMS is expected to bust various bubble activities, which sprang up on the back of the previous increase in the growth momentum of money supply. [Mike: This is Bernyankme printing that $83 billion per month and seeding it out through the stock market cloud.]

Mike Church Show Transcript – Don’t Be Fooled By Bernanke, The Great Recession Is Still Here

Remember that economic bust is about busting bubble activities. Beforehand it is not always clear which activity is a bubble and which is not.

Note that once a bust emerges, seemingly good companies go belly up. Given that since 2008 the Fed has been pursuing extremely loose monetary policy this raises the likelihood that we have had a large increase in bubble activities as a percentage of overall activity.

Once the bust emerges, this will affect a large percentage of bubble activities and hence banks that provided loans to these activities will discover that they hold a large amount of non-performing assets. [Mike: In other words, there is big trouble directly ahead.]

A likely further decline in lending is going to curtail lending out of “thin air” further and this will put a further pressure on the growth momentum of money supply.

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In fractional reserve banking, when money is repaid and the bank doesn’t renew the loan, money evaporates. Because the loan was originated out of nothing, it obviously couldn’t have had an owner.

In a free market, in contrast, when money, i.e., gold is repaid, it is passed back to the original lender; the money stock stays intact.

Since the present monetary system is fundamentally unstable, it is not possible to fix it. The central bank can keep the present paper standard going as long as the pool of real wealth is still expanding.

Once the pool begins to stagnate, or, worse, shrinks then no monetary pumping will be able to prevent the plunge of the system.

A better solution is of course to have a true free market and allow the gold to assert its monetary role.

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Mike:  That’s not going to happen anytime soon.  So what’s the conclusion?  There is a massive correction coming.  Bernyankme’s dark, black art is about to wreak havoc on a market that by all means of accounting is a bubble and has been the direct beneficiary of all the designs of the fiat — that means “at will,” by the way — the paper money system of Bernyankme and his cohorts.  In other words, folks, it’s a house of cards, much like the one that crashed in 2007 and 2008.  It took almost seven years for that to work its way through.  Recall that the pumping and the priming and the lowering of the interest rates, that all occurred in 2002, ’03, ’04, ’05 and began to tail off in ’06 and finally in ’07.  It was at the end of 2008 when all that finally came to pass and all of financial Armageddon then resulted.  The fact that it hasn’t happened, [mocking] “Well, it’s been almost five years,” the correction is coming in other words.  Be prepared.

End Mike Church Show Transcript

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