Feersum Endjinn
Federal income tax revenue dropped 44 percent from a year ago. (source)
Overall federal tax revenue dropped 34 percent from a year ago. California is experiencing similar drops in tax revenues.
Across the country, sales tax revenue and property tax revenues are also dropping by large amounts. Economists are concerned that local governments may default on their bonds. Even if they don't default, credit rating markdowns will make the cost of borrowing to pay for government services, expenses, salaries, and defined benefit pensions higher.
As you know, 1 in 8 American homeowners is in the default or foreclosure process. But sub-prime mortgages aren't even the majority of foreclosures anymore. That was so last year.
More waves of mortgage rate resets and foreclosures are coming.
At the same time, the federal government took on $6.8 trillion in funding obligations and debt in 2008, pushing the total owed to a record $63.8 trillion. That's things like government bonds, military pensions, Social Security, and Medicare benefits.
Millions are expected each year to join the ranks of Social Security retirement income recipients and Medicare patients. Congress hasn't set aside funding for that. And it hasn't set aside funding for military and civil servant retirement benefit obligations (currently an estimated $5.3 trillion). The picture is really scary. (source)
Because of government put the unions and itself in line ahead of GM's and Chrysler's secured bond creditors in their bankrupcy/reorganizations, fewer investors will want to lend money to companies in the U.S. that have unions and/or government bailouts. "A new Garman Research study titled 'Priority Lost' determined that corporate bonds already are losing value based on the bondholder slap-around." (source)
"I think the punishment for mugging bondholders will be a reduced trust of foreigners in the U.S. legal system and an increase of the interest that foreigners will request for investing in U.S. instruments," said Ottavio Lavaggi, an Italian bondholder who sued deadbeat Argentina over its $100 billion sovereign bond default in 2001. "There is no free lunch, and robbing bondholders . . . will have consequences." (source)
The Chinese are trying to diversify out of the dollar. Recently their holdings in U.S. Treasury bonds decreased by a few billion dollars. Other foreign countries and their investment funds (like the South Korean National Pension Service) are quietly trying to find ways out of Treasury bonds.
Rather than buying bonds in other currencies, China is buying ownership interests in mining companies and buying commodities. They're securing access to land and raw materials and minerals in Africa, Australia, South America, even Canada. They're trying to do it without raising suspicions. (source)
Two Japanese men were caught trying to smuggle $134.5 BILLION dollars in U.S. Treasury bonds into Switzerland. (source)
The bonds were mostly in 249 certificates printed with a value of $500 million each. These are NOT stuff ordinary investors use. They're certificates meant for government-to-government transactions.
One analyst mentioned that it is highly unlikely that they are forgeries, because such things are difficult to fake, difficult to resell, and difficult to redeem without first being authenticated. $134.5 billion in U.S. Treasury bonds represents roughly ONE THIRD of Japan's Treasury bond holdings. Some speculate that the Japanese government may be trying to unload Treasury bonds quietly on the black market without attracting attention. (source)
On the other hand, they could really be forgeries and these two people could even be North Korean agents.
These are interesting times...