Eeyores news and view

This is really sad, that is why i started my prep talks with handeling your money. If you don't control it it will control you.
Suicides from financial crisis cause concern
October 14, 2008 - 9:00am
KELLI KENNEDY
Associated Press Writer

(AP) - An out-of-work money manager in California loses a fortune and wipes out his family in a murder-suicide. A 90-year-old Ohio widow shoots herself in the chest as authorities arrive to evict her from the modest house she called home for 38 years.

In Massachusetts, a housewife who had hidden her family's mounting financial crisis from her husband sends a note to the mortgage company warning: "By the time you foreclose on my house, I'll be dead."

Then Carlene Balderrama shot herself to death, leaving an insurance policy and a suicide note on a table.

Across the country, authorities are becoming concerned that the nation's financial woes could turn increasingly violent, and they are urging people to get help. In some places, mental-health hot lines are jammed, counseling services are in high demand and domestic-violence shelters are full.

"I've had a number of people say that this is the thing most reminiscent of 9/11 that's happened here since then," said the Rev. Canon Ann Malonee, vicar at Trinity Church in the heart of New York's financial district. "It's that sense of having the rug pulled out from under them."

With nowhere else to turn, many people are calling suicide-prevention hot lines. The Samaritans of New York have seen calls rise more than 16 percent in the past year, many of them money-related. The Switchboard of Miami has recorded more than 500 foreclosure-related calls this year.

"A lot of people are telling us they are losing everything. They're losing their homes, they're going into foreclosure, they've lost their jobs," said Virginia Cervasio, executive director of a suicide resource enter in southwest Florida's Lee County.

But tragedies keep mounting:

_ In Los Angeles last week, a former money manager fatally shot his wife, three sons and his mother-in-law before killing himself.

Karthik Rajaram, 45, left a suicide note saying he was in financial trouble and contemplated killing just himself. But he said he decided to kill his entire family because that was more honorable, police said.

Rajaram once worked for a major accounting firm and for Sony Pictures, and he had been part-owner of a financial holding company. But he had been out of work for several months, police said.

After the murder-suicide, police and mental-health officials in Los Angeles took the unusual step of urging people to seek help for themselves or loved ones if they feel overwhelmed by grim financial news. They said they were specifically afraid of the "copycat phenomenon."

"This is a perfect American family behind me that has absolutely been destroyed, apparently because of a man who just got stuck in a rabbit hole, if you will, of absolute despair," Deputy Police Chief Michel Moore said. "It is critical to step up and recognize we are in some pretty troubled times."

_ In Tennessee, a woman fatally shot herself last week as sheriff's deputies went to evict her from her foreclosed home.

Pamela Ross, 57, and her husband were fighting foreclosure on their home when sheriff's deputies in Sevierville came to serve an eviction notice. They were across the street when they heard a gunshot and found Ross dead from a wound to the chest. The case was even more tragic because the couple had recently been granted an extra 10 days to appeal.

_ In Akron, Ohio, the 90-year-old widow who shot herself on Oct. 1 is recovering. A congressman told Addie Polk's story on the House floor before lawmakers voted to approve a $700 billion financial rescue package. Mortgage finance company Fannie Mae dropped the foreclosure, forgave her mortgage and said she could remain in the home.

_ In Ocala, Fla., Roland Gore shot his wife and dog in March and then set fire to the couple's home, which had been in foreclosure, before killing himself. His case was one of several in which people killed spouses or pets, destroyed property or attacked police before taking their own lives.

"The financial stress builds up to the point the person feels they can't go on, and the person believes their family is better off dead than left without a financial support," said Kristen Rand, legislative director of the Washington D.C.-based Violence Policy Center.

Dr. Edward Charlesworth, a clinical psychologist in Houston, said the current crisis is breeding a sense of chronic anxiety among people who feel helpless and panic-stricken, as well as angry that their government has let them down.

"They feel like in this great society that we live in we should have more protection for the individuals rather than just the corporation," he said.

It's not yet clear there is a statistical link between suicides and the financial downturn since there is generally a two-year lag in national suicide figures. But historically, suicides increase in times of economic hardship. And the current financial crisis is already being called the worst since the Great Depression.

Rising mortgage defaults and falling home values are at the heart of it. More than 4 million Americans were at least one month behind on their mortgages at the end of June, according to the Mortgage Bankers Association.

A record 500,000 had entered the foreclosure process. And that trend is expected to continue through next year, despite the current programs from the government and the lending industry to refinance delinquent homeowners into more affordable loans.

Counselors at Catholic Charities USA report seeing a "significant increase" in the need for housing counseling.

One counselor said half of her clients were on some form of antidepressant or anti-anxiety medication. The agency has seen a decrease in overall funding, but it has expanded foreclosure counseling and received nearly $2 million for such services in late 2007.

Adding to financially tense households is an air of secrecy. Experts said it's common for one spouse to blame the other for their financial mess or to hide it entirely, as Balderrama did.

After falling 3 1/2 years behind in payments, the Taunton, Mass., housewife had been intercepting letters from the mortgage company and shredding them before her husband saw them. She tried to refinance but was declined.

In July, on the day the house was to be auctioned, she faxed the note to the mortgage company. Then the 52-year-old walked outside, shot her three beloved cats and then herself with her husband's rifle.

Notes left on the table revealed months of planning. She'd picked out her funeral home, laid out the insurance policy and left a note saying, "pay off the house with the insurance money."

"She put in her suicide note that it got overwhelming for her," said her husband, John Balderrama. "Apparently she didn't have anyone to talk to. She didn't come to me. I don't know why. There's gotta be some help out there for people that are hurting, (something better) than to see somebody lose a life over a stupid house."

___

Associated Press Writers P. Solomon Banda in Denver, Joann Loviglio in Philadelphia, Juanita Cousins in Atlanta, Samantha Gross in New York and John Rogers in Los Angeles contributed to this report.

http://www.wtop.com/?nid=104&sid=1496501

The Quadrillion Dollar Powder Keg Waiting To Blow

Posted: October 11 2008
Derivatives at the heart of the crisis, catastrophic losses are inevitable, financial system headed for oblivion, the new world disorder, EU doomed, Credit Default Swaps at the heart of the problem, Plunge Protection Team history, coverups for globalization failures, Bloodbath for the Yen,

The heart of the current crisis is the quadrillion plus derivative market. Roughly half of these derivatives are listed on exchanges, but the other half are on the totally unregulated, totally opaque, poorly documented and mostly naked (no reserves or collateral given to secure performance) OTC derivatives market. The subprime and Alt-A mortgage debacles, and the soon to be recognized prime mortgage debacle, are little more than a side show with what will become their one to two trillion in losses which the Phony-Fraudie nationalization and the Paulson Ponzi Plunder Plan are meant to address, albeit futilely. However, the real estate derivative problems created by these debacles have been important catalysts leading to the loss of confidence that is preventing banks from lending to one another, because these problems, like a Zippo lighter on high flame, metaphorically speaking, have lit the fuse leading to the quadrillion dollar powder keg waiting to blow any day now, and Hanky Panky and Helicopter Ben are running around like raving, corporatist, fascist lunatics trying to stomp out the lit fuse before the whole world financial system goes up in a blaze of glory.
It is this powder keg that has everyone trembling with fear and foreboding, because the inevitable losses will be catastrophic, with losses which may exceed the entire world's GDP, thus obliterating the balance sheets of every major Wall Street commercial bank, including the Fed itself, while virtually every major bank and financial institution in nations throughout the world join them on the receiving end of a destructive juggernaut of loss, insolvency, failure and bankruptcy. In the aftermath, most will be nationalized. All of Western Civilization is about to become a smoldering collection of fascist police states. The entire world financial system is headed for oblivion, and there is nothing on earth that can stop it. All they can do currently is try to delay and hide the destruction so that they can continue to milk their Ponzi system dry, ripping off the sheople in one final orgy of fraud and profligacy before the government and financial system are merged into an all-powerful super-entity that will rule all non-insider institutions with an iron fist. Frankly, from what we have seen lately, we are already there. The final step to nationalization of our financial system will be little more than a formality. Their intention is to take total control, to make markets do whatever pleases them, thus creating their own reality.

The Paulson Ponzi Plunder Plan is the first installment of their final attempt to bankrupt the sheople, who they hope to beat into submission by hyper-inflating and Weimarizing them with bailout after bailout, ad nauseam, knowing full well that these bailouts are futile and useless. The Illuminati will now attempt to force the poor, hapless sheople into a fascist police state as the next giant step toward the creation of a New World Disorder called Novus Ordo Seclorum (a New Order of the Ages), as set forth on the back of every dollar bill under the all-seeing eye overlooking the unfinished pyramid, both symbols of the new age, the occult and the ancient mystery religions. What else would you expect from the satanic trillionaires who hope to become the new lords of the universe. Nice try fellas, but we suspect that God, the current and eternal Lord of the Universe, has other plans. Many of their own henchmen are going to go down in the chaos to follow, but the raving madmen we refer to as the Illuminati will gleefully sacrifice them on the alter of world government.

The New World Disorder is the hope and dream of the Illuminati which they have been planning for centuries. But we believe that something is going to happen on the way to that Forum, and that in the end they are all going to end up "swingin' in the breeze." Their plans are unraveling. The destruction is far greater than they had planned. The whole plan is going up in smoke thanks to the bungling of their "Chaos" henchmen in our government and on Wall Street. To think that they attempted to use naked credit default swaps to cover bonds and derivatives secured by houses borrowers could not afford on such a gargantuan scale tells you everything you need to know about their financial acumen. They even permitted ownership of derivatives by those who did not own the underlying assets to be hedged (known as "dry derivatives," which are essentially the equivalent of insurance policies taken out on someone or something in whom the policy holder has no insurable interest), thus turning the world's financial markets into a giant gambling casino, with the added bonus that many unscrupulous people were put into a position where they could force an event that would give them a big payoff without suffering any pain on their end. In essence, by coming up with all these obtuse, Byzantine, rocket-scientist-created derivatives, the smugly clever Illuminati have finally outsmarted themselves.

Then there is the one-rate-fits-all plan in the now-doomed European Union. What a freaking blooper that was! We have been saying that this conglomerate banking scheme could not work from the inception of this ill-conceived union of what are very diverse and culturally unique nations, but of course no one listened. They have so thoroughly destroyed the financial system that there is now no hope of keeping the EU together. The plan did not even work well in a period of substantial prosperity, and now they are going to attempt to keep the plan going in circumstances, which are the antithesis of prosperity. Good Luck! If they hadn't allowed their system to be corrupted by all these financial weapons of mass destruction, out of their unending, boundless greed to milk their sheople, they might have had a shot at preserving the EU and then moving on to world government. Now they are the proud owners of 75% of all the toxic waste derivatives produced by the American branch of the Illuminati. And they have piles of banking bonds covered by credit default swaps issued by AIG, and by who knows what other zombie entity, so their stock and bond ratings, as well as their cost of capital, are in serious jeopardy. As the implosion of these derivatives transpires, the majority of their economies are going down in flames as inflation, recession, and eventually depression set in, adding to their already substantial woes. Their fascist dream is about to go up in flames along with their precious EU, the revived British Mercantilist system and the debt-based, fractional reserve Ponzi scheme of the evil European bankers and their Black Nobility clientele. Their American counterparts will fare little better.

Note that the major Wall Street investment banks, all leveraged to the hilt, are now all gone, whether by bankruptcy, buyout or change of charter. Goldman Sachs, the only investment bank, which has retained its namesake, other than the bankrupt Lehman Brothers, is on the verge of going under in a Bear Stearns-like squeeze on their liquidity and net equity. The recent demise of all these investment banks is just the first round. Things are going to get much worse as the money from the Paulson Ponzi Plunder Plan gets doled out to the various Illuminist toadies. The latest idea, suggested by the Bank of England (what a feeling of confidence we get knowing that this bastion of financial acumen supports this idea!) and now adopted by Hanky Panky, is to make liquidity injections into the fraudster banks in return for equity positions, such as preferred stock ownership. What a joke. Like that is going to chase the credit default swap monster away and restore a feeling of safety and confidence so banks can start lending again. We have news for you. Even the bondholders of these toxic waste sites are going to get vaporized, so the sheople stockholders can expect to get a Big Zippo. At least by acquiring toxic waste assets we might have an outside chance of picking up some chump change later, but with this new plan to fleece the sheople, you are throwing your money down a rat hole. We are told that this will get the money to where it is needed faster. The only "faster" we see is the rate at which taxpayers will get fleeced.

All these toxic cesspool repositories are headed for bankruptcy and nationalization. All you will be doing is keeping people employed with exorbitant salaries and bonuses as they continue to rip you off with insider trading and fraudulent derivative schemes. These witless, pipe-dreaming dolts seem to think that they can get their fractional reserve multiplier going again as the Illuminati try to reinvigorate and re-inflate rampant market speculation along with their profligate money and credit system. They seem to think they can re-inflate the otherwise tanking real estate markets, using their perfect fraud machines, Phony and Fraudie, because they no longer have to worry about ticking off wealthy, influential and politically connected entities that own their stocks. All losses that are suffered by Phony and Fraudie will now go directly to the sheople, do not pass Go, do not collect $200.

What are these people thinking? Again we say: "It's the swaps, stupid!!!" The credit default swaps will be the first to blow as we move from hundreds of billions to trillions in quarterly losses. That will send risk into the ozone while the bailouts send inflation into the stratosphere. And that of course means double-digit interest rates are on the way, which are the main fuse leading to the interest rate swap powder keg, which is the largest of all the derivative powder kegs by notional value, and thus by potential loss. Take JP Morgan Chase for example, and their $90 trillion derivative portfolio by notional value. Let's say that $50 trillion are in interest rate swaps. If they have even a mere two percent overhang where they have to pay out variable rates of interest on two percent more of their total interest rate swaps than the portion of swaps on which they are, by contrast, receiving variable rates of interest, they could suffer horrendous losses that could easily put them under. Let's say that everything balances at 4%. But now rates move to 14% as everyone totally ignores the rates set by the central banks sending LIBOR and T-Bill rates to unheard of levels, which are the types of rate indexes commonly used in these swaps. (Note that corporate debt in Europe, due to the lack of so-called insurance from credit default swaps, has already doubled from previous lower single digit rates into much higher double-digit rates in the 12% area). Two percent of $50 trillion is a trillion dollars of notional value overhang on which you are now paying out ten percent more, and ten percent of one trillion is $100 billion, a killer loss. That would put them under. Even an overhang of only one half of one percent pumps out a loss of $25 billion. And what if the overhang is 5%, or 10%, or 20%? With an overhang of 20%, we hit one trillion in losses. Now, what if rates go to 24%? And this is only one bank! As you can see, assuming that the system can survive the credit default swaps, which we very seriously doubt, we will be jumping out of the fire only to land face down in a red-hot frying pan.

It is only fitting that the credit-default swaps lie at the heart of the problem, which the fraudster banks now face. When you look at what has been done by these reprobates in the past, this is a most fitting fate for them. First, they had President Reagan pass an Executive Order in 1988 forming the President's Working Group on Financial Markets so they could manipulate markets 24/7 with the PPT. That was forced by the 1987 Stock Market Crash, an event orchestrated by the Illuminati to convince everyone that we had to have an interventional team to stop such extreme market gyrations. Then Slick Willie does away with Glass-Steagall in 1999 to do away with the system of checks and balances that allowed banks to pass on paper that was falsely rated as AAA on to their patsy clients. Then for a double whammy, Slick Willie leaves OTC derivatives unregulated with the passage of the Commodity Futures Modernization Act in 2000, so Wall Street could write insurance policies called credit default swaps without having to comply with annoying, silly and burdensome rules requiring such things as loss reserves or an insurable interest. These were all passed to cover up the devastating losses our economy was suffering on account of free trade, globalization, off-shoring, outsourcing and both legal and illegal immigration.

The PPT moved our markets, contrary to what market fundamentals would indicate, to give the appearance of prosperity when we were really getting hammered by the free trade agenda. Our government chimed in with their deceitful and fraudulent economic statistics by use of hedonics. Then credit default swaps were used to falsely suppress interest rates by insuring the risk of default for potential investors, and never mind that there were no loss reserves, collateral or requirement of an insurable interest. AAA credit was assigned to otherwise risky companies based on Ponzi scam bond insurers who were insuring bonds with little or nothing to back up their promises. If our corporations were forced to pay the higher rates demanded by the market without the benefit of these swaps, our corporate earnings would have been dismal, and would have reflected the losses suffered by the globalist free trade agenda. Then the falsely rated subprime derivatives were created so that Wall Street could earn oodles of fees, commissions and spreads by continually rolling over the same money which they were borrowing short-term and lending long-term. These earnings helped to boost our GDP and thus to further cover up the losses being suffered by our bloodied manufacturing sector as everyone became Walmart greeters and hamburger flippers instead of being tool and die makers and machinists and as 5 million of our best-paying jobs were moved overseas. Let's hear it for the Illuminist free trade agenda. Yeah, rah.

It appears that for whatever reason the Illuminati now want Obama to become president instead of McCain. The current financial carnage is of course being associated with Caligula, and since McCain is a Caligula Clone, by association he gets hit vicariously with voter ire. Listen to the two of them promise to save the borrowers who were given mortgages based on fraudulent information about their financial circumstances. Let's bail them out too. Why should the fraudsters on Main Street be treated any differently than the fraudsters on Wall Street? Now we will have equal opportunity bailouts. It's enough to make you puke. Worse yet, Obama is the biggest recipient of big banking largesse in the form of campaign contributions, especially from Fannie and Freddie, and he actively encouraged these organizations to pump out mortgages to people who could not afford them. Fortunately for Obama, McCain is not much better.

So what's going down in Illuminati town? In pondering the current pounding of gold and silver, we smell lots of rats. We hold out to you the following potential scenario: On September 15 and 16, the Illuminati thought they had the precious metals markets under wraps, driving gold below $800 per ounce and silver below $11 per ounce, in anticipation of their coming announcement of the Lehman Brothers and Merrill Lynch debacles that were made public late on September 16. Then the specs go wild, and gold is up $90 in one day, giving the Illuminists a collective myocardial infarction. As punishment for such insolence, on Friday, September 19, the SEC takes away their right to short 800 financial companies, a big money maker. They are told to butt out, or they will never get to place another short again, but if they cooperate, they will get the mother of all crashes, which they can short with impunity. Note how open interest in COMEX gold futures declined from 398,386 contracts on September 15 to 321,021 on October 8. Yet the price of gold during this period kept pressing past $900, which means that there was some short-covering to the tune of some 77,000 contracts. The specs under threat from the SEC, are told to butt out while the commercials cover their shorts. They are told that a crash is on its way, so they short all the non-financials, and stay out of the commodity markets. Then the Paulson Plan is introduced around September 20, and prior to the vote, the markets are crashed to make it look like a "no" vote will send us into the deepest depths of Mordor, knowing all along that markets will be crashed anyway no matter how Congress votes. Fortunes are being made shorting with knowledge of when markets will be crashed. A short-covering rally occurs on Tuesday, September 30, as word is received that the Paulson Plan will be reconsidered and probably passed, but insiders know this is all for show as roughly half of Monday's 777 point loss on the Dow is recovered. Markets are crashed again on October 1 and 2 erasing Tuesday's gains, those being the two days leading up to the second vote on October 3, to convince Congressional boneheads that the Paulson Plan must be passed to save the markets, and when the vote starts to look positive on October 3, up the markets go in the early going that day just before the vote in order to give our bribed and threatened Congressional morons the impression that markets will rally if the Paulson Plan is passed. Congressional dimwitted idiots pass the bill, and the markets nose-dive, all as planned. On October 6, paragon of virtue Jim Cramer scares the living daylights out of retirees, telling them they must get out of the markets. Panic hits the streets, and the cascade of losses is under way. The shorts are now cleaning up and are rolling in dough, but of course that was not enough for them. The Paulson Ponzi Plunder Plan also calls for an end to the ban on shorts against financials just before midnight on Wednesday, October 8, and because the specs have all been good little boys, the SEC lets the ban on shorts expire even though they could have extended it another week. The bloodbath continues on Thursday and Friday as the financials get bombed, the specs are fat and happy, and down go gold and silver while the grateful specs look the other way. Meanwhile, the carry trade is unwound and both the dollar and the yen go ballistic due to the crashes around the globe which send traders into yen and dollars to buy Japanese and US treasuries, respectively, and the yen even outperforms the dollar, causing precious metal liquidations by thoroughly bloodying carry traders while the stronger dollar hits the metals also. And of course, just as we predicted, oil gets hammered below 80, giving more dollar support through the euro effect, and reducing the need for gold and silver as a hedge against higher oil costs.

N. Korea allows U.N. monitors to main nuclear site
SEOUL (AP) — North Korea allowed United Nations monitors back into their main nuclear site Tuesday, but it was unclear whether they had fulfilled a pledge to resume disabling the facilities in line with a six-nation deal.

A diplomat in Vienna familiar with the International Atomic Energy Agency's work at the site said the agency's 3-member team had resumed monitoring the site, including reapplying seals the North had ordered taken off and remounting IAEA cameras. He demanded anonymity because he was not authorized to discuss the issue publicly.

Two months ago, North Korea stopped disabling the Yongbyon nuclear facility in anger over U.S. demands that Pyongyang accept a plan to verify its accounting of nuclear programs as a condition for removal from a blacklist of countries accused of sponsoring terrorism.

Until late last week, the North had threatened to reactivate the plutonium reprocessing plant at Yongbyon.

But the North and the U.S. reached a compromise on the verification row following a trip to Pyongyang by chief U.S. nuclear envoy Christopher Hill. Washington announced North Korea's removal from the terror list Saturday, saying Pyongyang had agreed to all its nuclear inspection demands.

U.S. State Department spokesman Sean McCormack said Tuesday he believed the North Koreans had taken steps in the right direction.

"I think, as simply put, the North Koreans have started the reversal of their reversal," he said. "Our monitors are on the ground. And I didn't check this morning to see if they actually were engaged in activities, but I believe that they are free to do so."

Pyongyang had earlier told the International Atomic Energy Agency it would restart work to disable the Yongbyon nuclear reactor and allow international inspectors to resume their activity. The plans were outlined in a restricted document to the agency's 35 board members obtained by The Associated Press.

North Korea also said Sunday it would restart work to disable Yongbyon, though it did not specify a date.

U.N. Secretary-General Ban Ki-moon welcomed the resolution of the dispute. His spokeswoman, Michelle Montas, said Ban considered it "another step towards a verifiable non-nuclear Korean Peninsula."

China also hailed the progress and pledged to move the process forward as host of the nuclear disarmament talks that involve Japan, the two Koreas, the United States and Russia.

"Promoting the six-party talks process serves the common interests of the involved parties," Foreign Ministry spokesman Qin Gang said in a statement issued late Monday. "China appreciates the constructive efforts made by the concerned parties."

Meanwhile, Japan reiterated its demand that Pyongyang resolve the issue of abductions of its citizens by North Korean agents in the 1970s and 1980s, saying it was a precondition for Tokyo's participation in providing aid to the North.

"We will not join the economic and energy aid under the six-party talks unless issues over Japan-North Korea relations, including the abduction problem, are cleared," Prime Minister Taro Aso told an upper house committee Tuesday.

On Tuesday, North Korea's Foreign Minister Pak Ui Chun left for Russia, Pyongyang's Korean Central News Agency said, without elaborating.

Moscow's Foreign Ministry spokesman Andrei Nesterenko said Pak and Russian Foreign Minister Sergei Lavrov would be discussing the status of the six-nation nuclear talks.

North Korea alarmed the world in 2006 by setting off a test nuclear blast. It then agreed to dismantle its nuclear program in exchange for energy aid and other concessions.

The regime began disabling Yongbyon in November, and blew up a cooling tower in June in a dramatic display of its determination to carry out the process. Just steps away from completing the second phase of the three-part process, Pyongyang abruptly reversed course and stopped disabling the plant, until this week.
http://www.usatoday.com/news/world/2008-10-14-nuclear-site_N.htm

This is true for more then just the States mentioned. I know it true for my neighboring States also. It bears watching. I just wonder why it has to be a Source from across the water to tie it togehter and one of the great news sources here?
America's latest export: empty municipal coffers
James Doran reports from New York on how all 50 state treasuries are failing to raise the billions needed just to keep functioning and pay the wages
Financial Armageddon, the meltdown, the crisis, or whichever title fits the bill this week, is about to enter another even more damaging phase in America.

And it would pay for the rest of the world to take notice because a fair amount of evidence has piled up in recent months to prove the adage about America sneezing and everyone else catching a cold.

The housing markets of much of Europe mimicked those in America by slumping after a few years of heady price increases. The credit markets of Europe and Asia seized up, again following America's lead. Then, of course, stock markets in London, continental Europe and the Far East lost trillions of dollars of value in the wake of several historic Wall Street plunges last week.

Even the solutions to these dominoing financial calamities were tried first in America. The big bail-out authored by US Treasury Secretary Hank Paulson and his friends in Congress, with provisions to protect hundreds of thousands of dollars in the accounts of ordinary citizens, was copied to some degree by Alistair Darling in the UK Treasury and his counterparts across much of continental Europe.

So what's next? What could possibly come along in the middle of this series of economic nightmares to make things even worse? How about a total depletion of local government finances that pay for the things that make up the very fabric of American society. Imagine that rippling across the rest of the world, reducing public services to skeleton operations.

Arnold Schwarzenegger, the former Terminator star turned governor of California, wrote a rather troubling letter to Paulson a couple of weeks ago warning him that the Golden State is in need of about $7bn to meet short-term spending needs.

The money is raised in the bond market to pay the wages of police officers, teachers, judges, attorneys, the National Guard and every other civil servant you can think of. It is also used to pay for the general upkeep of the state - the roads, bridges, tunnels and the essential infrastructure.

California State Treasurer Bill Lockyer is trying to raise a bond issue to help meet the payment, but it is proving very difficult with the debt markets being locked up as they are. And time is running out. Schwarzenegger needs to raise the money before the end of this month or thousands of policemen, teachers and other civil servants will not be paid, prompting who knows what kind of industrial action and civil unrest.

'What is most disconcerting about the way this turmoil is panning out,' says Sujit Canagaretna, senior fiscal analyst at the Council of State Governments (CSG), 'is that most state governments were already in a terrible state. But now things have worsened considerably and the credit markets have a real choke hold on almost all state treasuries. It is so bad that economic activity in most states has all but ground to a halt.'

States have become accustomed to borrowing their way out of troubles like these, but today state and local governments are having just as hard a time securing credit as the banks and financial firms .

'It is just like Wall Street,' Canagaretna says. 'It is almost as if they thought they could borrow for ever without ever confronting the consequences.'

In 1998 the 50 United States had just under $200bn of net tax-supported debt. By 2007, that figure had almost doubled to $398bn, according to the CSG, while tax revenues had fallen sharply. 'Increasing taxes is politically unpalatable and cutting costs is difficult, but borrowing more and more was easy,' Canagaretna adds.

Every day another state or city reports a fresh problem raising funds in the bond market. For the week ending 26 September 2008, some $6bn in new municipal debt issues were expected, yet only $100m came to the market.

Two weeks ago, Erie County, New York could not complete a $75m bond issue because of the unavailability of investors, jeopardising the county's entire $12m payroll. Last week, the state of Massachusetts went into the market for its routine $400m to be used for quarterly payments to cities and towns but the bond issue came up $170m short. Meanwhile, Missouri is having trouble raising a bond to pay for essential road and bridge repairs.

The only bright spot is in Kentucky, where the state treasury successfully completed a $400m bond issue last week. 'But the combined effects of all the problem states far overshadow this one success story,' Canagaretna says.

The financial problems of state governments stretch far beyond the bond market. New York State differs slightly from California and other states in that it cannot call upon the bond markets for short-term funding. Rather, the Empire State relies upon large cash reserves derived from its once bulging tax coffers.

New York State has about $8bn of cash to meet its essential costs, but is in the midst of a budget crisis. Tax revenues for the next year are set to fall by about a third because of the troubles on Wall Street. The problem is that the financial services industry accounts for about 20 per cent of all taxes levied in the State of New York.

'Things are very problematic,' says a spokesman for New York State Comptroller Thomas DiNapoli. 'And, like Governor [David] Paterson said the other day, 49 other states are dealing with the same problems. There is a lot of concern.'

As the spectre of a long and painful recession looms ever larger across the globe, it is troubling to note that these dual problems facing governments across America - falling tax revenue and reduced access to debt - are universal. Brace yourselves for another great American export.
http://www.guardian.co.uk/business/2008/oct/12/usa-government-borrowing