Illinois Stops Pensions, Chicago Becomes Detroit
as the Economy Spirals Down
Oct. 14, 2015 (EIRNS)—The state of Illinois announced "delays" in payments to state pensioners today, while Chicago became Detroit under the heel of Wall Street.
Illinois Comptroller Leslie Munger said on Wednesday that a $560 million November pension payment will be delayed, due to a cash crunch, while claiming that pension payments will be brought up to date by the end of Fiscal 2016, next July.
At the same time, Chicago Mayor Rahm Emanuel put forward a real estate tax increase of nearly $600 million over four years, essentially to pay derivatives debts to Wall Street.
Chicago’s "negative position" on its derivatives bets on its own debt has reached a huge $396 million, despite its having been paying dearly already in the past four months to get out of these killer derivatives. The biggest bad bet ($100 million) is currently with Deutsche Bank, although UBS, JPMorgan Chase, and Wells Fargo are not far behind in their gambling claims.
As in the economy overall, the Federal Reserve has acted as Wall Street’s and London’s accomplice in this financial crime. The big banks, handling states’ and cities’ bonded debt, coerced them to enter into these interest-rate swaps; the Fed’s seven years of zero interest rate policy (ZIRP) have made sure all cities and states have lost big to Wall Street on those bets. Chicago’s losses are among the biggest in the world.
The longer the Fed stays at ZIRP, the more the trapped cities and states owe "their" banks if they try to escape the swaps, or if the banks decide to terminate them. Chicago’s debt-rating downgrade to junk in May allowed the banks to demand that the city pay the losing bets now.
So, Chicago is bleeding $270 million to Wall Street and London banks this year, and another $110 million early next, according to Bloomberg News’ report today. It is borrowing much of this at rapidly rising municipal interest rates, and Mayor Rahm Emanuel is raising taxes sharply at the same time.
The Chicago Federal Reserve district is now one of three districts (with Kansas City and Richmond) whose surveys show their regional economies contracting overall. Seven banks, including those three, have shown contraction in manufacturing and industry all during 2015. Midwestern and Far West energy production is in particular collapse, with oil rigs in operation having fallen to 630 from 2,000 15 months ago.
But U.S. unused inventories of oil keep growing as demand declines, and the oil price has dropped back down to $46/barrel despite the dollar’s decline against all major currencies in October. The "commodities rally" is over after all of two weeks.
Worldwide GDP, when expressed in dollars, has contracted (a rate of -3.4%) in 2015, according to a report issued Oct. 13 by HSBC Research. That report also found that world trade, expressed in volume of goods, is declining at an extraordinary -8.4% rate in 2015. "By these measures we are in a global recession," is the obvious conclusion they draw. This, during money-printing of $850 billion equivalent by the ECB and Bank of Japan.