More CA cities should declare bankruptcy

Peter SchiffMarch 8, 2013

By John Seiler

Last year, three California cities declared bankruptcy: Stockton, San Bernardino and Mammoth Lakes. Atwater nearly did. Mammoth Lakes lost a lawsuit.

But for the other cities — as well as for the Vallejo bankruptcy in 2008 — what the cities basically are saying is: “Previous city councils were bought and paid for by the public-employee unions. Those councils ripped off the taxpayer by giving wildly excessive pay, perks and pensions to city employees. We can’t afford that anymore, so we’re declaring bankruptcy. Let a federal bankruptcy court sort it out. Then we can start over.”

Peter Schiff is one of the country’s top financial gurus. His Euro Pacific Capital has an office in Newport Beach. He’s best known for predicting the 2008 financial collapse. Here’s his reasoning on why cities should declare bankruptcy:

“Stockton is like a Greece here in California. I mean, Stockton, the government there made a lot of promises to its government employees. And, when the real estate boom was going, there was plenty of revenue coming in, and they promised the moon to voters and to employees, big pensions, health care benefits. And then the bottom dropped out. You’ve got 20 percent unemployment now in Stockton. They don’t have the tax base. They can’t afford all these commitments. And what are they doing? They’re telling their bondholders, we can’t pay. You’ve got all the municipal bonds outstanding. I mean, this is going to be a major problem for those bondholders and now government workers.

“But Stockton is not going to be the last city to declare bankruptcy, not by a long shot. And I think it’s going to go up the food chain. We’re going to have state governments that are going to face these problems. We’re going to have the federal government face this problem, especially when interest rates go up….

“If interest rates go up, or rather ‘when’ interest rates go up, the debt becomes unserviceable. And the minute it becomes unserviceable, the minute our creditors worry that we can’t service the debt, then they actually want their principle back. Then it’s not about just the interest; it’s about coming up with the principle. Where are we going to get that?…

“But, you know, it is going to be problematic for a lot of people who have based their lives on assumptions of a revenue stream coming in from a government entity. And so it’s going to be very painful for the people involved. And it’s also going to be painful to people who loaned money to the city of Stockton, who hold those bonds, who thought they were going to get certain interest payments and they were going to get their principle returned. They’re going to wake up to the reality that Stockton can’t pay. So when we do have the restructuring that we need, there is going to be pain. We just have to be able to suck it up and bear that pain.

“And, of course, for some people, it’ll be relief because, you know, otherwise, in order to keep their promises, we have to increase taxes. And if you already have 20 percent of the city unemployed, how are you going to increase taxes on the few people that are still working, and will they stay in town to pay those taxes or will they leave, particularly the employers? So we have to do this.”


Write a comment
    NTHEOC 8 March, 2013, 10:50

    And all Homeowners with a Mortgage should be able to default, not paying back their loan to the bank that was promised!! Same thing john.

    Reply this comment
    NTHEOC 8 March, 2013, 11:39

    “February jobs report shows unemployment rate at its lowest in 4 years, with job gains led by the most construction hiring in 6 years.”
    Stop living in the past John Seiler!!!! Can’t you doom and gloomers start writing about how nice it is to see the economy starting to bounce back. Btw, not one of my neighbors or any family member I know is unemployed! Oh the sky is falling huh!!

    Reply this comment
  3. AB32 Fighter
    AB32 Fighter 8 March, 2013, 12:28

    It’s people like you NTHEOC that are the problem, thinking everything is wonderful just because unemployment is down, but so what if the city is bankrupt and we the taxpayers are on the hook for the bill.

    Reply this comment
    NTHEOC 8 March, 2013, 13:40

    AB32 fighter,
    but so what if the city is bankrupt and we the taxpayers are on the hook for the bill.
    It is what it is AB fighter! The price you pay for wanting everything at your every request. Not to mention fire dept’s at your doorstep 90% of the time within 5 mins! Oh Ya, we taxpayers are also on the hook for the unjust WAR in Iraq that was brought on by BUSH!! Oh,and also the Wallstreet fiasco that we taxpayers are on the hook for!!!!!

    Reply this comment
  5. SkippingDog
    SkippingDog 8 March, 2013, 17:18

    Peter Schiff might be one of your top financial guru’s, John, but he’s just a cleaned up chip off the old block of his father, convicted tax evader and sovereign citizen Irwin Schiff. What’s old Irwin Schiff doing these days? Oh yeah, he’s still in prison for tax evasion and other charges. I particularly like the fact that he tried the old “diminished capacity” defense to explain his nutty tax claims.

    “In this last case Schiff’s attorneys again asked that the court consider the claim that Schiff has a mental disorder relating to his beliefs about taxes.[42] According to the prosecutor’s office the evidence at trial showed that Schiff had attempted to evade the payment of over $2 million in taxes from 1979 through 1985, and that he had used offshore bank accounts using multiple tax identification numbers and had attempted to hide assets in connection with his tax protester related activity.”

    Irwin also managed to take a lot of his Libertarian friends to jail with him, so perhaps you’re another one of his disciples, John?

    Peter Schiff also claims gold will rise to $5000 by next year. Are you buying your gold from Euro Pacific Precious Metals, John?

    Reply this comment
    • CalWatchdog
      CalWatchdog Author 15 March, 2013, 07:50

      SkippingDog: Peter Schiff has said his father’s tactics are wrong, that we should obey tax laws, however confiscatory. Neither am I one of Irwin’s disciples. Because of my position, I scrupulously pay all my taxes.

      P.S. I deleted a post of yours with personal attacks on us. Actually, this post above was a personal attack on me, too, but I’ll let it slide to clear the air.

      — John Seiler

      Reply this comment
  6. Donkey
    Donkey 8 March, 2013, 18:18

    More character assasination SKdog! Just as expected, not much unlike the Obamaites saying that Al Jawari’s 16 year old son picked the wrong Father when they killed him.

    When the interest rates begin to rise the entire RAGWUS sideshow will come tumbling down by hastening the collapse, and I am counting the days while enjoying my retirement. 3:)

    Reply this comment
    NTHEOC 8 March, 2013, 18:27

    Donkey says,
    When the interest rates begin to rise the entire RAGWUS sideshow will come tumbling down by hastening the collapse, and I am counting the days while enjoying my retirement. 3:)
    Same old BS Donkey!!! Trust me Donk, You will be in the hurt box long before we ever will be if that happens….

    Reply this comment
  8. Donkey
    Donkey 8 March, 2013, 20:53

    Ntheoc, you are going to find out that the doers of this nation will have no problems after you RAGWUS feeders finish distroying the state, because doers always have been this way, feeders like you came along later on looking for the easy life!! 🙂

    Reply this comment

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