The birthplace of Western Civilization, Greece, has been in the news lately over their huge debt problems . Today is also Presidents' Day- the ceremonial birthdays of Washington and Lincoln. By the standards of a country like Greece, we are still a young county perhaps just beginning to mature and facing the problems that go along with this process. The whole world is awash in debt and the strictures of heavy taxation have taken their toll in many of these countries such as Greece (along with Portugal, Spain, Ireland, Italy, England and others). Everyone on this side of the pond realizes the federal government here is rapidly approaching a debt crisis as well. My concern at present , however, is on many of the states where huge debt burdens are looming without any of the solutions available to the central government. For instance, California (which has an economy larger than Greece) is running a 22% budget deficit . A number of other states- Arizona, Florida, New Jersey and Illinois to name a few are facing similar issues. As property valuations decline and property tax revenues fall these budgets will be under yet additional stress.
All of this is a backdrop to what is broadly known as "crowding out" in the financial markets and generally creates lower growth for the economy and ultimately lower investment returns as well. Stay tuned.
