Ten Years Of Hell

In a previous post (this one), I talked a little about the probability  of seeing a lot more trouble with debt and default, and that it's likely to come from smaller counties and cities that got themselves sucked into the swirl of borrowing loads of cheap money as a way to avoid having to make some tough calls on collecting enough revenue to keep their joints going.

Here it comes.

Harrisburg is among an increasing number of municipalities showing signs of extreme fiscal stress. Squeezed by rising unemployment, plummeting tax revenue and growing employee costs, Vallejo, Calif., filed for bankruptcy two years ago. Jefferson County, Alabama's largest county, teeters on the edge of bankruptcy after a complex interest rate swap on a $3 billion sewer project went awry.

Last month, Central Falls, R.I., an impoverished city not far from Providence, put its finances in the hands of a receiver, who might have to rewrite contracts, cut pensions and restructure debt. Meanwhile, the nation's leading debt-rating agencies have relegated seven cities -- including Detroit, Harvey, Ill., and Woonsocket, R.I. -- to junk bond status, vastly increasing their borrowing costs.

This is just gonna get worse for a while.