- Low rates allow the Federal Government to keep spending on payroll rather than slash jobs.
- Low rates also give cities and states time to refinance their debt and offer lower rates on municipal bonds that they issue to pay salaries under deficit spending.
>>We had riots in California when UC Berkeley students were asked to pay more towards their subsidized education.
- Low rates help the stock market. Pension funds, especially CALPERS for California public employees, are under funded. A rising stock market makes it easier for CALPERS to meet their pension obligations without raising taxes or slashing benefits. >>Slashing pension benefits would lead to riots similar to those seen in Greece when the Greeks were forced into austerity to get loans from the EU to avoid bankruptcy.
Moody's slashes Chicago's Muni Bond Rating
Detroit may file for bankruptcy within days if emergency manager Kevyn Orr can not reach agreement with the city's bondholders, pension funds and other debtees over restructuring $20B of long-term liabilities. The plan is to offer secured creditors much of what they're owed but to provide pennies on the dollar to unsecured bondholders, unions and pension funds. Municipal-worker retirees would be especially hard hit, receiving less than 10% of what they're owed.