Some of my 2011 economic predictions are bang on the trend, but may not happen as described by the end of the year. Specifically 8 and 9.
8. There will be a serious Euro crisis, most likely brought about by a sovereign default or a nation announcing it will be leaving the Euro. Italy is the most likely candidate.
Political and economic crisis in Italy spurred fears of a split in the euro zone with borrowing costs for Europe’s third biggest economy near unsustainable levels and the bloc unable to afford a bailout.
Yeah, that doesn’t look too bad at the moment. Greek is already in technical default with the 2-year bond up to 108% and the one-year at 222%. Double your money! The big banks simply don’t want to call it that because doing so will trigger all the credit default swaps that are hanging over their heads. And Italy will pull out of the Euro sooner or later, but not necessarily by December 31st.
9. One U.S. state and at least three major cities (100k population plus) will attempt to file for bankruptcy or federal bailout. (It’s unclear if states can file for bankruptcy and public employee unions will oppose the city filings.)
Alabama’s Jefferson County filed for bankruptcy court protection on Wednesday in the biggest municipal bankruptcy in U.S. history. Commissioners for the county, which is home to Birmingham, the state’s biggest city and economic powerhouse, voted 4-1 to declare bankruptcy after meeting behind closed doors for two days in a last ditch-attempt to restructure its debt out of court.
Harrisburg also filed for bankruptcy this year and I thought it counted until I learned it’s only got a population of 50,000. You’d think I would have remembered that since I went to college about an hour away… of course, I never, ever went there, which probably should have been my first clue. I’d count Jefferson County and its 658,466 population but not Harrisburg. The big question, of course, is the state of Illinois. That’s the state I expect to declare bankruptcy first.
It does, however, look as if the blog will just barely make it to the predicted 2,750,000 for the year, up 16% from last year’s 2,370,028. On the other hand, the number of bank failures has decreased significantly in 2011, at this rate it may not even break 100.