Yet another state is on the verge of collapse. Just like Illinois, California, and New Jersey, it’s now Connecticut who is struggling to keep the lights on, and it doesn’t look like the situation will get any easier.
Let’s take a closer look at what’s happening in The Constitution State. See how it compares with other states across the nation, and what you should know about protecting yourself…
No Safety for the Richest State
How could one of the richest states in the union have such a hard time paying its bills? With Connecticut boasting the highest average income in the country, and being home to a range of vastly lucrative private businesses, taking things at face value, it doesn’t make a whole lot of sense.
Yet Connecticut is finding it nearly impossible to reconcile its $74 billion of debt. And a budget deficit of $5 billion or more is expected over the next few years.
Just like in Illinois, Connecticut legislators are at an impasse over the state’s budget. The money just isn’t there. Governor Dannel Malloy doesn’t expect a finalized budget until September or October, long after the July 1 deadline.
Meanwhile, the city of Hartford is considering bankruptcy. And the state’s four largest cities will likely require state intervention to settle their $4.8 billion in combined retirement benefit obligations.
So how did Connecticut get where it is today?
A Sinking Ship
If you blamed Connecticut’s current problems on the same mistakes of other failing states — incompetent leadership, reckless borrowing, and runaway spending — you’d only be half right.
Granted, Connecticut is guilty of those transgressions, just like Illinois, New Jersey, and the like. But there’s a second set of problems facing Connecticut that similar states don’t have to worry about.
First of all, there’s Connecticut’s dwindling population. The state is one of just eight in the country whose population is shrinking. High taxes, lack of metropolitan areas, and other negative factors are motivating people to leave the state in droves, especially millennials.
Businesses are running from Connecticut too. General Electric moved its Connecticut operations to Boston last year. Pfizer did away with its 750,000-square foot facility in the state. UBS set up shop in Manhattan. And insurance giant Aetna, which was responsible for earning Hartford the title of “Insurance Capital of the World,’ plans to do the same in the coming year.
Then there’s Connecticut’s staggering income inequality, which is causing serious problems for tax revenue.
The American Prospect reports:
"Between 2009 and 2013, the top 1 percent of Connecticut earners saw their incomes rise 17 percent while everyone else experienced a 2 percent drop in earnings. The state’s richest 0.02 percent — about 700 individuals — make more than the bottom half of the state’s population combined.
"Even if the highest bracket on Connecticut’s income tax were raised to 7.49 percent, it would fall well short of California’s highest bracket of 13.3 percent on families with annual incomes over $1 million. The mega-rich of Greenwich and Darian pay at a far lower rate than their counterparts in Silicon Valley and Beverly Hills."
Protect Your Savings Before States Collapse
Never before have we been faced with the threat of several U.S. states teetering on the verge of bankruptcy. We’re living in a time of unprecedented uncertainty, and the budgetary woes of states across the country could easily be the catalyst for our next major crisis.
In terms of financial viability, states like Connecticut may very well be past the point of no return. And when one of them goes belly-up, the others are likely to follow suit, shaking the bedrock of our entire economy.
When that happens, the Federal Reserve won’t have any magic bullets to save us. The best it can do is fall back on its bad habit of printing more money and injecting it into the economy through quantitative easing — a policy that only dulls our pain and slows down the inevitable, while simultaneously decimating the value of our currency.
That said, you don’t have to cross your fingers and hope for the best. There is a way to guard your wealth against this looming threat: physical precious metals.
As states like Connecticut collapse, and take our economy with them, traditional investment assets will likely plummet. And, if the Fed does indeed fall back on quantitative easing, it would not be a shock to see inflation skyrocket as a result. Meanwhile, if people seeking safe haven move into gold in large numbers, prices could substantially climb from current levels.
Peter Reagan is a financial market strategist at Birch Gold Group. As the Precious Metal IRA Specialists, Birch Gold helps Americans protect their retirement savings with physical gold and silver.
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