Results 1 to 3 of 3
Thread Information
Users Browsing this Thread
There are currently 1 users browsing this thread. (0 members and 1 guests)
Hybrid View
-
12-07-2009, 02:27 AM #1
- Join Date
- May 2007
- Location
- South West Florida (Behind friendly lines but still in Occupied Territory)
- Posts
- 117,696
Arizona Maxes Out Line Of Credit In Two Weeks Flat
Thursday, December 03, 2009
Arizona Maxes Out Line Of Credit In Two Weeks Flat
Here is a good story courtesy of the Arizona Republic: Cash-short Ariz. maxes out new line of credit. http://www.azcentral.com/news/election/ ... et-ON.html
The state's cash-flow problems are so dire that it took less than two weeks for government to tap the entire $700 million loan it had borrowed to help with short-term needs.
State Treasurer Dean Martin on Wednesday said that means the state will have to revert to some internal borrowing to keep money flowing in the state's checking account.
The shortage developed when the Treasurer's Office had to make a Dec. 1 payment of $389 million to the state's schools, which exceeded the cash on hand. To make up the difference, Martin borrowed $73 million from internal state accounts.
Those amounts will be replenished as tax collections roll in.
On Nov. 19, the state finalized a loan agreement with Bank of America for $700 million, the first time since the Depression that Arizona has needed to turn to an outside borrower.
Internal Borrowing vs. Check Kiting
Internal Borrowing Example: Assume the state has a $30 million expense due in a month with sufficient cash on hand. It has another expense for $30 million due now that it does not have. It borrows money from the first account to pay the bills of the second, hoping to collect enough tax revenue in the interim to pay back the first account before the money is due.
While not exactly the same, the setup has a lot in common with check kiting. http://dictionary.reference.com/browse/kiting
1. A piece of negotiable paper representing a fictitious financial transaction and used temporarily to sustain credit or raise money.
2. A bank check drawn on insufficient funds to take advantage of the time interval required for collection.
Arizona is betting the "amounts will be replenished as tax collections roll in". I am betting they won't, at least without more internal borrowing.
Eventually, this scheme will blow sky high. In this case I am betting on sooner, rather than later.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
74 votes
Comments 154
http://globaleconomicanalysis.blogspot. ... n-two.htmlJoin our efforts to Secure America's Borders and End Illegal Immigration by Joining ALIPAC's E-Mail Alerts network (CLICK HERE)
DHS says 'privacy' of migrants on terrorist watchlist is greater...
05-17-2024, 09:42 PM in illegal immigration News Stories & Reports