Investors will make Illinois state politicians suffer

Politicians in local and state government are some of the most naive people I’ve ever encountered when it comes to finances. 

Economics is not hard and you don’t need a degree to understand it. You do need to follow it daily is my only recommendation. Even if it’s just for five minutes.

Current economics in government on local/state levels are about to get served up a big dose of reality by carrying so much debt. Politicians are good in getting voters to believe they have magical powers to control the economy. They don’t and the latest example from Economic Policy Journal proves just that in regards to the state of Illinois:

EconomicPolicyJournal.com has learned that the state of Illinois, which is a financial wreck, is slow-paying some of its receivables.

The firms holding the receivables, in need of operating cash flow, have started to sell-off the receivables to vulture hedge funds, who are willingly picking up the paper.

Here’s the kicker, the receivables contain clauses that if there is a delay in payment of receivables beyond the scheduled payment date, the interest rate on the receivables jumps to 1% per month.

The vulture funds are fully confident that they will eventually get paid and are more than happy to patiently wait at a 12% annual rate when the current rate on 90-day Treasury Bill is only 0.27%.

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