Submitted by Charles Hugh-Smith of OfTwoMinds blog,

When borrowing become prohibitive (or impossible) and raising taxes no longer generates more revenues, state and local governments will have to cut expenditures.

Strangely enough, every easily foreseeable financial crisis is presented in the mainstream media as one that "nobody saw coming." No doubt the crisis visible in these three charts will also fall into the "nobody saw it coming" category.

Take a look at this chart of state and local government debt. As we noted yesterday, nominal GDP rose about 77% since 2000. So state and local debt rose at double the rate of GDP. That is the definition of an unsustainable trend.

Here is the context that matters: household income. This is median real income, i.e. adjusted for inflation.

Wages and salaries are barely keeping up with inflation, real household incomes are down 8.5% since 2000 and state and local government taxes and spending are rising at twice the rate of inflation--where does this lead to?

1. The bond market may choke if state and local governments try to "borrow our way to prosperity" as they did in the 2000s.

2. If state and local taxes keep soaring while wages stagnate and household income declines, households will have less cash to spend on consumption.

3. Declining consumer spending = recession.

4. In recessions, sales and income taxes decline as households spending drops. This will crimp state and local tax revenues.

5. This sets up an unvirtuous cycle: state and local governments will have to raise taxes to maintain their trend of higher spending. Higher taxes reduce household spending, which reduces income and sales tax revenues. In response, state and local governments raise taxes again. This further suppresses disposable income and consumption. In other words, raising taxes offers diminishing returns.

At some point, local government revenues will decline despite tax increases and the bond market will raise the premium on local government debt in response to the rising risks.

When borrowing become prohibitive (or impossible) and raising taxes no longer generates more revenues, state and local governments will have to cut expenditures. Given their many contractual obligations, these cuts will slice very quickly into sinews and bone.

If this doesn't strike you a crisis, please check back in a few years. It is easily foreseeable, but very inconvenient. As a result, it too will be a crisis that "nobody saw coming."

Moscow (AFP) - The United States is further damaging its relations with Moscow by adding a Russian offshore oil and gas field to its sanctions imposed over Ukraine, a Kremlin spokesman said Friday.

"The trend to continue a dialogue in the language of sanctions is further destroying our bilateral relations, unfortunately," President Vladimir Putin's spokesman Dmitry Peskov said, quoted by TASS news agency.

He commented after Washington widened its sanctions against Russian energy projects to include the Yuzhno-Kirinskoye oil field off the far eastern coast of Russia.

Peskov said that Russia views Western sanctions as short-sighted and insisted its economy is able to withstand the pressure.

"The economy is showing its steadiness, so I don't think we can talk about any significant or systematic influence from such actions, which we do not consider successful, legitimate or most importantly far-sighted," Peskov said.

The United States added the Yuzhno-Kirinskoye oil and gas field controlled by Russian energy giant Gazprom to its list of energy projects that fall under an export ban, according a statement posted on the Federal Register's website on Friday.

The Federal Register said the field "is reported to contain substantial reserves of oil in addition to reserves of gas."

The oil and gas field is located in far eastern Russia in the Sea of Okhotsk off Sakhalin Island. Gazprom says on its website that it is set to go into production in 2018.

Ferguson (United States) (AFP) - The fatal police shooting of unarmed black teenager Michael Brown in Ferguson, Missouri a year ago ignited weeks of unrest and fueled the Black Lives Matter movement.

Here are details on his case and a selection of other recent ones that have caused outrage -- and sometimes violent protests -- across America.

- Michael Brown -

August 9, 2014: In Ferguson, Missouri, a white police officer shoots dead 18-year-old Brown, unleashing sometimes violent protests.

A subsequent decision not to indict the officer, Darren Wilson, prompts riots in Ferguson and raises tensions from New York to Seattle, with thousands taking to the streets.

In March 2015, the US Justice Department publishes a scathing report into the shooting, condemning Ferguson's city hall, police department and municipal court for targeting the city's African American majority.

- Eric Garner -

July 17, 2014: African American father-of-six Eric Garner, 43, dies after being held in a police chokehold while he is being arrested for selling individual cigarettes illegally in New York.

In an amateur video which is viewed around the world, as police wrestle him to the ground, Garner is heard repeating: "I can't breathe."

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A rain-soaked memorial remains at the location where teenager Michael Brown was shot and killed by F …

A coroner declares the death a homicide. But a grand jury opts not to charge the white officer involved, sparking demonstrations in several cities.

- Akai Gurley -

November 20, 2014: An unarmed black man, Akai Gurley, 28, father of a young daughter, is shot by an Asian-American officer who opens fire in a dimly lit staircase at a Brooklyn, New York apartment block.

On the day of his funeral on December 7, New Yorkers take to the streets to denounce the spate of police killings. The police officer, Peter Liang, was charged with manslaughter.

- Tamir Rice -

November 22, 2014: In Cleveland, Ohio, a video emerges of US police officers shooting dead Tamir Rice, a 12-year-old black boy carrying a replica gun, just seconds after confronting him.

Surveillance video showed Rice was killed within seconds of the patrol car arriving on the scene in a park.

A judge ruled in June that there was probable cause to charge the police officers with murder, but prosecutors said they are still investigating the case.

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Protesters march on the street from City Hall a day after Baltimore authorities released a report on …

- Walter Scott -

April 4: In the state of South Carolina, police officer Michael Slager is charged with murder after a video shows him gunning down a fleeing black man, 50-year-old Walter Scott, after a traffic stop.

The video seems to show Slager in an altercation with Scott. Slager then draws his gun and shoot seven to eight shots in Scott's back as he flees.

- Freddie Gray -

April 12: Baltimore police officers arrest Freddie Gray, 25. He is handcuffed and eventually placed on his stomach in a police wagon, unsecured by a seatbelt.

While in transit, Gray asks for medical help but none is given. The police wagon is diverted to assist in an unrelated case, at which point Gray is found unresponsive.

Despite this, an ambulance is not called until after the police van reaches a police station and Gray is found to be in cardiac arrest, having suffered serious injuries in the van.

Gray dies on April 19, leading to rioting in Baltimore and protests in other US cities. State prosecutor Marilyn Mosby calls the arrest illegal. Six officers are later charged over the incident.

- Samuel DuBose -

July 19: A white University of Cincinnati campus police officer pulls over Samuel DuBose, 43, for failing to have a front license plate on his vehicle and then shoots him as DuBose tries to drive away.

The officer, Ray Tensing, initially said he shot DuBose, who is black, because he was being dragged by the car. But prosecutors said Tensing's bodycam video shows he was never in danger and hit the ground only after he fired the fatal shot two minutes after approaching DuBose's car.

Tensing was charged with murder on July 29.

- Other recent cases -

July 13: A video showing Sandra Bland, 28, pinned to the ground after being pulled over for failing to signal a lane change in rural Texas goes viral after her body is found hanging in a jail cell three days later.

While the coroner ruled her death a suicide and found no evidence of foul play, many still see her death as suspicious and insist she never should have been arrested in the first place.

April 2: In Tulsa, Oklahoma, Eric Harris, 44, a suspect in an undercover gun sale operation, is shot by a volunteer reserve deputy police officer who says he thought he had drawn his Taser stun gun when he shot Harris. The officer has been charged with manslaughter.

March 6: Tony Terrell Robinson, 19, is killed in Madison, Wisconsin, by a police officer. The killing comes on the eve of the commemoration in Selma, Alabama of the 50th anniversary of the brutal repression of a protest demanding civic rights for blacks.

August 11, 2014: Ezell Ford, 25, an unarmed black man who is mentally disabled, according to his family, is killed by Los Angeles police officers as he walked in the street. His autopsy shows he was shot three times, including once in the back at close range.

Reuters Videos
Chinese families of MH370 victims demand answers

Chinese relatives of passengers aboard missing flight MH370 on Friday marched to Malaysia's embassy in Beijing, some demanding to be taken to Reunion island where suspected wreckage from the plane was found.

Most of the aircraft's passengers were Chinese, and around 30 of their relatives protested near the embassy, as dozens of police blocked off roads near the building.

Earlier they gathered at an office in the hope of meeting Malaysian officials, although none arrived.

Several demanded that Kuala Lumpur organise travel to the French Indian Ocean island, where a wing part that Malaysia's prime minister said came from the plane was washed ashore.

"We want to go to the island and see the truth," said Lu Zhanzhong, whose son was on the plane, adding: "I want to see if my son's luggage is there."

Lu held a sign appealing to China's President Xi Jinping to help find the missing plane, but had harsh words for the dozens of security personnel present.

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In this photo dated Wednesday, July 29, 2015, French police officers carry a piece of debris from a …

"The Chinese government has only repressed us. Look at all the police here.. they come to our houses and stop us from giving interviews... They want to cover up the truth," he added.

Hu Xiufang, who had three relatives on board the plane said: "Our demand is to go to Reunion island and look for ourselves".

"All the relatives want to go there," she said. "Malaysia is the country responsible and they should obtain the relevant documents," he added.

Malaysian Prime Minister Najib Razak said early Thursday that wing wreckage found on the French island was from the plane, though French investigators said only there was a "very high probability" it came from the Boeing 777.

Malaysia said on Thursday that more objects -- aircraft seat cushions and windows -- had since been discovered on Reunion, but that any MH370 link "had to be verified by the French authorities".

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Relatives of passengers on missing Malaysia Airlines flight MH370 gathered outside an office buildin …

Zhang Jianyi, who had a daughter and granddaughter on the plane, added: "We will all go there together. That's what international agreements require. And Malaysia is the relevant country to arrange it."

The Malaysia Airlines flight, with 239 people -- including 153 Chinese citizens -- on board, vanished en route from Kuala Lumpur to Beijing in March last year, and authorities said it went down in the southern Indian Ocean.

Many Chinese relatives of MH370 passengers have consistently questioned official accounts and expressed beliefs that their loved ones are alive, perhaps being held at an unknown location, despite the mounting evidence of a fatal crash.

Some of the relatives, including Zhang, wore white T-shirts printed with "we pray for the safe return of MH370".

Relatives also expressed continuing frustration with Malaysian officials.

"The Malaysian government have refused to send anyone to meet us," said Jiang Hui, whose mother was on the flight.

"I don't know what the Malaysian government fears, or what it's trying to cover up." he said.