California Budget Issue

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clthk01's picture
clthk01
Status: Member (Offline)
Joined: Mar 17 2009
Posts: 3
California Budget Issue

Listening to CNBC this morning, heard an interesting conversation right after the durable goods report at 8:30 in which David Faber (who is my favorite guy on the network). He said, talking to CEO's, these reports simply show bouncing on an all-time low bottom and we are looking at an L-shape recovery. 

He then said when the hec are we going to talk about the tax receipt issue for state, federal and local governments having fallen off a cliff by 30% .  Steve Liesman (CNBC economist) said the Fed had it under control, and took it to the federal level (obviously because the Fed and Treasury own the printing presses for the time being).  But Faber shot right back, and said the US has already stated they WOULD NOT bail out California, and their Controller General has given them until July 31 (end of fiscal year) before they are out of $$ and loaned money.  They quickly went to commercial break after this, probably to avoid any real answers.

My take: California is Lehman II, but worse.

The only lender that I believe will give Cali any more $$ is the US Government, so either they will do it, or they won't (as they have stated).

If they DO NOT, who does California stop paying? 

They could stop paying teachers.  Protests would be insane.
They could stop all infrastructure repairs and builds.  This would cause disastrous consequences over the next few years (watch the History Channels "Crumbling of America" if you do not believe me, which was on Tuesday this week and will hopefully replay, very good program)
They could stop many social programs (I would support some of this, as personally, I am tired of supporting all kinds of people who pay no taxes, since I have heard over 50% of Californians do not pay, and it is only slightly under 50% nationwide).  However, this will probably cause mass rioting in the streets (I remember the Rodney King trial).

Or, they would do what I expect: Default on interest payments on municipal bonds.  This would crash the municipal bond market, and freeze the credit markets in a similar, but maybe more intense fashion than the collapse of Lehman did.

Of course, at the end of the day I believe the US is playing lip service and will bailout California, probably with remaining TARP $ or the like.

I'm curious if anyone has any comments here.  This is entirely my take, but it seems like this situation is not being discussed as much as it should at the major national financial news outlets, like CNBC or Bloomberg (maybe locally in California, but I do not live there).

Alex Szczech's picture
Alex Szczech
Status: Silver Member (Offline)
Joined: Dec 31 2008
Posts: 105
Re: California Budget Issue
clthk01 wrote:

Of course, at the end of the day I believe the US is playing lip service and will bailout California, probably with remaining TARP $ or the like.

I'll be very surprised if California doesn't recieve some sort of federal assistance. However, the assistance should be made contingent on California reforming their political system to: 1) get rid of the voter initiatives and; 2) get rid of the 2/3 legislative requirement to pass spending bills. Otherwise, to hell with them.

rocketgirl1's picture
rocketgirl1
Status: Silver Member (Offline)
Joined: Feb 11 2009
Posts: 230
Re: Influenza Sudden Death syndrome

They say change is good, unfortunately, not when it comes to influenza.  www.fluwiki2.com  under "ABOUT" click on "Recent Diary Posts"  scroll down to "Influenza Sudden Death syndrome"  be sure to read the following posts containing links and information on recent sudden flu deaths in the US and around the world.  A healthy 6 year old dieing within 24 hours from swine flu is NOT comparable to seasonal flu and neither are any of the recent sudden flu deaths.  Healthy, young, and suddenly dead and when will we hear from our health officials? 

rocketgirl1's picture
rocketgirl1
Status: Silver Member (Offline)
Joined: Feb 11 2009
Posts: 230
Re: California Budget Issue

sorry I attached this to the CA budget issue, I don't know how to create a new forum topic independently.

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