I read an article by Martin D. Weiss, PhD entitled “California Collapsing” on the Internet, it is located at http://www.moneyandmarkets.com/california-collapsing-34271 and it is an eye opening report. I knew there were some serious problems going on in the state but an 11.5% unemployment rate and a $ 24.3 billion dollar budget deficit were surprising numbers to discover.
With a mind numbing budget crisis, crushing debt, high unemployment, commercial real estate defaults increasing and a new wave of mortgage resets with 50% to 80% defaults likely in the home mortgage market, it is going to be a rough ride in the short-term future and in Dr. Weiss’s opinion there is ” a very HIGH probability that California will default.”
It has been my opinion that we would inflate our way out of our massive debt, but a default by a major state like California would solve their problem and possibly others much quicker. Sure it would devastate a lot of people’s lives, but the government has already decided that a California bail out is not as important as the Wall Street bail outs since it has repeatedly turned California down flat after several requests for additional funds.
I have not been in favor of any bail-outs, so the near trillion dollars that was set aside for them has always seemed more than a bit unfair. Many have asked, why bail out Wall Street and not states? The default of a huge state government would bring with it an extremely bad precedent that may be followed by a number of smaller defaults. I expect that the default of California would bring a number of other defaults, a virtual “house of cards,” that would be even worse for the general public than that which came from the Chrysler failure.
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I also can imagine a “house of cards” effect. I heard a few days ago that there was a very limited amount of cash available for the state to keep going, but I forget specifically how that was defined. I think it had to do with financing public departments, etc. It certainly is serious.
I wonder how much different California’s position could have been if Arnold had done things differently?
The Governator is not popular now that things are falling apart, but I don’t think that anyone else could have done better given the circumstances. If the entire country is failing, its tough to point at California with blame. They just have farther to fall since real estate values there are 5 times higher than many other places. So when you get upside down you may be paying on $ 500,000 in mortgage excess that you will never recover instead of $ 100,000.
I didn’t know that California’s estate values are that high. If that is so then many of the people there now must have gone on foreclosure already. Not to mention that some banks these days, where you can also gt financial help, are taking advantage of the situation.
I haven’t followed the situation closely, but I also assume that Arnold inherited some very challenging problems relating specifically to California as he was elected into office years ago.
I remember hearing that he worked for less money to keep the third Terminator movie in California, rather than British Columbia. Although that’s probably easier to do if you’re also an executive producer and not just an actor.
It was a great PR move as part of his campaign… There’s no denying that.
Yeah but how would you react seeing your leader a an actor in a movie? Doesn’t seem like a good thing to me. This would likely be another major reason for further recession in the US and should be given a solution. Not just to revive the economy but also for the sake of the people.
I can’t imagine that an entire state could go bankrupt- especially when it has a bigger economy than most countries.
I agree with you on that..it would become a bad precedent if the government will bail out the state of California and i am sure smaller states will follow too..which means that they become dependent on the bail out thing if something happens again..and don’t bother to think of any solution to their economic problems..