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Silly question, "can California default"?
We have over $600 billion in debt. LA and San Fran have over $500 million deficits, each--while California's is $36 billion. Our pension plans are way underwater and our unemployment fund is $7 billion in debt.
The real question is when California will default, not if. We have the worst bond ratings in the nation. The Assembly recognized this by increasing the interest cap from 5% to 12%. That is how bad the situation has become.
"After this latest downgrade, for instance, one argument advanced by the state's officials is that it would never stiff bondholders because they are (by the very nature of tax-exempt investments) California residents. This argument is so politically naive that any savvy investor should see right through it. For one thing, when a budget crunch gets so severe that bondholders start to worry about their investments, it usually means that politicians are facing the choice between paying off a government's senior obligations and cutting services to the bone. Yes, the state's bondholders might be citizens, but under budget duress they will inevitably be characterized (rightly or wrongly) as rich citizens whose demands for payment are being made at the expense of those getting their programs and services cut."
The California Great Depression continues and default is in our future.
More...
We have over $600 billion in debt. LA and San Fran have over $500 million deficits, each--while California's is $36 billion. Our pension plans are way underwater and our unemployment fund is $7 billion in debt.
The real question is when California will default, not if. We have the worst bond ratings in the nation. The Assembly recognized this by increasing the interest cap from 5% to 12%. That is how bad the situation has become.
"After this latest downgrade, for instance, one argument advanced by the state's officials is that it would never stiff bondholders because they are (by the very nature of tax-exempt investments) California residents. This argument is so politically naive that any savvy investor should see right through it. For one thing, when a budget crunch gets so severe that bondholders start to worry about their investments, it usually means that politicians are facing the choice between paying off a government's senior obligations and cutting services to the bone. Yes, the state's bondholders might be citizens, but under budget duress they will inevitably be characterized (rightly or wrongly) as rich citizens whose demands for payment are being made at the expense of those getting their programs and services cut."
The California Great Depression continues and default is in our future.
More...