California Will Default on its Debt

[sixmile]

http://finance.yahoo.com/tech-ticker/california-will-default-on-its-debt-says-chris-whalen-535616.html?tickers=%5Edji,%5Egspc,%5Eixic,%5Etnx,tlt,tbt&sec=topStories&pos=1&asset=&ccode=

'Municipal bonds have plummeted in recent days, as investors have suddenly focused on huge state and city budget deficits that there's no easy way to fix.

Nowhere has this collapse been more visible than California, which faces a massive $25 billion shortfall and red ink for as far as the eye can see.

After years in which every looming financial crisis has been met with a government bailout, you might think that the same solution awaits California, as well as all the other states that have huge obligations that they can't afford to meet.

But this time that may not happen, says Chris Whalen, a financial industry analyst and Managing Director of Institutional Risk Analytics.

In fact, Whalen thinks that California will default on its debt--hammering all the pension funds and other investors who have loaded up on apparently safe state bonds.

The state won't immediately default, Whalen says. It will start by issuing the same sort of IOUs that it issued to by itself time during its budget crisis last year. But, eventually, the debts will have to be restructured, and this will result in those who own California's bonds receiving less than 100 cents on the dollar.'

more at link

[Xicano]

1. Just think how much legalizing marijuana could have brought in and saved.

*sigh*

[madinmaryland]

16. California would pull in $25 billion in MJ tax revenue??

Damn! Nothing would happen in CA for years, except trips to 7/11 for ho-ho's and hotdogs!

:smoke:

[closeupready]

2. If they were smart, they'd cut taxes on the wealthiest 2% of Californians.

And make property taxes illegal. That would spur job creation and the state's economy. Or so I've heard. :sarcasm:

[janewin]

14. how about

stop they just quit borrowing more money? as the saying goes, if you find yourself in a ditch, stop digging. States cant behave like Countries, The federal govt can always print out more money when they are in a bind

[janewin]

15. how about

stop they just quit borrowing more money? as the saying goes, if you find yourself in a ditch, stop digging. States cant behave like Countries, The federal govt can always print out more money when they are in a bind

[closeupready]

17. I like my suggestion better.

:sarcasm:

[no_hypocrisy]

3. They're still running commercials on NYC radio, trumpeting the purchase of CA muni bonds.

Periculo vestro (at your own risk).

[dana_b]

22. omg - I had no idea

that people in other states were doing this. Funny that they don't push those bonds onto us, the citizens of said state.

I'm screwed too. As a state employess, I'll be lucky to ever have a pension in 20 years.

[hunter]

4. Down the drain we go.

The federal government bailed out big banks and General Motors.

Let's see what happens next.

[DBoon]

9. They bailed out reliable republican supporters

nt

[ej510]

5. Fuck we are fucked, because of repukes blocking tax hikes for the past three decades.

[Ernesto]

7. VERY TRUE..... nt

[DBoon]

10. actually cutting corporate taxes last year

costing billions in revenue

[jberryhill]

6. California is ungovernable

It seems that California really screwed itself by essentially giving up the legislative function to "government by ballot proposition".

They have imposed so many restrictions on the process of even formulating a budget, that I can't see how it matters who is in the legislature or the governor's mansion.

[Le Taz Hot]

21. Ballot propositions

were put in place because the Legislature wasn't doing their job. Granted, the process is open to massive private-interest manipulation but there have been some positive changes, for example, medical marijuana. Californians have also voted down many of those private-interest ploys. Prop. 25 is an excellent example.

Eliminating the ballot propositions would do nothing but give us LESS voice. California's problems are mostly self-inflicted and that's because politicians of BOTH political parties have been/are unwilling to make the hard choices, such as raising taxes on the wealthy.

[denverbill]

8. A government should not be able to file for bankrupty.

Not when they have taxing authority. A judge should be able to force the legislature to impose whatever tax (or budget cut) is necessary to pay off their debts.

[w4rma]

11. Yes, governments should be able to file for bankruptcy. Investments aren't 100% safe. (nt)

[Igel]

12. Can't agree.

Taxation is to be with the consent of the governed. That means, at the very least, instituted on the governed by their representatives.

Having a judge impose a requirement for taxes--which would mean, over the course of the years as the case went from the lowest to highest court, perhaps having 10 judges look at it and at least 6 or 7 agree--would be to have the judicial branch all but dictate taxes on the governed without their consent.

It happens. It's always reprehensible, and signals both a lapse on the part of elected officials and a breakdown in democracy, a warping of the republic. If a government defaults on bonds, ultimately the government pays the price for that default: In the very short term investors lose money, but given the risk involved in more of the same government's bonds the government, and therefore the electorate, pay through the nose.

[cbdo2007]

19. Wrong - people should stop doing business with them and loaning them money.

[stopbush]

13. CA sends over $48-BILLION a YEAR to the Feds in the form of fed taxes

that gets redistributed to other states to help THEM meet their budget needs...and, to build those bridges to nowhere.

It wasn't always that way. Back when Reagan was president, CA got $1 back for every $1 we sent to DC. Now, we get $.78 back for every $1 we send to DC. The other $.22 from each dollar we send to DC gets redistributed to red states, and it amounts to $48-billion each year - out of the pockets of CA taxpayers and into the coffers of other states.

See here: http://www.taxfoundation.org/research/topic/92.html

If the red states would give us back our fucking money, we'd be fine!

[slackmaster]

18. Who the fuck is Chris Whalen? Or to put it another way, what is Chris Whalen selling?

:nuke:

[UTUSN]

20. So why is paragon Darrel ISSA not running a Recall against Ahhhhnuld?!1 n/t