California Is More Likely to Default than Iceland or Iraq

George Washington's picture

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Mercury's picture

California defaults (or comes close enough), fall into the arms of the federal government and forever has less control over it's own affairs.  What's not to love from Obama's perspective? He's probably pushing with both hands.

The Professor's picture

I think that's exactly right. I have never bought the argument that "states can't print money, therefore they must default, and any fed intervention creates too many states spending whatever they want, knowing they will be bailed out." Greece was bailed out by those with a printing press, just as California will be.

I think the feds can step in and bail out California under the radar. I can see a nationalized prison system funded by a printing press happening much faster than California furloughing half the prison population or drastically curtailing welfare. Plus, more control!

baserunr's picture


I think Cali is more likely to default than Greece.  The state's budget is heading for a brick wall at 90MPH.  But not to worry, the legislature and Gov have agreed to take their collective foot off of the gas pedal.  However, if you touch the brake, the unions will scream.  I see little appetite for the rest of the States to bankroll Cali's fiscal insanity.  In theory, Cali is a soverign state.  they can tell bondholders to pound sand.  Obama did w/Chrysler.  Then it's not a problem until the state needs to borrow again.


Like next year!

SWRichmond's picture

Forgive me for wandering OT a bit, but I couldn't help but notice that Argentina is yet again deemed likely to default.  Dare I suggest that the rampant corruption that overtook the country after the recent default has hastened the next one?  Did Argentina elect demagogues after the earlier default?  Lessons not learned?  Can WE learn from this?

Tic tock's picture

So, pork, more pork, pornos and computers.

Postal's picture

Need less pork, and more porn... ;-)

Hephasteus's picture

Oranges, happy cows and pissed off movie makers who only make 16 million on a movie that costs 15 million to make but gets a shit ton of 'awards' goes on sue rampage against pirates.

The Butthurt Locker.

Cheeky Bastard's picture

Nice, balanced, well reasoned article.


Burnbright's picture

I have to agree, but I still don't get how california has a 1.8 Trillion economy. What on God's green earth do we produce in this state that creates that much economic activity, it can't all be house flipping and pot growing.

Steaming_Wookie_Doo's picture

As a Californian and Latvian, you can only imagine the ecstasy of financial excess I can (at least tangentially) experience. The only thing better than this would be being Icelandic.

As for the size of California's economy, please recall all of the wine, dairy, fruit, nuts, etc we produce for your eating pleasure. High tech, biotech, military (at least in SoCal) and the movie industry. Of course, at least one of my friends is praying fervently for pot to be really legalized, not just in Berkeley and SF...that alone will double the GDP.

Burnbright's picture

I live in northern california and as far as I can see there is no real industry. My point was that their isnt any textile or manufacturing jobs. Most jobs in california are either producing drugs like pot, alcohol, or pharm or its in software design/electronics.

Humboldt county for example has had its timber industry basically wiped out. All most all the money comming into Arcata and Eureka is soley do to student loans, pot, or the fishing industry. And yet the cost of living here is increasing not decreasing. A house in this area is 250k to 500k that isn't a mobile home and the average pay around here is 10hr. Nothing adds up.

Oh regional Indian's picture

Agriculture, defense and then Silicon valley, in that order I think.

But it is so concentrated (Pasadena and environs for defense) and San Joaquin Valley area for bulk of the ag.

The rest, well, you just need to look around you and count the for sale signs.

At least last I was there in 06, doubt much has changed, especially from what I read/hear.

barnvette's picture

Saying states won't default, is like saying the housing market will never decline.  Of coarse, Big Ben would likely step in to save the day.

Real Wealth's picture

Caution: when going down a hill in a wheelchair, don't roll into a crocodile's mouth.

carbonmutant's picture

Do not underestimate the spectactular November election payoffs for Ms. Pelosi's efforts regarding health care...