Californa will default (Montclair: insurance, credit, loans)

[jimhcom]

California is Too Big To Fail; Therefore, It Will Fail | Newgeography.com

This article points out rightly in my opinion why California will default. It is the path of least resistance. The moral danger of subsidizing financial mismanagement is now becoming apparent as the perpetrators of countless acts of fraud are now being bailed out by the federal government while at the same time eluding any type of punishment for their misdeeds. There is simply no downside, and in many cases there are rewards for doing the unethical thing. Such is the case with California. By continuing to run budget deficits and lacking the political courage to do what is needed the legislators will be rewarded for their lack of leadership by being bailed out. They can continue to feather their own nests by handing out lucrative state contracts, (for which they will be compensated at a later time) paying out obscene pensions, and doing business as usual knowing California is too big to fail.

[drshang]

California SHOULD default...it's the best way to get out of their problems. The state will just collapse anyway if it tries to pay all those nonsense union and pension contracts. At least if they default they can negotiate better and sustainable terms. They simply won't negotiate unless things get that bad. But the thing is, there's not a lot that can be done if you don't slash pay for people (yes, cops too) and reduce current and future pension contracts. All the other nonsense like legal pot is pennies compared to the core problem. If you double the taxes people will just leave and you end up defaulting anyway (and laffer effect kicks in and you don't even make more money), but it's a much slower road to recovery that way since there won't be anything left. CA literally can not raise taxes, and they can't cut spending without the threat of default (since they have to negotiate with unions). They should also cut 20% of government jobs. But I think defaulting is easier than that.

[steel7]

I doubt it if ca defaults. They should though. This nov a 18.00 car fee to pay for state parks is on the ballot. I hope people vote it down. Car fees are already too high & if you want to visit a state park then pay at the gate. We have a horrible legislature..wow.

[mateo45]

For all the talk of "trimming the fat", "cutting welfare", etc., the fact is that sooner or later we have to start raising taxes in this state in order to sustain it, because there's simply not enough revenue coming in, regardless.

It may sound harsh, but if folks really want to live in Cali, they're simply gonna have to be able to pay for it, same way most folks have to choose a car that they can actually afford (rather than what they wish for). In fact, why exactly should anyone be "entitled" to be able to afford to live in California (or anywhere else for that matter), anymore than they're "entitled" to own beachfront property? Nuthin's ever "free"....

[californio sur]

Originally Posted by mateo45

For all the talk of "trimming the fat", "cutting welfare", etc., the fact is that sooner or later we have to start raising taxes in this state in order to sustain it, because there's simply not enough revenue coming in, regardless.

It may sound harsh, but if folks really want to live in Cali, they're simply gonna have to be able to pay for it, same way most folks have to choose a car that they can actually afford (rather than what they wish for). In fact, why exactly should anyone be "entitled" to be able to afford to live in California (or anywhere else for that matter), anymore than they're "entitled" to own beachfront property? Nuthin's ever "free"....

That really is what it is all about. If one wants to live in California than be prepared to pay more than if living in Arkansas. Our air quality is the worst in the nation so we tax polluters\ gasoline\ invest in green tech. That requires taxes. It's interesting that every governor [Republican or Democrat] has raised taxes [in-fact Ronald Reagan carries the record for highest tax increase ever in California]. If default means the state will be repaid our federal tax subsidies of Southern states than I think it is overdue.

[18Montclair]

California has never been late on repayments of its bonds-and the state has enough revenue to keep making those payments so we don't go into default.

Also, we have to stop relying on speculators who say California is headed to default.

Keep in mind, the biggest speculators spreading these rumors are the same bankers who sold the bonds in the bonds in the first place. They also take out insurance hoping the bond will FAIL so they can make a killing.

This horrible(but legal) scheme is all very well documented and such speculation is why the EuroZone is in so much of a panic today.

“The municipal CDS market, when used by bondholders to hedge risk, can benefit issuers by increasing demand for bonds,” Lockyer, who earlier sought a ban on speculative trading of municipal credit default swaps, said today in a statement. “But naked trading of CDS by investors who don’t own California bonds poses a potential danger to taxpayers.”

The growth of credit default swaps has raised questions among officials including Lockyer about whether Wall Street banks that are paid to underwrite their bonds also profit by arranging or promoting bets against them. Credit-default swaps tied to subprime home loans amplified the financial crisis that struck more than two years ago.

“Unchecked speculation opens the door to market manipulation that could artificially inflate perceived credit risk and increase taxpayers’ borrowing costs on bonds,” Lockyer said today. “Reducing leverage opportunities will make it harder for speculators to game the system and hurt taxpayers.”

Moody’s Investors Service grades California debt at A1, its fifth-highest rating. Standard & Poor’s gives it an A-, its seventh-highest.

California’s Lockyer Seeks Curbs on ‘Naked’ Swaps (Update2) - BusinessWeek

[hsw]

CA, NY, NJ, CT and IL will each need to enter some form of bankruptcy to break the unions and absurd entitlements

US and esp CA are world's most dynamic, innovative places, so will likely restructure before far more sclerotic and troubled Germany or Japan or rest of EU/UK

Ultimately bond investors (those evil hedge funds again) will bring any sovereign incl US to its knees if policies become too irresponsible

SiliconValley-invented mobile computing tech and Manhattan-invented financial engineering allow any major co. to easily move HQs, high-income jobs and tax residency to suburban Dallas or Geneva or wherever is most efficient....stuff that wasn't as easy to do even 10yrs ago before advances in mobile computing and videoconferencing

And it's all relative...income taxes are still about 300bp lower in CA than in NYC despite crappy weather, air quality, weak fresh produce, pothole-laced roads and lack of car infrastructure in Manhattan....and SF's PacHts and LA's Westside have ~30-40% cheaper housing than comparables in Manhattan: CA is in much better shape than NYC for the value and tax-conscious

[18Montclair]

Originally Posted by hsw

CA, NY, NJ, CT and IL will each need to enter some form of bankruptcy to break the unions and absurd entitlements

Something needs to be done about that ASAP.

[mateo45]

Originally Posted by hsw
CA, NY, NJ, CT and IL will each need to enter some form of bankruptcy to break the unions and absurd entitlements

Originally Posted by 18Montclair

Something needs to be done about that ASAP.

Yeah, you tell 'em....

"New Jersey already has the highest tax burden of any state in the nation, with a per person state and local tax burden of $6,610."
New Jersey: the making of a financial disaster | Bankrupting America (http://www.bankruptingamerica.org/2010/05/18/new-jersey-part-one-the-making-of-a-financial-disaster/ - broken link)

[Pretzelogik]

Not a problemo...Obummer will bail them out.