Sunday, December 20, 2009

California Crisis Deepens... Part 4

OK!  So I first thought there would only be 3 parts to this series.  However, things keep getting worse on a daily basis.  Who knows?  There might even be a Part 5 and 6!  Let's see how things develop.

In any case, California's deterioration continues.  According to a very recent article in the L.A. Times, Bill Watkins, who heads the Center for Economic Research and Forecasting at Califonia Lutheran University, released a recent report.  He urges that the State begin emergency discussions with both the Obama administration and the Federal Reserve in the increasingly likely event of a state default.  Had he read "Marko's Take" he would have realized that these discussions are already taking place!

Watkins believes that the odds now FAVOR a default.  California Treasurer Bill Lockyear sharply took exception with Mr. Watkins' assessment, accusing him of "irresponsible fear-mongering".  It makes one wonder whether Mr. Lockyear has spoken to Governor Schwarzenegger who has been saying the same thing!

The crux of the problem is centered in the budget.  Republicans are adamant in their refusal to increase taxes, while Democrats are equally determined in THEIR refusal of further budget cuts.

The only reason that California is NOT in default is that some banks still honor the IOUs already issued on 4 separate occasions.  If they should refuse to honor those IOUs AND the Obama Administration refuses to provide emergency bailout funds, then the State will have no choice.

As I've mentioned previously in the "California Crisis Deepens"  series, the State is SO important, not only to the United States, but the world.  I believe the Obama admistration will have NO choice but to provide emergency bailout funds.  Therefore, I disagree with Mr. Watkins' conclusions entirely.

California has come up with a rather interesting partial solution to the budget stalemate which will appear on the 2010 ballot:  the legalization of growing marijuana!  In so doing, the pot industry, the largest agricultural sector in the Golden State, will be subject to taxation at a variety of levels and should be able to raise revenues substantially.  Recent polls show this initiative is very likely to pass.

I hope the new initiative has left this troubling piece on a "high" note!

So, why don't you give me your "Take" in the comments section below?

Marko's Take

5 comments:

  1. Marko
    You are a sick person,and probably know nothing about United States history.Oh by the way tell people of California that English is the first language.If California is so important to the world why is it broke? Why should Americans bail out California,when excessive spending will not stop?

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  2. A Federal Bailout of Kaal-ee-for-nee-a will be one more nail in the national Dems. political hopes. People are already sick of the bailouts for the crooked Banksters of Wall Street!

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  3. So what if Cali deteriorates. It's gonna fall into the ocean anyway.
    So what if the polytishuns can't get anything done. The last thing that place needs is more law and regulation.
    Services shmervices, fire the tax collectors and watch folks take care of themselves. Let the "State" destroy itself, hopefully this trend will continue elsewhere.

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  4. It is all starting to fall on the Feds balance sheet which in turn will have direct effect on the dollar and US debt strength. When the bond markets turn on the T-Bill because the FederaL gov has taken on too much exposure then the shit will hit the fan. The defacto nationalization of Fannie and Freddie, exposure to AIG, and the FHA are all good examples why a treasury default is on its way.

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  5. It does remind me of 1960's science fiction stories, slot machines in the schools, and vending machines selling grass... crazy times. Entitlements have to end or the system breaks, but civil unrest kicks in because folks are used to getting the benefits... but now, they are given vouchers for Mary Jane, and all is good ... lol. Who knows. It's a mess. I do hope they can resolve things.

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Take me on!