Is California the biggest PIIG?

loosecannon

Senior Member
May 7, 2007
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California Will Default On Its Debt, Says Chris Whalen

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.

Why won't California just get a bailout?

Because the Republicans now control Congress, Whalen says. And also because, if California gets bailed out, dozens of other states will immediately line up with their hands out. The public is fed up with bailouts, Whalen says--and eventually, the country will be forced to face up to its bad debts and write them off.

We may be entering completely uncharted territory.....Like third world territory, and sooner than you thought.
 
California maybe becoming a third world shithole, but you can't say California is racist.
 
Its one of the things people really don't bet when voting on bond measures. Sooner or later the state has to pay for them.
 

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