Why State Default Points are Unpredictable

[william the wie]

Take the big three states with major financial problems: CA, IL & NY.

CA spends maintenance funds on daily operations and every so often goes into temporary IOU defaults anyway.

IL has been in non-bond default since the 90s.

NY has massive unfunded liabilities. It was bailed out twice in the twentieth century most famously by president Ford and less famously TR and JP Morgan pulled off a bailout pre-WWI.

CA is experiencing a massive growth in homeless poverty while counting on ever higher taxes on the wealthy. The tax base is heavily dependent on tech share prices that are flattening out as far as growth is concerned. Attempts to tax low tech businesses is causing them to move out. So there is a breakpoint coming but no one knows what it is.

IL is losing tax base in a compound interest function and this greatly benefits IN and WI.

NY is losing tax base as well but the biggest risk to NY is that NJ or CT will go under and take NY out.

The current partial shutdown is enough to trigger a default wave

 

[kyzr]

The only thing those states need to know is that there will be no Federal bailouts, so they had better adjust pensions, tighten their belts, and do whatever else is needed to straighten out their finances.

 

[jwoodie]

These States are too big to fail.

Bailouts will come.

Ocasio-Cortez (aka Evita) is the face of the future.

We are doomed.

 

[kyzr]

These States are too big to fail.

Bailouts will come.

Ocasio-Cortez (aka Evita) is the face of the future.

We are doomed.

I remember when NYC almost went bankrupt in 1975 and they were whining and wailing, and the Feds said NO BAILOUT.
Lessons From the Great Default Crisis of 1975

 

[william the wie]

These States are too big to fail.

Bailouts will come.

Ocasio-Cortez (aka Evita) is the face of the future.

We are doomed.

These states are too big to bail out as well.

It would not surprise me if unfunded liabilities and deferred maintenance just for CA exceeded US GDP plus a similar figure for NY and IL.