NY and California on the verge of bankrupcy?

[Elie]

What are these guys talking about?

http://www.thedailybeast.com/blogs-and-stories/2008-12-22/what-if-new-york-go-bust

[Dr Mordrid]

Pretty much true.

In the case of NY its taxes on the stock markets make up a large part of its budget, and that cash cow is flat on its back.

In the Peoples Republic of California you have the Governator, who has been trying very hard to impose some fiscal discipline, vs. a state legislature that's still partying like it's 1999....literally. That and their budget has been decimated by paying welfare, K-12, college and full medical for the illegals.

Both, along with a lot of other states whose governors & legislators wouldn't know a balanced budget if it fell on them in a tank, are now busy asking for the Feds to bail them out like they did the banks.

It's enough to make a taxpayer retch.

[dZeus]

This is all peanuts to if/when China decides that US treasuries aren't worth buying any longer. Then we'll be in a world of hurt...

[Dr Mordrid]

China, actually mostly Chinese individuals and copanies, hold about $1 trillion in US bonds etc. Peanuts in this environment where the Fed devalues the dollar by that amount almost weekly.

Before long their $1T will be worth a third of that.

IMO the bottom line strategy is to devalue the face value of the dollar so much that the debt held by creditors won't be worth cashing it in.

Then again a lot of analysts are saying that US paper is still better off than China's and Europe's.

[dZeus]

I wonder when we'll see repeats of what happened during the Weimar republic. There's quite a lot of talk about the inevatibility of hyperinflation.

[UtwigMU]

Dollar will definitely devalaute. I'm interested what will happen with Euro, there are also bailouts, bank guarantees, employment subsidies but on a smaller scale. The Maastricht imposes budget discipline but in this crisis no one will adhere.

[Dr Mordrid]

Link....

Calif. tax refunds to be delayed starting Feb. 1

Jan 16, 3:40 PM (ET)

SACRAMENTO, Calif. (AP) - California's controller says he will begin a 30-day delay on tax refunds and other payments starting Feb. 1 because the state is running out of money.

Controller John Chiang said Friday he must delay $3.7 billion in payments next month because lawmakers have failed to address California's growing deficit.

With a $41.6 billion shortfall over the next year-and-a-half, the state is on the brink of issuing IOUs.

Chiang says his office must continue education and debt payments but will defer money for tax refunds, student aid, social services and mental health programs.

A severe drop in revenue has left the state's main bank account depleted. The state had been relying on borrowing from special funds and Wall Street investors; those options are no longer available.