Following
Y.A.B.A.N
Possible End Of BAB Program Raises Questions On Investments →
This once looked like a pretty sure thing. Now it looks like the Build America Bonds program won’t be extended. This, combined with the falloff of other federal aid, will put a lot of strain on California’s budget.
I guess some cans weren’t meant to be kicked forever.
I like CA for a trial patient. Or patient zero, more likely.
For sentimental reasons, I prefer Illinois go first.
Let us all move to Iceland!
For the default-and-devalue option to work, you’ve got to have the devalue option. We don’t. Even if we did, it’s no cup of tea. I’m all for the default part, though.
The problem with default is that you generally get a fat dose of living-with-a-balanced-budget to go along with it. California doesn’t know how to do that. Imagine not being able to auction bonds off to build a school. Then there’s a bunch of other fallout to go with it. California debt is mostly held domestically. The general structure of tax incentives for municipal bonds makes the interest rate worthwhile locally, not so much elsewhere. It’s much easier to default when outsiders are holding your debt. Your default becomes their problem. When your own people hold your debt, their problem tends to transform back into your problem.
There’s currently also a legal framework problem with default. There’s no laws to enable states to default. That doesn’t mean a state can’t default. Skip a payment and the state has defaulted. But now what happens? It was illegal for the state to skip a payment. But Let’s assume the state defaulted because they actually ran out of money. If there’s no money, then the legal constraint on skipping a payment doesn’t prevent it from happening. And raising taxes without a 2/3 majority in the state legislature is also illegal. So it’s illegal to skip a payment and illegal to get the funds to make a payment. That would be quite a bind, wouldn’t it?
Incidentally, Iceland is screwed in a bunch of different ways. Getting out of recession isn’t an all-clear. After all, we’ve been out of recession for a year. Simple example: Iceland over-fished. They’re going to need to start importing food. If currency wars start heating up, expect Iceland to be hurt by the resulting protectionism. They handled their banking crisis well, but they’ve got a few problems remaining to be dealt with.
I suppose getting Prop. 13 changed or revoked is off the table?
About
I have many leather-bound books and my apartment smells of rich mahogany.
Grundig blaupunkt luger frug Watusi snarf wazoo! Nixon dirksen nasahist Reboso boogaloo.
Ask me your questions, bridge keeper. I'm not afraid.
