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numan Offline OP
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From Golden State to 19th-century backwater

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Imagine a state that considers itself progressive, cutting edge, the envy of the world. Imagine a state with the globe's fifth largest economy. Imagine a state, population 37 million, with more wealthy people than practically any other spot on earth....

Now imagine that state so cash-strapped, because of decades of anti-tax revolts and irresponsible, unfunded, spending mandates, that it can't pay even its basic bills and is hoping to sell off prized public lands and buildings to plug just a tiny fraction of its deficit.

Welcome to California....

[SNIP]

To use words like "counter-productive", or "short-sighted" to describe these cuts doesn't begin to do justice to the scale of the disaster being mapped out in Sacramento. The state is essentially going to step back into the 19th century and watch while millions fall into destitution, while illnesses go untreated, while school services are decimated....

Can anyone think of a few likely consequences down the road? Well, how about rising crime, epidemics, increased illiteracy rates, the spreading presence of shanty towns, increased gang violence as the informal economy fills the vacuum left by these state rollbacks.

[SNIP]

New York Times columnist Paul Krugman recently wrote that California is becoming a banana republic. That's probably being charitable....

At last! Libertarians will get a tongue-tip taste of their paradise! wink

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Last edited by numan; 05/30/09 05:55 PM.
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UKalifornia, or why there�s never going to be a recovery

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The UK and California both are flashing red lights at the end of the world. There is a point beyond which the credit of governments will not stretch....

S&P warned that the Britain�s rising debt burden could force it to take away its prized top-notch triple A status. The agency said it would consider a downgrade, depending on the performance of the economy, over the next two years.

[SNIP]

The Federal Reserve cannot obtain the resources it requires to hold up the American $1.8 trillion borrowing requirement, for that matter, without buying huge amounts of Treasury securities on its own, and yesterday raised the prospect of another $300 billion in purchases.

Now comes the matter of California. Governing by apocalypse is the only option left to the Governator, who cannot get the Democrats to accept budget cuts and could not persuade the electorate in this week�s referendum to accept tax increases....

Nonetheless, there is only so far that the bandaids can stretch. For the US government to spend more to bail out states or industries or banks, it must persuade the Fed to extend its balance sheet, which means that eventually America itself will be in the same position that UKalifornia is in. Governments will have to cut spending, which means that consumers will cut spending, which means that the economy will crawl along its L-shaped recession path indefinitely.

An L-shaped recession?! Oh, such starry-eyed optimism!

Better wrap your mind around a descending-staircase depression! Klunk! Klunk! Klunk!

Pull in your limbs, and protect your head!

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