Anybody have any thoughts on the probability of California defaulting on its bond debt? Apparently only a few states in US history have defaulted (during depression of 1840's), and that was mostly to London bankers, so who cares. Not sure who owns most of CA bonds?
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FollowBefriend40 threads2,652 comments
I don't think CA will default. I think the feds will bail the state out.
Honestly though, the only way to fix the state's problems is with a new constitution, ideally one that stops letting stupid, uninformed citizens vote on every single issue, whether they understand it or not. Republics were created for a good reason.
FollowBefriend3 threads16 comments
I agree with the second paragraph. However, I am not so sure the Fed's will be willing to bail the state out. If they did, they may be opening themselves up to more states (maybe even every state in the union for that matter) coming to them for a bailout.
Dropping or stagnating home prices, high unemployment, and a poorly planned income tax will all put pressure on the state to either keep cutting services (although politically this is only feasible up to a point, especially with a democratically controlled legislature) or raise taxes (so far the repubs haven't been willing to budge). There may be a point where neither raising taxes nor cutting services will generate enough revenue to pay off bond debt and continue to operate the existing programs that everyone seems to take for granted.
Where that point is I dont know.