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Thread: California running out of money

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    Quote Originally Posted by The Snark View Post
    But then I suppose the sort of people who write this kind of crap generally don't allow their opinions to be tainted by things like "facts" and "reality".
    Distortion becomes somehow pure in its wildness
    The note that began all can also destroy

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    Default Re: California running out of money

    California has been using every trick in the book to borrow additional money over the past few years ... and is STILL continuing to run up larger and larger deficits. The state has now reached the point where the credit markets are no longer willing to buy their muni bonds at 'reasonable' interest rates. S&P has downgraded the state's credit rating to the basement.

    STILL, state lawmakers are unable to reach agreement in regard to cutting social welfare spending or cutting gov't employees or raising income taxes to narrow the state budget deficit. As a result, all of the state's capital improvement money will have been spent by the end of the year. And if nothing changes, the state will run out of operating money a few months after that.

    The 'tin foil hat' crowd is of the opinion that California's cross-section of voters has now reached the point where any cuts in social welfare spending will be impossible, and any cuts in public sector gov't employment will be extremely difficult. This leads to one possibility ... increasing state and local tax rates by significant margins. Actually two possibilities ... the state is also likely to issue new muni bonds at very high interest rates (which will be snapped up by rich Californians since their interest is free of federal, state and local income tax).

    Der Governator has been pushing for a federal 'bailout' ... i.e. taxpayers in the other 49 states being saddled with guaranteeing California bonds against default instead of just California taxpayers.

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    Default Re: California running out of money

    I think the reason why (or a reason why) that they can't raise taxes is because they have already been doing it. A number of acquaintances have left Cali (before Governator) because of the increased burdens.Cali is the prime example of what happens when all 3 branches of govt are controlled by the dems.............bad times.
    Quote Originally Posted by The Snark View Post
    But then I suppose the sort of people who write this kind of crap generally don't allow their opinions to be tainted by things like "facts" and "reality".
    Distortion becomes somehow pure in its wildness
    The note that began all can also destroy

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    Veteran Member justtobenaked's Avatar
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    Default Re: California running out of money

    yep, I am here in Cali and a lot will be changing...no free school lunches in cali schools because the schools are still owed from last year, social security checks have already been cut, the white population is now the minority in cali, and spanish will now be required to learn in schools. In schools they are going to try to teach english one day and spanish the next for each lesson! I think I am moving now....damn lease though...

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    Default Re: California running out of money

    it would indeed seem that California is steadily turning into a 'third world' economy ... where the very rich get even richer by loaning money to the state (at very high tax free interest rates) and by investing in gov't sanctioned (subsidized) businesses, and where the poor continue to collect benefits from the gov't. It is the middle class taxpayer, and non gov't subsidized businesses, that are taking a pounding !

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    Default Re: California running out of money

    Why is it always the rich, the very rich, etc.. If it wasn't for whomever was buying the state bonds, Cali would have already gone under.
    Quote Originally Posted by The Snark View Post
    But then I suppose the sort of people who write this kind of crap generally don't allow their opinions to be tainted by things like "facts" and "reality".
    Distortion becomes somehow pure in its wildness
    The note that began all can also destroy

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    Default Re: California running out of money

    ^^^ well, until earlier this year, the buyers of many California bond issues were Wall St. financial houses, pension funds etc. However, these days, 'risk' matters ! And California muni bonds have a minimum price tag of $50k per bond. One needs to be reasonably rich in order to cough up such large amounts of money for a single investment.

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    Default Re: California running out of money

    Where do you get the 50k buy in. I know one set of warrants that were not sold to individuals, but they (Cali) were advertising bonds for individuals to buy.
    Quote Originally Posted by The Snark View Post
    But then I suppose the sort of people who write this kind of crap generally don't allow their opinions to be tainted by things like "facts" and "reality".
    Distortion becomes somehow pure in its wildness
    The note that began all can also destroy

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    Default Re: California running out of money

    ^^^ the $50k (or $100k) is the minimum face value of the primo bonds being offered for sale. Yes it is possible to buy 'subdivided' portions, via bond mutual funds or bond dealers. However, owning anything besides one 'complete' bond either reduces the de-facto interest earnings or complicates taking the tax exemption on the interest earned or both.

    Since I'm an East Coaster, I'm not familiar with Cali's direct offering of new muni bonds. However I AM familiar with NY's similar offering ... hell they even bought media time to advertise them ! From what I understand, these are an attempt by the gov't to reduce their 'borrowing cost' i.e. offering smaller denomination bonds that are theoretically affordable by a much wider range of investors, but on which the gov't is able to pay a far lower interest rate than the auction bid interest rates set on the 'real thing' $50k bonds sold at auction to the financial community. In essence, these are an attempt to clone the 'US Savings Bonds' at the state level.

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