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Thread: California eventually to become third world country due to finances?

  1. #1
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    Default California eventually to become third world country due to finances?

    That's what the talk show host I'm listening to now suggested will occur some years down the road.

    He said something about the projected revenue for either the last month or last quarter being $1.3 billion less than expected - his theory being there is much less "flipping" going on in the real estate market now. This in turn leads to less construction work for remodeling, etc., and also affecting supporting businesses to construction via the "multiplier effect."

    As he pointed out, in the days of the "Dot-com" boom, the state legislature didn't look upon the revenue as a one-time windfall, but thought it would last forever. Just as now they don't look upon the 380 million in taxes from the first 16 or so employees of Google, including the two founders, exercising their stock options as a one-time windfall.

    And the host also stated the legislature is spending money faster than either the state population or revenue is rising. And that the state has actively driven away employers to other states which provided the income for people to make their house payments. And finally that once enough homeowners are driven out of the state, there will be no more homeowners to replace them (or to pay property taxes anymore)

    There are a number of politicians here who believe the following, so I'll just call them the "Powers that be": private home ownership needs to be drastically reduced and people forced to live in high-density housing along public transportation corridors. This neglects, of course, that you're turning those people into "sitting ducks" in any emergency, whether they can't get to a hospital if the transportation systems fail in a natural disaster, or whether they become victims to gangs or terrorists. There was an interesting article, within a year of 9/11, suggesting people should "decentralize" their lives, using the internet to work and for school, while converting to living in small villages dotting the entire U.S., instead of the centralization of major cities, which are tempting targets of attack.

    My own belief is that too many politicians have political science degrees and/or law degrees. Some, of course, have other liberal arts degrees. But it's the students who graduate with business or engineering degrees who learn that everything eventually costs something. That eventually, the bills have to be paid. I guess I'd add some of the "hard sciences" as well (e.g., chemistry) and possibly nursing (due to what hospitals have to charge in order to avoid going bankrupt).

  2. #2
    Yekhefah
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    Default Re: California eventually to become third world country due to finances?

    Yeah, I can see it happening. Here in Los Angeles we're already developing a plantation economy - there are the very wealthy and the very poor who serve them, with little to no middle class. It's only going to get more pronounced as the middle class continues to move away (and take their businesses with them). California is rapidly becoming unliveable. We might as well just give it back to Mexico and start over.

    OTOH, California represents the world's seventh-largest economy. What would be the effects of such a collapse on the rest of the country and the world?

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    Veteran Member Lurker's Avatar
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    Default Re: California eventually to become third world country due to finances?

    I don't really understand this post--a 3rd world country in what sense? Financial collapse of the state (not necessarily a 3rd world phenomenon), actual wealth levels/economic performance, or social inequality?

    The 3rd is quite possible and would just reflect the worldwide trends of rich getting richer and poor getting poorer (relatively), the 2nd is conceivable but really wouldn't affect the state economy too much, and the 2nd is impossible outside of some terrorist event, monster earthquake, or similar disaster.
    "All this time you were pretending
    So much for my happy ending."
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    Default Re: California eventually to become third world country due to finances?

    OTOH, California represents the world's seventh-largest economy. What would be the effects of such a collapse on the rest of the country and the world?
    In terms of redirected federal tax revenue, a collapse of California would affect other states in direct proportion to the amount of federally funded social welfare program money which will be collected from the taxpayers of other states and 'shipped' into California to help pay their welfare / medicaid / unemployment benefit bills ! As far as nationwide economic losses of a different nature, for the most part this has already been lost as companies who formerly manufactured in California have moved such facilities offshore, as companies who formerly provided major software services have outsourced etc.


    I don't really understand this post--a 3rd world country in what sense? Financial collapse of the state (not necessarily a 3rd world phenomenon), actual wealth levels/economic performance, or social inequality?
    In the sense that high state taxes, strict environmental laws thus high environmental compliance costs, high electricity costs for industries to subsidize discount energy costs for low income residents etc. have been and continue to drive out 'middle class' industries i.e. manufacturing. Thus the remaining major industries in California are now centered on Hollywood entertainment and a few other 'elite' industries, and Dole Foods / wineries / other agricultural industries, and corporate HQ / Accounting divisions of industries who have shifted their manufacturing functions overseas. Thus you have good opportunities for 'elites' i.e. entertainment business and corporate managers and accountants / attorneys, as well as good opportunities for farm workers / gardeners / landscapers and other services provided to the 'elites', but very little opportunity anywhere in between !

    The 'middle class' hole in the California economy had been filled until recently with a rash of new home construction. However, the real estate bubble's collapse has impacted California to the point where the home construction industry, plus retailers supplying new home furnishings, plus bankers / brokers dealing in mortgage lending, are now being laid off in droves. Essentially, these 'middle class' newly unemployed people have no other 'middle class' industry to pick up the slack.

    California also has a huge problem with its percentage of public sector employees ... who have had very lucrative jobs in education / transportation / law enforcement / social services etc. Unfortunately, public sector employees only 'recycle' the tax money they receive in their paychecks - they don't actually create any new tax revenues for the state.

  5. #5
    Yekhefah
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    Default Re: California eventually to become third world country due to finances?

    Quote Originally Posted by Lurker
    ...the 2nd is impossible outside of some terrorist event, monster earthquake, or similar disaster.
    Los Angeles is due for a really big one. I could easily see a big enough earthquake shaking down L.A. or San Francisco and doing enough damage to cause irreparable financial damage to the whole state.

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    Default Re: California eventually to become third world country due to finances?

    a tidbit from LA from an investor website ...

    (snip)"Walked out today for lunch. I've always known the rents on Westwood Blvd have been too high for most businesses to be able to sustain themselves. Now there are more empty storefronts and even on the side streets the "Going out of business sales."

    Last year there was a huge public outcry when the city of L.A. threw out the Westwood Farmers market to make room for the construction of a new mall. That farmers' market brought staff down from UCLA campus and I used to go to it every week as it was literally just steps away from where I work. The market is now some 20 minutes away by foot, and has lost much of its patronage because it is now inaccessible to us on or near campus.

    They can't even keep the storefronts along Westwood Blvd occupied - but somehow the L.A. city council thinks a mall will do better.

    Although Washington DC is the chief Logic-Free Zone, we seem to have lots of mini logic free zones sprinkled all over the country.

    There are increasing numbers of people panhandling on the street, and there have been stories in the local papers about how some communities here are "under siege" with all the homeless. "(snip)

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    Default Re: California eventually to become third world country due to finances?

    I started thinking about moving out of there when they couldn't keep the lights on.

    The place is swarming with homeless people desperate to figure out what to do with their lives. Not as bad as Bangladesh but getting there. I have seen people pissing and shitting on the street.

    Their "Cheech and Chong" attitude towards drugs has put on an illusion to the reality of it's use.

    The high cost of living there puts the normal life that much more out of reach of those who are already lost and those who are on the verge of being lost. So like a third world nation - the cost of the basics are high.

    One has to work twice as hard to keep one's head afloat like a third world country.

    Incredible income gap between the haves and have nots.

    California has a LOT of gated communities. Living around the country, I have not seen so many as in California. Looks pretty third world to me.

    The list goes on. The people already looking with open eyes have long since bailed out of there.

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    Default Re: California eventually to become third world country due to finances?

    California has a LOT of gated communities. Living around the country, I have not seen so many as in California. Looks pretty third world to me.
    yup, the last time I was in SoCal the gated communities and McMansions sitting behind the fences reminded me so much of large cities in Mexico !

    The people already looking with open eyes have long since bailed out of there.
    yup, thus the cross-border migration to Nevada, and the outright exodus to more distant states by 'middle class' Californians. The population figures are masked, though, due to the heavy influx of illegal immigrants and their legal offspring. However, the state revenue figures cannot stay masked for long, because every 'middle class' Californian who leaves costs the state treasury tax revenue plus every illegal immigrant and their legal offspring who move in also costs the state treasury additional money in the form of social services (which is well in excess of any state tax revenue they generate).

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