TimesOnline:

The state of California, one of the top ten largest economies in the world, will run out of money by February, causing “financial Armageddon”, according to dire new budget projections.

As of yesterday, the state’s debts were mounting at a rate of $1.7 million (£1.1 million) per hour.
The de facto insolvency of America’s most populous state — home to such economic engines as Silicon Valley, the Central Valley agricultural region, Hollywood, Napa Valley, the Long Beach ports, and the defence research and production facilities of Los Angeles, San Diego and the Mojave desert — would represent a new scale of catastrophe in a year in which financial markets and economies have imploded globally.

Bill Lockyer, the treasurer of California, has cautioned that $5 billion of public works projects, including road and school construction, will have to be cancelled because the state’s lenders are worried about an impending Iceland-style bankruptcy. California — which has a GDP of $1.7 trillion — already has the worst credit rating of any of America’s 50 states. “Without a budget solution, state financing of infrastructure projects will stop. It’s as simple, and dire, as that,” Mr Lockyer said this week.

My comment: If you think watching the Congress debate a $15 billion dollar auto industry bailout was funny just wait until California goes bankrupt. It is going to be delicious watching those Republican Senators dress down Schwarzenegger and the rest of the children running the state. The answer is real simple, cut spending. In the end the FED’s will bail them out and how is that dollar positive? Where does the money come from? If you live in a smaller state that is cutting back on services or raising taxes to pay bills how will you feel about having to subsidize California? One thing I do like about this recession/depression is that is showing how truly inept and stupid our leaders really are, however I doubt this will seriously undermine Boobus’s confidence in his overlords.

John Polomny
The Real Deal