John Dvorak’s Second Opinion: California needs to face the music, go bankrupt – MarketWatch — I normally do not self promote my MarketWatch column on the blog, but this one is apt.
California already has issued IOUs to employees, which were eventually refused by the banks and ironically refused by the state itself. The only real solution to save California from the inevitable actually is the inevitable: Declare bankruptcy, and reset the system.
What will then emerge will be as important as the process and recovery. We will finally get to see, as the saga unfolds, what we saw in the city of Vallejo, Calif., during its bankruptcy proceedings — a pattern of corruption, cronyism, abuse and the defrauding of the taxpaying public. City officials making more than $300,000 a year, firemen making more than $200,000, friends hiring friends.
Government work should be a refuge, not a gold mine.
#11 Upon reflection, perhaps with a little eisegesis of your words…you are correct…I have no expertise in this area…
I just don’t like giving taxpayer money to rich people.
I really don’t care if it saved the system…I would have rather the system gone down than taxpayers bail out the rich.
I suspect it would not have gone down…that free market capitalism would have proven its resilience.
The state did not issue IOUs to employees. That has been ruled California issued IOUs to contractors and suppliers.
#21 said, “I have no expertise in this area…”
Then STFU!
#3 And exactly what corruptionless heaven are you gonna fly to (if you don’t mind my asking)
#7 Worst part is Kruschev was not foretelling anything, but rather announcing their plan, which they were able to execute unhindered.
#19 smitty-
The flip side of your story is that if she’s like a lot of other retirees from CA, she’ll move east to CO, AZ, NM or NV for a greatly decreased cost of living… and suck money out of the state never to return.
What smittybc said in #19 makes way too much sense for anyone to pay attention. You mean California was run for years on end by Democrats and it failed? Michigan? Washington DC? This pattern can not be significant. I detect racism in this thread and I’m calling President Carter.
The only real solution to save California from the inevitable actually is the inevitable: Declare bankruptcy, and reset the system.
What will then emerge will be as important as the process and recovery. We will finally get to see, as the saga unfolds, what we saw in the city of Vallejo, Calif., during its bankruptcy proceedings — a pattern of corruption, cronyism, abuse and the defrauding of the taxpaying public. City officials making more than $300,000 a year, firemen making more than $200,000, friends hiring friends.- John C Dvorak
No one’s commenting on the gist of John’s argument…and its applicability to the Federal Government…
It is common knowledge Government waste, fraud and corruption might be as high as 30%…therefore reducing Government is reclaiming wealth for the economy, big time.
His reset option would work for the country as a whole…at least, that is the opinion of some very knowledgeable economists…and I see no reason to disagree.
Governments never go bankrupt. They push others into bankruptcy. The state-sponsored looting is just to help a minority to survive the impending crash.
“And you thought that we won the Cold War.”
No, just like the Soviet Union, we’re collapsing _in part_ because of the expenses of it. It just took us a little longer.
#12 Tell that to Iceland.
I hope the Feds don’t bail them out the way that coward Gerald Ford bailed out New York.
personally i hope california breaks off the mainland and everyone drowns
#32 Everyone is kinda harsh. But I could think of some that really deserve to drown. Glover & Penn are on the top of my list.
Bankruptcy. It’s the American way.
California is simply too big. Splitting it into several smaller states would go a long way to solving this problem. Would never happen though, as it is now pretty much a democratic shoe it in the electoral college and in the Senate.
Comedy Central should have a show that does nothing but make fun of California 24/7. There so so much good material coming out of California, they could do this for decades. I guess the only problem is that after a week, it would be just be so pathetic that no one would be laughing anymore.
Even though there are plenty of suggestions for helping to fix this broken state (part time legislators, redistricting, limits on lobbyists, breaking California into smaller states, etc.), I think it is probably too late for any of these “solutions” to have a meaningful effect.
So other than a controlled bankruptcy restructuring (or whatever is the legal alternative is for a state) is there another solution?
#36 You missed John’s point, there isn’t another way…
Nor should one look for another way.
State & Local government negotiated absurd compensation rates to police, fire, and bureaucrats.
They paid many fold more than they had to, when the economy was overheated from the bubbles.
The best solution is bankruptcy…which allows renegotiation of these…
And another benefit he didn’t mention…all the gov waste, fraud and mismanagement, that vanishes when Government is shrunk…is like turbocharging the economy…
What is not consumed by parasitical government, seeds economic growth…
Lending money to Government, rather than to businessmen to create business…is why our economy is not creating jobs…the Government is consuming all the capital like a black hole.
John, AFAIK, States (or countries) cannot declare bankruptcy. They can tell their creditors to go f- themselves or they can raise taxes but they cannot declare bankruptcy.
Any state that would allow their infrastructure to be at risk from a company like Enron deserves what it gets.
I’m sure the tech companies could move to Phoenix, Las Vegas, Tucson, Portland, Seattle and/or Salt Lake City if they really needed to. Good luck Kalifornia, your going to need it.
#38–Thomas==I think you are right. But telling all the creditors they will from this date forward get nothing is the functional equivalent.
So, will California ever tell their group of retirees that the state will not make good on their pensions? Seems like a disaster, but so does the current predicament. I can’t see the Feds stepping in.
I’ve always wondered why people in the Congo should pay off the debt created by Edi Amin and all similar scenarios. Of course, it is because countries like the USA say pay off your debt or we won’t loan you any more money or trade with you etc. So then it becomes “real politic.” I think more countries SHOULD tell all creditors that when they deal with dictators, they risk their entire investments. What a change that could make.