“California’s Assembly passed a bill allowing it to delay payments to programs including schools to avoid running out of cash, a move aimed at boosting confidence in bonds sold by the most-populous U.S. state.”
As mentioned before, governments at all levels will throw anyone they have to under the bus in order to protect their ability to borrow. If CA defaults on bond payments then it can just kiss off being able to roll over any of its debt, much less increase the debt level going forward. That will lead to the need to cut government jobs and salaries which will result in more foreclosures and less tax revenue. Income, property and sales taxes will all be affected by this. It is a big deal because government jobs are such a big part of the fake economy.
I predict that a CA debt default is in the cards despite anything that Governor Arnold tries to do at this point. CA has racked up an unpayable amount of debt at a time when tax receipts are falling. CA was always planning on inflating its way out of debt. It believed that prices on houses and everything else would go up forever thus allowing them to collect more taxes to make the increasing payment on an increasing pile of debt. CA never counted on Great Depression 2.0 coming along and putting housing values in the dumps for years and years. Wait until the fed is forced to raise the interest rates. The housing market is falling at a time when people can borrow at 5 or 6%. Wait until it is 10, 12 or more % (like it was when I was in my 20s) and then let’s see what happens to home prices. We ain’t seen bad yet, but its coming.
