Here’s a fascinating table that was linked on Marginal Revolution. Of all the political jurisdictions in the world, the one most likely to default (according to market perception) is Venezuela. No big surprise, of course, but I was surprised to see California in 8th place. That’s worse than Portugal and Spain (neither of which are in the top 10, though perhaps bottom 10 would be a better description of this list). This is a very damning indictment of the modern American welfare state. How about a new motto? Instead of “The Golden State,” California’s new motto can be “Better than Ukraine, Worse than Iraq.”
Welcome Instapundit readers!
I did like the article really much, was really informative and the best part was that only the required part was elaborated, to the point concise information always helps and keeps readers running around digging for the information’s will never require a reread. I really wish spammers read these articles and check how easy it is to be human and respect knowledge.
This is a awesome write-up, im happy I came across this. Ill be back again later on to check out other posts that you have on your blog.
That rss feature on your blog here is magnificent, you should tell more folks about it in your upcoming post. I haven’t noted it for the first couple of times, now I’m using it each morning to check on any updates. I’m on a very slow dial-up link in Jakarta and it’s quite frustrating to sit there and wait for such a long time ’til the page loads… but hey, I just found your rss page and added it to the Google Reader and there you are… I’m always up-to-date! Well pal, keep up the good work and make that rss button a little bigger so that other people can enjoy that as well 😛
100% financing, as the name implies, offers complete financing of your property. The other option, 80/20 finance your mortgage with two loans. Loans may be made by the lender, but sometimes the seller or the lender is obligated to reach second mortgage of 20%.
100% financing is easier to handle, but not all lenders offer this type of loan.
Qualifications for the Zero-Down
If a credit score of 600 or more may be best, large cash reserves to qualify, too.
If you choose 80/20 financing with the seller of the second mortgage, you can be treated with sub-prime lenders with a score 560th
Its failure of the fairy tale that a significant number of people faced with 60% marginal tax rates (40% fed+10% CA+10% sales) will keep engaging in ever more productive work.
Failure of the welfare state. Or failure of free capitalism. This is failure because of fairness and equality or failure because of greed and lawlessness.
It is not so difficult to see, is it?
[…] The 10 Most-Likely-to-Default Governments Here’s a fascinating table that was linked on Marginal Revolution. Of all the political jurisdictions in the world […] […]
[…] Is The Financial System Corrupt? 2: Answer Stratton Oakmont Executives Admit Stock Manipulation The 10 Most-Likely-to-Default Governments Dollar Pounds […]
[…] May 17, 2010 Posted by taoist in Government. Tags: Bankruptcy, Debt, Spending, Welfare trackback Near term. The U.S. would show up pretty high on that list if you factored in social security, medicare, and […]
Pat Patterson
Jettisoning CA might not be terribly smart as for all its problems it still has a GDP almost twice that of the next state, Texas. It produces 13% of the GDP of the US far in excess of its percentage of the national population and it still is the 8th largest economy in the world.
…
So even though it’s hemorrhaging funds it should be maintained simply because of it’s size? Wait, I’ve heard of this…
California is “too big to fail”? Is that it? Or you’re losing money per transaction, but making it up on volume?
…
Remembering History
Failure of the Welfare State? Not entirely.
California’s economy is the wreckage of the first neo-conservative experiment in this country.
…
HA, exactly. When I think of a bastion of Conservatism and neo-conservative principals in the country, the state I think of is California… at about #46 or 47 on my list. Oh, you meant as #1? How much have you had to drink exactly?
For those who wonder what Mid Spread and CPD % are, here is a quick article explaining it. (It shows numbers from 2009, but the explanation still applies.)
http://www.bloggingstocks.com/2009/12/20/which-government-debt-issuers-are-most-likely-to-default/
If you want an up-to-date chart, look here:
http://www.cmavision.com/market-data
Notice, Iraq has dropped from the list, and has been replaced by Portugal, which has ‘leap-frogged’ over California. I wonder if that is because they recently opted for higher taxes rather than deep cuts in spending.
Mr Internet: Sounds like you would like to see another leftist killing spree. Didn’t we get enough of that in the 20th Century?
What is really mind-boggling is the continuous ‘JUNK SHOTS’ by the Republican Party! Is anyone paying attention?
Is there any way we can jettison the GOP and their reckless and embarrassing behavior from American life???
What is this detritus? Why isn’t USA on that list? No one is fooled here, we’ll all be damned the day I see any country pay off the magnitude of debt that country has.
I work in Silicon Valley, having worked around the world, and there is no place even close to it anywhere else, though plenty are trying. It’s probably not a permanent advantage, but it is one hell of an advantage for now. The Valley is the greatest, and for now unmatched, innovation machinery in the world. The existence of Silicon Valley raises California’s prospects immeasurably, and few investors or workers in the industries of the future are prepared, or even planning to flee California any time soon.
That said, all the other things about California are also true; and some combination of the current ungainly political-economic cocktail is real cause for consternation…
– CA had its fastest growth during its most liberal period. It went from a dream to the preeminent economy in the US in less than two generations.
– CA demographics may not be shifting as favorably as they once were.
– CA government employees and patrons have taken at least their fair share of all that growth, and the system is now bloated.
– CA conservatives have succeeded to some degree in their pursuit of the “starve the beast” program.
But, if CA remains innovative and open, and even more so than in the recent past, than all these disconnects are manageable and will likely be resolved in the usual ugly, sometimes ineffective public process.
It is easy to kick California. However, please remember that as California goes, so goes the nation. We Californians send $1.84 to the federal government for each $1 we get back. It is our hard work that is paying for all the infrastructure being built in Mississippi and Georgia not to mention all the boondoggles in Alaska!
“Remembering History” or “Rediscovering Greece”?
Because these are the core arguments I used to hear in Greece, before moving to the US; i.e. the state is a competent businessman, and redistribution is both moral and economically efficient as well.
Perhaps Americans are closer than I realized to Greece’s fate.
Charles Fuller,
Sorry, I meant to put “compassionate” in quotes.
I hope California has a sharp lesson soon when the pension checks bounce. What are you going to do, you fifty six year old retired bureaucrats? Riot and burn down the local bank building? Maybe the state will give you IOU’s which even the state will not accept for payment of taxes. Even better, the local doctors will be gone to AZ and you will not be able to buy gas at $6 per gallon to drive for the medical attention Obama’s death panels will deny you if you get sick in the 3rd or 4th quarters after the allocated moneys are exhausted.
By the way, I won’t be buying any CA wines. Ever. How’s that AZ boycott working out for you?
Remembering History has a great narrative that has been told for decades. You will note a blithe elimination of actual numbers from the story. Just “revenue down because taxes cut.” No mention of the spending numbers over the years (especially the last decade), neither in absolute dollars nor percentage increases. No mention of the revenue numbers over the years. No mention of anything, in fact, except the storyline. Pesky things, facts.
[…] The 10 Most-Likely-to-Default Governments Here’s a fascinating table that was linked on Marginal Revolution. Of all the political jurisdictions in the […] […]
“Remembering History”, if you’re alluding to Prop 13–it apparently doesn’t stop California from saddling its residents with the sixth-highest state-and-local tax burden in the country.
Remembering History wrote:
Cutting taxes without cutting spending is the moral equivalent of taking out the largest mortgage you can afford, quitting your job, and expecting that someone will keep paying the note.
That sounds an awful lot like Pelosi suggesting that govt healthcare is entrepeneurial because people can quit their jobs and puruse their dreams (like becoming musicians) and still get the free health care. Someone will keep paying that note after all.
If you want to raise taxes, why don’t liberals ever suggest raising taxes on people who don’t pay any. They don’t have to go crazy, just make the lower echelon pay a tiny percentage of their income. After all, the majority of the services being offered by the state are those being used by the lower echelon. Shouldn’t they pay their share too?
Since it’s already on the verge of being a banana republic, why not be part of Latin America where it fits better? Plus it would instantly solve the whole illegal situation since those who fled Mexico and living in California would become Mexicans again.
Is it too late to sell California to Mexico at cost? If not sell, how about just give it to them. Making sure of course that all the illegals get shipped to California. That would solve the illegal problem as all the Mexicans would be back in Mexico where they belong. Mexico would get Hollywood and the Citrus Industry. Not to mention the teachers unions.
Watch out for uinintended consequences concerning California. They say that if it breaks up, everything east of the San Andreas Fauilt would slide right into the Atlantic…
Remembering History:
Two questions:
What part of government employs you?
Does the SEIU represent you at the bargaining table?
Got that?
California’s imminent bankruptcy is Ronald Reagan’s fault!
I love how liberals twist themselves into rhetorical pretzels to absolve themselves of any responsibility for anything.
Failure of the Welfare State? Not entirely.
California’s economy is the wreckage of the first neo-conservative experiment in this country. In the 1970’s Californians voted to reduce the income of the state (taxes). Those same voters wanted the state to provide services. Knowing that voters would not choose to eliminate state programs, people like Grover Norquist convinced politicians like Ronald Reagan to pursue lower income (taxes) while maintaining the same lifestyle (public expenditures) IN ORDER to bankrupt the government, to force privatization of government functions. Trickle-down (Voodoo-economics acording ot George HW Bush) was a deliberate lie. California is proof that you can’t live like a king on a pauper’s income. Cutting taxes without cutting spending is the moral equivalent of taking out the largest mortgage you can afford, quitting your job, and expecting that someone will keep paying the note.
Pure, reckless individualism leads to a group of individuals…not a country, community or civilization. It always seems to be promoted by people who couldn’t survive a month on their own…
Seeing California in the list makes me wonder: Isn’t California the prime state of USA ? So if California collapses what state would that leave US in ? That data has interesting outcomes.
Pr. Despandee
What compassion?
I see only an infinite greed for power, an Orwellian nightmare.
One form of power is the ever greater removal of the individual’s liberty.
The other is the infinite hunger for money, also a form of power.
It’s what Marhiavelli saidin THE PRINCE. “Whenever you can spend other people’s money, do so as lavishly as possible.”
It’s about POWER, not compassion.
Americans,
I am a little surprised that US sovereign spreads are not any higher than they currently are. Is this a case of The Emperor having no clothes?
Many people point to various reasons why the US’s ability to borrow is not yet being called into question, like, for example, the fact that the US dollar remains the dominant currency for international exchanges. However this and other details are all just technicalities, secondary to the main fundamental: the fact that the US has been the most competitive economy in the world for almost 100 years now. But for how long will these technicalities be able to resist deteriorating fundamentals such as falling competitiveness?
When the policy becomes to offer a guaranteed baseline standard of living to the middle class regardless of what they produce, while at the same time, the more productive are being saddled with providing this baseline for everyone else, it is inevitable that incentives to engage in high value work will decrease, and so will competitiveness. Worse, the dominant call in politics (your household name economist, Paul Krugman comes to mind) is to increase competitiveness through central planning, subsidies, taxes and other anti-market misallocations of resources.
Americans are abandoning the dominant feature of American exceptionalism: Individualism. You are now starting to see the consequences as you approach the grand tipping point: Loosing your #1 position on the worldwide competitiveness scale. Past that tipping point, a positive feedback loop will take over and decline will take a life all of its own.
The fact that America has been the most prosperous country in the world for 100 years could not have been a coincidence. If you want to keep that position, you must revert to the core value that made you exceptional: Individualism
(any foreigner who hears modern Americans claiming that American success is due to active central government would laugh).
California’s natural endowment of superlative geography and climate was squandered by the reckless fallacy of progressive policies. This advantage has not (yet) been completely negated but if a state with less favorable weather and geography (like, say, Texas) were to pursue similar progressive policies, its economy would go down the toilet in no time. Californians can simply afford to support lousy policies and still come out ok because of their natural advantage of geography and climate. But for how long? Their survival and future prosperity is now really coming into question. I think it was Margaret Thatcher who once said that “the problem with liberals is that they eventually run out of other people’s money.” History shows that once the scale tips and a jurisdiction starts loosing competitiveness, it is difficult to reverse the trend. Seems like it has to first hit bottom before the majority that hopes to live by taxing the more productive, realizes that they are headed for disaster too. Alas, it is hard to wean yourself from dependency.
Charles Fuller,
It seems like a general rule that, the more compassionate a state becomes the more cruel it must inevitably become to collect its revenue. Shall we call that the “California Paradox?”
California needs no help making itself look bad. First, start with what is in effect a one-party state. Second, create government unions and give them enormous power. Third — well, the first two are sufficient.
I would find this interesting and something more than mere political propaganda if the author of this piece would explain what the chart is supposed to illustrate. “Mid spread”? CDP? Excuse my ignorance, but what are those supposed to mean and where did the numbers come from? Without an explanation, I’m just assuming this is cooked statistics for the purpose of making California look bad.
The California economy isn’t really a basket case. As Pat says, it’s an engine of the US economy, and one of the biggest sources we have of creativity and innovation. California has the same GDP as the entire Southwest and Rocky Mountain areas of the US combined, including Texas. It has more GDP as the combined GDP of 26 states.
The state government is the basket case. The state collects a huge amount of tax revenue, so the budget can be back in the black if they reduce government spending to a reasonable level (which probably requires doing something about their insane pensions). They can also fix their unemployment problems if they enforce immigration law.
Taiwan would do. Or Shanghai. Or South Korea. It’s a sad day when “Red China” is more capitalistic than California.
California has a very big economy relative to the US, but then so did Michigan in its heyday. California’s going down, Texas is going up.
Teki, Why on Earth would you want to swap one cash-bleeding, socialistic state for another? As much as I might support Israel on the world stage is still basically in a state of socialism and is completely dependent on donated money (including huge amount from the U.S. government, far in excess of anything reasonable). I’d rather cut California loose and drag Taiwan over in its place. Let the Chinese have California as payment for all the U.S. debt they hold.
Iraq needs to come off the list
They soon will be pumping 10 B barrels of oil, so they are set.
Thank you Bush, we all know Obama tried to fail in Iraq, and instead he failed.
Eleven years ago I departed the moldering Golden State, the state of five generations of my ancestors. My reason? It had shed an excessive amount of the liberties that define what it is to be an American.
I am very glad that I did!
I recently had to fight California’s Franchise Tax Board (FTB) because it was claiming that I owed over 10,000 dollars in back taxes, penalties, and interest payments.
The scenario was surreal in the degree of arrogance demonstrated by the claim.
When in California I had two security licenses, armed and unarmed. When I left California I just forgot about the licenses.
The FTB however, did not.
The FTB arrogated to itself the right to assume an income for me and tax me accordingly. It then traced down my senior citizen parents and harassed them in a county in which I never lived nor worked.
It took considerable effort to reverse this illegitimate governmental assault. If a private company had done something parallel, they would have ended up in prison.
Accept it, California is so desperate for revenue the state will got to criminal means to extract money from people.
And the libs wonder why the Tea Party Movement is so popular.
Where is the United States? It should be at or near the top of the list.
That motto’s too long. How about replacing “The Golden State” with “At least we’re not Greece (yet)”
Pat Patterson,
It appears Kalefornea (my state, and where I received my fine edyoukatun) is the ONLY state/country that is both in the top 10 for GDP and bad debt.
Amazing!!!
As I lifelong resident of California I can tell you it’s very sad to see the state devolving into a defective, incompetent (and bankrupt) Latin American welfare state. However, while the demographics are becoming less than desirable, the sunsets and scenery can still be jaw droppers (hah!..just like some of those countries in Latin America..). Oh well, it was a good life…
Eighth largest FAILING economy in the world, you mean.
Teki Setsu,
I chuckled out loud. Thank you so much for that.
If only it could be done!
Jettisoning CA might not be terribly smart as for all its problems it still has a GDP almost twice that of the next state, Texas. It produces 13% of the GDP of the US far in excess of its percentage of the national population and it still is the 8th largest economy in the world. You don’t cut off you own nose because of a boil on you butt and you really don’t wish the engine of the US economy to fail. Besides where would you guys get your almonds, Desperate Housewives and silicon breast implants.
[…] most likely governments to default on debt (California is #8) Res ipsa loquitur. Note that, while Greece is #3, Spain isn’t even in the top 10, while California […]
Let’s swap California with Israel, putting California into the Middle East and attach Israel next to Nevada.
Israel has a more vibrant and entrepreneurial economy, it’s less of a basket case, and the people (both Jews and Israeli Arabs) would be happy to be situated among friends.
California would be free to work its liberal mojo to achieve peace in the Middle East. Let’s give them a Nobel prize right now just knowing they’ll succeed.
Of course governments always revert to type because people always believe in the “free lunch”. What is always, Always, ALWAYS missing is the government’s tracking of all that redistributed income. If people knew their neighbor was getting his mortgage paid from their taxes it would change the outlook. This is why we need to be pushing for a new form, the IRS Form 1099-GOV, that tracks outlays to individuals just as they force us to track all our free(?) market transactions!!!
Is there any way to cut California loose?
ANyone else ever notice than all governments behave the same? It’s almost irrelevant whether America has a constitution. The government with few exceptions, and the bureaucrats making the decisions revert to type…almost evey time.