Friday, July 10, 2009

California is not the Golden State

Amazing things have been happening in California, economically speaking. You have to rub your eyes in disbelief at what is happening in supposedly the region with the most brilliant people in the world.

I had posted about the mess that California as a state is in here. Usually after a lot of brinksmanship, California does pass a budget before the fiscal year begins and life somehow carries on. Unfortunately this year, even the brinksmanship failed. The budget is not passed and technically the government should have shut down. But to keep things going somehow, California just issued its own currency.

These are called IOUs. They are being issued to all and sundry in California, including people receiving tax credits. Now Californians, and other Americans being as smart as they are, saw an opportunity to trade in these IOUs. The SEC quickly stepped in and declared that non registered traders would be in contravention of federal law. Banks in the state have compounded the mess by refusing to accept these IOUs – they will be arm twisted in due course to accept them – after all what would people left holding these IOUs otherwise do ?

We are seeing the birth of a new currency. Now where California goes, other states will surely follow. Can you imagine what a danger a currency is in the hands of California’s politicians. What a mess.

What California needs is an “economic dictator”. Who will ruthlessly make the hard decisions and get some sanity back into its public finances.

Margaret Thatcher for Governor of California !!