Saturday, 11 July 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 !!

8 comments:

thethoughtfultrain said...

That was some piece of news!! I was totally amazed. I do hope the Californians dunk their heads in a bucket of cold water and come out of their money stupor!

Ramesh said...

Yeah its a problem of avoiding hard decisions for too long.

Ravi Rajagopalan said...

The people of California - selfish, hedonistic, and uncaring - are squarely to blame. The root of this mess goes back more than 30 years, when voters mandated a law that prevented politicians from raising several taxes including property tax. Since then, a rising population has meant increasing expenditure on things like schools, fire services, roads, traffic lights, etc - all of which rich Californians enjoy but will refuse to pay for them. It leads to the basic question of how much of state intervention should be there in one's life. California is proving to be the test case of what happens if too much of individual liberty and choice is allowed to play havoc with the common good. Chinese Communist Party please note.

Ramesh said...

Harsh words Dada. But one of the great things about California is that they also have the smartest people around. They'll pull themselves out.

Preeti Shenoy said...

Some of the banks have agreed to accept the IOUs.
To me it seems like complete inefficiency and mismanagement on part of the Government.
The sad fact is that the one who will be most hit is the common man (like in any other country).

Ramesh said...

Yes Preeti - lots of mismanagement, but the public should take a share of the blame. Since California has a referendum democracy, the people have voted in impossible spending increases and tax decreases. Its a case also of democracy gone wild, as Ravi observed.

A journey called Life said...

plebiscite gone all wrong..

Ramesh said...

Indeed AJCL.

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