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Both California and Massachussets have come hat in hand to the government asking if they can borrow money on the same terms as the banks are allowed to borrow them. Why? Because the market for debt has dried up, and they can't float new bonds. Mass is set to try again this week, assuming that TARP works, but if it doesn't, well... California has a few weeks of money left. Mass won't say, but probably a few months.
States (and municipalities) running out of money is something I predicted last year, and even if the debt markets shudder back to a semblance of life this week, it will only put matters off, since tax revenues are also collapsing. Like a lot of things, this is a vicious cycle. Tax revenues fall, people get laid off, tax revenues fall further. Meanwhile lower tax revenues mean the bonds become more risky and buyers want to charge higher interest rates, which the States can't afford.
Certainly the Feds can lend the states the funds they need, which amounts to selling treasuries then sending that money to the states. If this keeps up the only government in the US which can raise money at reasonable rates will be the Federal government.
The fear then will be that one day foreigners and maybe even Americans will wonder why they are in treasuries when they pay almost nothing and expose them to significant currency risk.
At that point, the real fun begins.
Likely to happen? It shouldn't. There are things that could be done which would ensure it doesn't.
Wonder if anyone will do any of those things? 'Cause doing them will require that your first priority isn't bailing out the rich, and what TARP told us is that right now that's still where Congress, the President and both presidential candidates are.
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Thank you Ian. Frightening development.
Digg please
You can add Florida to the list:
Don’t even look at New York — I think 20% of the State budget comes from Wall Street activities..and that doesn’t include all the income taxes that come from people who work/used to work for Wall Street firms and investment banks who no longer have jobs.
Dugg, Egreg - how are you this morning?
Cali has been teetering since the dot.com bubble busted here so hardly news but I’m surprised about Mass and Florida
And looking abroad, there’s a whole country in the same state; Iceland. This is going to get really nasty.
Of whooppee. Fulds (Lehmann) is on the next panel on cspan. Popping up big batch to watch them whip the man.
I called Obama’s office this morning to point this out and to point to the global markets as an indicator that the bailout bill was not enough and that taking care of the housing crisis was the first priority and that it still has to happen.
Galbraith was right.
Cummings is hanging Fulds on his own emails. What is there about: emails last forever that fin execs don’t understand?
here in worcester MA, we’ve been laying off teachers and closing schools for a couple of years.
Ian, BTW, thank you for this post and for staying on the issue.
Financial Crisis? What Financial Crisis?
that’s a shame. seems education is always the first casualty.
Done, thanks for the link.
As you say, Ian, (and HAVE said) all that is happening was rather drearily predictable (!), why you even predicted such a scenario.
It is the “Wonder if anyone will do any of those things?” part of that is of increasing concern.
Care to offer any predictions on that score?
Who?
When?
How much too late?
That sort of prognostication.
I won’t hold you to it, of course, but I’m hoping that Obama sends someone over this way, every so often, just to see which way the wind is blowing.
Kucinich gets into Paulson’s conflict of interest.
That’s true, but Cali spends 51% of its entire budget on education. We still have kids who don’t go school (Oakland has an average 40% non-attendance every day), we have large drop-out numbers, and the kids are not learning much of anything that matters. Something is seriously sick in our educational system.
Ian, FDL was pretty good on FISA. We knew which legislation we backed and we “hit the phones.”
Are there liberals on Congress’ Joint Economic Committee, that we can contact? If so, what would we urge them to do?
I have thought transparency around what Paulson is using the 700 billion for is a very high priority. If liberals think that
lurchPaulson overpaid for something, I think that’s something the legacy media might pick up on???? As you know, we havestrange bedfellowsa lot in common on this issue with a lot of neocons in the House.OT, any thoughts about the market for credit default swaps?
why do we live here again, Jim? This place is a basket case.
yes. also, i think that the housing bubble started bursting here in MA a year or so before most of the country.
the winters?
Ian, please feel very free to ignore my 18. You have done so much for liberals with your posts. I’m not trying to increase your burden.
We also have prop 13 still in place which is killing us. I don’t have an issue with the money spent for education as a mandated expense but how it is being spent is criminal. Too top heavy with administrators. I would love a revamp of the system with the realization that not all students are college bound and therefore provide apprenticeship programs. Pipe dream, I know
Dennis the K stirring it up on CSpan.
Q - “Conflicts of interest with Paulson?”
A - “Yes”.
that was for Twain @ 17
we (i.e. the state) get over 90% of our revenue from sales tax. bad economy, people don’t buy; toursits don’t come. No sales. No tax revenue. My kids class trips are cancelled for the year. No money for gas for school buses. (Last time I tell that one. Promise).
Ian, your posts are always informative (and increasingly scary).
Seems so much of what is happening is out of the control of the average citizen even when it directly impacts them. Failed neocon ideology backs each misstep.
At this point, I’d be happy with a rebuilding plan that relies on mere symbolic victories. Take away their monuments:
Scrub Ronald Reagan’s name off Washington National Airport.
Scrub George H. W. Bush’s name off the CIA.
Do put George W. Bush’s mug on the declining $1 bill. Return Washington’s portrait on that bill once the economy turns around.
I have heard reports of squatters over in the IE (Inland Empire) where they have virtually neighboorhoods of foreclosed and abandoned homes.
what’s winter?
They brought that up in last night’s 60 minutes. That was when I realized that is an investment vehicle that was also hyped to many pension plans and big insurance companies…before that, I thought all of those suckers should lose their money! But pension plans means a lot of innocent people will lose their money!
Someone evidently threw some cold water on Jim Crammer this morning. Mr. “Bullish on Bear Sterns/Wachovia” is now Bearish on everything!
From this morning’s Today Show:
“Whatever money you may need for the next five years, please take it out of the stock market right now, this week. I do not believe that you should risk those assets in the stock market right now.” - Jim Crammer, 10/6/08
Take note people.
i hear you. mr wobbs is a teacher and while this does not apply to his school (provate brit school) it still has an effect on the educational system of the state and the type of education the kids receive. I still hold t the fact that we have an outdated antiquated school system that does not address what for education children need
Is it a basket or a bucket?
we don’t have anything in the market here but over in the UK (oy). But we’re young so we just have to ride out some stuff and my bro-in-law has shifted around our stuff
loved, loved, loved when Springfield sued Merrill Lynch for fraud . . .and won :D
Now is not the time to place blame on Crazy John and his team of crazy loyal booshies. He did suspend his campaign in order to get a bi-partisan Cash for Crap program. How much more can he do. Turn the page. Move on. Dog-gone-it, stop whining.
Don’t think that will resonate with folks worrying about heating oil prices
Unbelievable, isn’t it?
McCain has been there, front and center, cheering on and actively enabling every single deregulation attempt that put us into this mess that is cratering the world’s economy, and they want to turn the page because it is Obama who’s risky?
wow. nothing like that, that i know of, here. but lots of blue collar, poor immigrant, and even public housing here. small city that has been trying to make the transition from manufacturing to some other economy - helped immensely imo by the concentration of colleges and universities here.
Per TPM:
jeebus. although he is normally mr any way the paulson wind blows, that is an incredible statement from him
our daughter works for a ’boutique’ hedge fund in santa monica - they all but worship the guy - can not wait to hear their response X~o
The schools still operate like 1950 but don’t teach nearly as well as then. I have 4 kids who went through the Cali schools and I was horrified. I did what I could at home to tell them about the world and what was going on. That’s what they didn’t get in school. Practical info about their world…..and other stuff.
I wouldn’t call those folks “neocons.” IIUC, the neocons are more interested in matters of security and foreign policy, particularly the middle east. And they aren’t the least bit shy about deficit spending, and setting up a police state.
– http://www.atimes.com/atimes/M.....0Ak07.html
– http://www.atimes.com/atimes/m.....9ak01.html
IMHO, the Republicans who are standing up to Bush on the bailout are more libertarian, like the folks at antiwar.com.
thank you for the link! i didn’t know about that - and certainly should have.
it’s the weather/season i will be cursing come january. *g*
My #43 was in response to pdaly at #27.
fyi - long before he informed us of McCrazy’s invention of the blackberry, he was famous for this quote:
“Social Security is Grenada, Medi-Care is Vietnam”
Did anyone see this?
http://money.cnn.com/2008/10/0...../index.htm
I should stress this is not part of but in addition to the $700 billion bailout.
Yes and no. My wingnut Gooper Congressman has supported Bush 90% of the time, especially on the war, but voted against the bailout both times it was in the House. I don’t think he’s alone. Some of them are finally figuring out they have ruined our country and are trying desperately to run away from the damage.
Oh, yeah, that’ll get by a Dem congress!
Agreed. I went to school in the system here (except 2 years I went to private school on Brasil) but I went to school in PV (lots of property tax money) where my education was pretty damn good. Sadly, I know that that is an exception
ack!
OK. now i remember. i’ve gotten a snow day or 2 in NJ. you think there’s no winner here and Obamam is the lesser of 2 evils, right?
Is this so there will not be anything available for a housing/foreclosure fix which is what is needed the most?
nope, hadn’t seen it but thanks for the info
no. thanks. i think.
is the plan to do everything possible to push the economy over the edge right now? sorta a “beat the christmas rush” kind of thing?
I continue to hope that a class action law suit can be brought against all of the people employed by all of the firms. I very Much want to see these people live out the remainder of their days in abject poverty
lol. yes. not real winters.
Oh, yeah, that’ll get by a Dem congress!
consider the source.
Holtz-Eakin is bug-fuck crazy (the maker of the “McGramps invented the Blackberry” statement).
I find myself wondering whether Gramps has even been made aware of this guy’s statement/strategy/tactic.
1,787 DAYZ AND THE KILLIN’ GOEZ ON AND ON AND…
Citizen Ian Weslsh and the Firepup Freedom Fighters:
This entire economic collapse has been planned,coordinated and implimented by the corporate oligarchy whose existence goes back to the slavocracy of the ante bellum South and the Northern bankin’ establishment…these folks were blind sided by FDR and the New Deal when the last economic collapse didn’t replace the Constitution with fascism. Now we have another world-wide collapse that includes suffocating debt that makes it impossible to rebuild the national economy by confiscatory taxation of the rich. When Slick Willie paid off the debt, he transferred working and middle class taxes into the accounts of the oligarchy because they held most of it…then the Chimpenfeuhrer had a war and borrowed the money ta pay for it and tax cuts for the wealthy from China and anyone else who had any cash. Now if we wanna “renegotiate” our debt, we risk the retaliation of the new immergin superpower we created.
We are experiencing the last stage of a fascist coup that started in 1980…why aren’t we usin’ the “F” word to describe the politics of the corporatists in BOTH parties?
KEEP THE FAITH AND PASS THE AMMUNTION, THE WAR IS NOW IN YOUR YARD AND FEAR IS JEST A WORD!!
It kind of looks that way, selise.
‘They’ are ‘cleaning’ out da joint; anything that’s not welded to the floor is gonna be gone by Christmas.
Happy New Year!
I saw that and couldn’t believe it.
As you point out he’s the same guy that pimped Bear Stearns right before they collapsed, then said speculation was only 2-3 dollars of the $147 price of oil a few months back. (It’s around $90 this morning).
Sure the economy has lots to do with this sell off, but most of it is probably his hedge fund buddies de-leveraging portfolios that had 40-1 leverage.
What is he going to do for a show for the next five years?
I wish we could get more people to volunteer in the schools as well to tech the kids about things the state no longer deem important (art, music, language, literature etc.)
your such a pollyanna *g*
It represents a large unbalanced increase in the money supply because the Fed is essentially trading money for crap.
you’re not your
Thanks, wobbly.
;~D
Real history
Even so.
have you seen what passes for history books? Talk about white wash
Well, we cannot give up on addressing the need to address the housing/foreclosure issue…I continue to make calls…We all need to…
New McCain revelations in the bmaz post
BTW, one major problem in the stock market now is that there are no buyers of any size.
Pension funds and mutual fund managers aren’t going anywhere near stocks these days, kinda like you wouldn’t get into the water if you saw shark fins everywhere.
Until the SEC & the Fed restore confidence for the ‘normal’ buyers of securities, stock will continue to decline.
Did you all know that McCain’s adviser is citing his fling with one of my fellow countrymen as his foreign policy experience in South America? that and the fact that he was born in Panama.
posted without further comment
Get the hook. Crammer has blown a gasket.
He has forgotten Tinkerbell economics: “The markets will survive if and only if we believe in them.”
Thank you Ian and Hugh for your posts on this economic craptacular. I don’t know where I would be getting information on this stuff if not from you guys.
Additional BTW,
WTF (as in ‘Where’) are Bernanke & Paulson today?
Global markets are down anywhere from 5-10% (they knew this was happening overnight), and nothing.
But you couldn’t get their ass off TV the last two weeks when they were begging for the 700 billion.
Credit default swaps have lead to much of the demise of the economy. These credit default swaps were sold as insurance but were not called insurance to avoid oversight and the meeting of appropriate capital requirements. Investors bought this shit believing that they were insured. This is fraud SUE THE BASTARDS
Sue them? Shit! Send out Big Louie from Longbeach. He fee is reasonable, and he guarantees his work.
So the “cells” of the body of the United States, the States, are starving? Sounds like Grover Norquist’s dream of a government “small enough to drown in a bathtub” is coming to fruition, and that the United States is drowning.
Once again I say that there is a portion of the aristocracy (as well as Sarah Palin’s husband) that would like to see the United States collapse. I’m sure Sarah would rather be Queen of the Alaskan Nation than even Vice President of the United States. And John McCain would probably enjoy being Emperor of the Arizona Empire more than being President.
This just in:
From the NY Times, “Consumers are pulling back on spending, all but guaranteeing that the economic situation will get worse.”
Bad, bad, consumers.
Ye, of little faith …
Aren’t you ashamed of yourselves?
This is all your fault.
Go buy plastic sheeting and duct tape!
Go to the Malls. Spend! Spend!
It is your patriotic duty.
My friends, how else can we save the republic and defeat the terrorists?
That ain’t gonna happen! We have a Dem gov and State AG. McLame would have to go thru them, and I think she’s much more popular than he is.
Dems were warning about growing health care costs at least as early as Bill Clinton’s 1992 presidential campaign. Republicans prevented change.
Dems warned about high gasoline prices this year. Republicans prevented change.
We needed changes before the trouble became this severe. Now MUST have changes to have any chance of saving ourselves.
Yes, and probably the high desert. Antelope and Victor Valleys.
I wonderered when the squatter stories would start.
Dear Fed:
The $70 Billion did not work. Please stop the check.
Sincerly,
The Taxpayers.
Now known as the 50 cent piece.
Those offering to pay ‘em off never had the proper regulation or financial wherewithall to do it. In short, it was a pure scam.
Those people are walking away with all the ‘premiums’ paid to them and it’s huge. Who are those people? Why weren’t they regulated like insurance companies? Who failed to regulate them (or worse deregulated them)? Is there any recourse?
It may sound harsh, but if we have a true enemy who is trying to harm us by destroying the economy then we have to consider the possibility of letting the money go and freeing ourselves from the enemy before setting things right again.
Who might that enemy be? How would we determine it?
And, worst, who would have the guts to say we have to toss the dollar the way a junkie tosses out their drugs?
Personally responsible!
Gosh Mark, apparently you’ve not got into the spirit of things,
Spend, baby, spend!
Therein lies our salvation.
Don’t allow these other minor, if noisy, distractions to unduly pessimize you.
Our economy is like religion. You gotta ‘believe’!
The ‘unseen hand’ needs a leg up. Do your part.
Note: The preceding SNARK is for entertainment porpoises only. All other porpoises are expected to wine and whale quite pitifully, but always with proper gravitas.
It’s probably to make the political point that we can’t govern ourselves and that we need the strong hand of a political system such as China (who will loan us a lot of money). If Republicans WANT China’s political system they should stick around a few decades and see how China evolves into a Liberal Western Democracy.
We have to solve our own problems and hope we have enough friends to help us. Of course, it would be better if Republicans didn’t get in the way.
When they’re leveraged far beyond value and suddenly everybody wakes up and realizes the emperor has no value, then there aren’t any more ‘greater fools’.
Maybe down the road, but right now it’s the possibility of a Market small enough to drown in a thimble which is terrifying.
Kids are electronic. Schools peddle literacy. Kids, accustomed to video games and remotes, react, sometimes violently, to boredom. Where in America do you find division and multiplication done with pencil and paper except in the fifth grade? Why can’t kids have calculators like everyone else?
We need to make the schools electronic, that is interactive, DVD’s instead of term papers. Provide quality movie making and editing equipment (which can be available to the community after hours), but teachers who purportedly learn to teach rather than learn their subject cannot be expected to share classroom teaching time with students. I’ll bet there isn’t a high school in the country where some fourteen year old doesn’t know more about computers than anyone on the faculty. Linux instead of Windows would be a good place to start and lots cheaper, but most high school teachers are not ready to teach computer programming at that level. Instead they create a variety of attention deficit disorders and drug the kids who protest the most.
“Thar she blows!”
Is nevah an appropriate exclamation when discussing economic ’situations’,
nor is, “dead in the water”.
Hope floats all boats.
It is permissible to remark that ‘they’ have yachts and ‘we’ have old, leaky rubber dinghys, but no mention must evah be made regarding the size of the swells.
Gee, I noticed the sky was very RED this morning.
I wonder what that means?
Happy sails to all.
That long delay in getting the budget passed didn’t help, either.
There are a bunch of state legislators who need to be put out to pasture, because they sure don’t give a sh*t about their constituents.
Drove up the valley and back last weekend. Saw ONE candidate with party affiliation on their signs. All the others were name and office only. (At least one of those, Devin Nunes, is an incumbent R.) Can we say they really don’t want to be associated with their party?
It’s not possible to survive on a “Service Economy” unless you service the whole world. Services are not offsetting our balance of trade issues - hence we need more manufacturing done here in the U.S., even if the cost of products goes up.
Unfortunately, the conversion to manufacturing is restrained by (among other things) the fact that much of our infrastructure has been sold of and carted away by Asian-rim and Eastern-European nations. Nothing sexy, just things like machine tools, cranes, mills, and so on.
“and so on.”
And then we said to those who had the SKILLS to ‘do’ all the things that are done with those, “nothing sexy” things, “Hey, we don’t need your skills any more, you need ‘retraining’, or you can ‘retire’ as you are redundant anyhow. So, get with the program update your skills and go flip burgers.”
Golden parachutes?
No, we’ll just urge you to take the equity out of your home while we blow up a bubble.
And then, when jobs that pay decent wages are a thing of the past, and two incomes hardly cover what one used to, dear Leader sez, “They hate us for our freedom, so stick a finger in Osama’s eye! Go to the malls and celebrate, I want ya to spend, baby spend, like there is no tomorrow, that’s whut I want and that’s whut Gawd wants ya to do too.”
So, filled with pride, almost to the bursting point, the people went forth and did as they were bidden. They always do.
Its wunnerful, livin’ in ‘Murkuh, our leaders do all our thinkin’ for us, so we got nuthin’ to worry about. ‘Cuz they love us and our country and all its intitutions.
One way or another, I kinda feel sorry for everyone else, how ’bout you?
Hi, Ian.
Thanks for being right all the time. I just wish you had some good news for a change!
;)