Friday, May 14, 2010

California Hits Top 10 On World Default Probabilities Chart

The newsite Cal Watchdog has published an interesting little piece on the current economic condition of California, putting some recent developments here into a sobering perspective. Citing the CMA Sovereign Risk Monitor, a service for investors that ranks the risks involved in investing your financial nest egg in things like government bonds, CW now shows California cracking the Top 10 "for highest government default probabilities in the world." And according to the CMA's Top 10 chart, we are in some very distinguished company.

Cal Watchdog points out that Greece, which recently made quite a bit of news lately by becoming so heavily indebted that it ran the risk of default (which many believe might have begun a domino effect that would drag the world economy to even more perilous straits than it is now), is no longer the world's #1 risk for default. The good news being that with the vast sums of money coughed up by the EU and other economically concerned partners, "the liquidity crisis surrounding the rollover of Greek debt" has now subsided a little. And the odds of Greece defaulting have fallen from even money to one in three.

According to the CMA Sovereign Risk Monitor, here is the new Top 10 "Highest Default Probabilities."

1) Venezuela
2) Argentina
3) Pakistan
4) Greece
5) Ukraine
6) Dubai/Emirate of
7) Latvia/Republic of
8) California/State of
9) Lebanon
10) Sicily/Region of

The big news for us is that California has now entered this chart of world class risk at #8. Which really is quite an accomplishment.

Joseph Vranich, who you might be familiar with as one of the ubiquitous talking heads called out to dress up the economic segments of news broadcasts on places like CNN and CSPAN, puts this into perspective on his interesting blog, The Business Relocation Coach.

California bonds are now viewed as one of the riskiest places in the world for investors to put their money. At least that is according to the latest "CMA Sovereign Risk Monitor," which ranks the world's most volatile sovereign debt issuers.

Vranich then backs this apocalyptic news up with a quote from Spencer Jakab of the Financial Times, who shares the following intriguing comparison of California to Kazahkhstan:

Kazakhstan, with the world's 11th largest oil reserves, an economy that grew more than 8 per cent annually from 2002 through 2007 and unemployment of just 6.7 per cent looks positively vibrant next to the Golden State's joblessness of 12.4 per cent. And Kazakhstan's modest budget deficit compared to a state forced to pay bills with IOUs last year and possibly again this summer ... If it were to raise taxes or cut public services, wealthy Kazakhs could hardly defect to Kyrgyzstan the way Californians, already facing some of the highest levies and worst schools in the nation, might decamp to, say, Utah.

A little perspective is in order after this week's revelations regarding Sacramento raking off $2.05 billion from the CRA accounts of its captive cities. These are not the kinds of things a state that is doing things properly would do. Rather these are the extraordinary actions of a government that might very well be in a terminal financial death spiral. Lobbyist run and operated on a pay-to-play basis, Sacramento has become a financial black hole that is sucking everything of value into it. And when the state has been sucked dry and there is nothing left to take, all that we'll be left with is a truly world-class default.

Bill Watkins, writing on the always intriguing New Geography.com site, posted an article last December entitled What Happens When California Defaults? Here is his take:

The California Legislative Analyst's Office recently reported that the State faces a $21 billion shortfall in the current as well as the next fiscal year ... Our governor and legislature used every trick in their books when they created the most recent budget. They even resorted to mandatory interest free loans from the taxpayers. Now, they have no idea where to go. The Democrats have declared they will not allow budget cuts. The Republicans will not allow tax increases. They have probably run out of smoke and mirrors, although their ability to engage in budget gimmickry is enough to make an Enron accountant blush. No one is considering raising revenues by increasing economic activity.

In my opinion, California is now more likely to default than it is to not default. It is not a certainty, but it is a possibility that is increasingly likely.

If the CMA's "Top 10" chart is any indication, our man Bill here could turn out to be something of a prophet.

And to think that Sacramento believes it has the right to tell us how to do our City planning ...

51 comments:

  1. Sacramento is not about city planning, it's about generating construction and building activity again under any flimsy excuse out there, such as GHG reduction. The state was built on "growth" which translates into construction revenue, real estate revenue, development and investment revenue.

    But not on any real industries that produce things of value and hire white-collar over the long term. The jobs that pay are gone, and people are moving out. The whole structure is based upon a premise that has proven bankrupt, so this is a classic beat-a-dead-horse strategy that will only make things worse. Sacramento needs to wake up and set in place some industries and services that function in the "new normal" economy that is no longer a bubble.

    After the state bankruptcy filing has unloaded all the debt the state has piled up over the last 30 years of fiscal shell games.

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  2. Wow, just great, only two notches above Sicily. Yikes!! Thank a lot Gubernator, its your cronyism and inability to work with your own legislature that has sealed this "deal". You have left our State in tatters, you and your corporate alliance's selfish motives have wrecked havoc. I always find it so ironic how Arnold came to fame, playing a cyborg sent to destroy the human race, how utterly fitting, how scary, how sad.

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  3. we have nothing to worry about in Sierra Madre, we've got the great legal and business minds of Joe Mosca, John Buhanan and Joshy Moran to save us....

    oh cr@p, we're screwed.

    okay Mrs. Walsh, nod in agreement....

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  4. Nancy: "Bobble Bobble Bobble."

    Josh: "I partied in Sacramento once. It rocked."

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  5. Once again we find Dubai our neighbor.

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  6. It'll make an interesting documentary:
    The Stupidest Guys in the Room
    or
    The Greediest Guys in the Room.

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  7. I don't know if it is fair to single out Nancy Walsh as a bobblehead. I'd say that Joe, John, Josh and Nancy are all Sacramento bobbleheads. They just express their compliance in ways that suit their individual personalities best.

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  8. So now we have a Shenanigan State.

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  9. Forensic audits being done?
    Whose hands have been in the cookie jar?

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  10. If the city starts to show deficits, you can thank the 4 members now in control of the council for allowing it to happen

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  11. The rich get richer and the poor get poorer. In the meantime, inbetween times, ain't we got fun? Survival? Live in a gated community with lots of private security. Fly in private jets. Vacation in far away exlusive resorts. Educate those darlings in private schools. Get your hands into the public trough. Its not that tough.

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  12. What I still do not get is all the people who back them all up. Don't they get that they are going to RUIN Sierra Madre along with Arnold's help???

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  13. There is apparently a new sobriety test the SMPD is giving to drivers they suspect of being under the influence. If a driver answers "yes" to the question "Do you think Joe Mosca is a good for Sierra Madre," they immediately order that person out of their car and administer a breathalyzer.

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  14. I know a woman who moved out of Sierra Madre last month. She said "the people in Sierra Madre
    are crazy, look what they just elected to city council".

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  15. I can't imagine why anyone would move out of Sierra Madre based on an election. I don't know who's crazier, 9:59 am or the woman. Now if the move was out of California that makes more sense.

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  16. Sierra Madre majorityMay 14, 2010 at 10:28 AM

    True 10:12. As long as you're going to stay in Southern CA, Sierra Madre is a good choice.
    Heck, you can live here, enjoy the human scale of things, and never know one thing about the politics.

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  17. The majority in Sierra Madre are those folks who don't vote and never know one thing about politics.

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  18. native CalifornianMay 14, 2010 at 11:17 AM

    We had best let a businesswoman try her hand at fixing the state. Goodness knows the politicians and actors have failed.

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  19. Native, you mean the woman who hasn't voted for 28 years, at least according to the latest ads.

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  20. With the mood toward politics the way it is, the fact that Whitman hasn't voted might be in her favor.

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  21. The Justice CardMay 14, 2010 at 11:29 AM

    I saw that list, yesterday and Christopher Story covered the greece situation as it pertained to Bush's haven of derivatives, they bought a lot of them there, it was one of his hiding places for the barrington money. Now remember barrington was the landmark city where the eminent domain or rights of the greater outweigh the rights of one individual when transportation needs to put a highway in the middle of your living room, this is not new to me I used to eat lunch with Carol Welch a biggie in Housing and Urban development, and was made aware of the workings and destruction of lives and homes that go along with eminent domain at the time the century freeway was being put in, back in 1983-84, you could buy a house for five dollars if you could move it to your own lot, and nobody ever got a decent percentage of what their homes were worth even after extensive, very expensive litagation. It was 1983-86, when "gateway" was first being used by crooked politicians in LA, which is not a nice word, if you read "The Final Verdict", by Adela Rogers St John a relative of Clarence Darrow "gateway" is a word he used to describe the first dramatic not true shenanigans of defense attorneys to win for their clients, in one case he applied karo syrup to a babies lips in a paternity suit because the "Father" was observed nervously licking his lips, and of course the jury after watching both the opposition and baby lick their lips deduced they had to be related. A lot of murderers were found not guilty as he applied his tactics. Gateway is not a happiness path to civility or prosperity, it is used as double speak when politicians, developers, & MTA contrive to conceal their illusions of grandeur to use a lot of eminent domain for projects. Especially the Transit centers... I cringe when I heard anything about any gateway project, and these cocktail bribed pillars of political society have trickled it down to the cities and public like "it's a good thing"

    I watched the developers aided and abetted by the city of El Monte at a town hall at Cherry Lee school drag out a letter from a Brookside Mobile Park over 5 miles away from the cherrylee school district, that was over 30 years old (the letter) in 2004 or 5, they opened the meeting with the letter, (now most of the folks weren't forced by their political mother to ride horseback as a child with signs that said stop the zoning, keep the horses, keep kids off drugs). It was back in 65 I think when brookside came in, that is when that letter was written. But But But, while the letter was a true letter, they opened the meeting reading it with brookside does not want any animals blah blah, reading that letter as if it just was received by them in 2004-2004. The place was packed with Asian developers and Old Bart might have been the too, it was the first time I talked and told the citizens to fight them. (by the way the city was now tryng to boot Brookside to develop it) I used Troyers words against himself about the developers and animals, Rumor was Troyer resigned because he did not want to be complicite in such dishonorable antics and is now in Rancho Cucamonga, and we know the financial situation El Monte is in now.
    I digress, it is just that lives were lost, properties seized, great California with it's valuable farmland cemented over to keep feeding builders and developers, forcing folks into smaller and smaller places for greater and greater amounts of money and pure unadulterated greed that has brought California to this point. Let it go bankrupt, let the politicians in Sacramento be bankrupt, the souls of the innocents cry out for justice, disband the redevelopment agencies, give the stolen money back to the state of california, dissolve the fraudulent bonds of indebtedness.

    I worry for Sierra Madre, Bart Doyle come callin..

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  22. The Justice CardMay 14, 2010 at 11:41 AM

    Correction Adela Rogers St. Johns father was Earl Rogers a notorious attorney and a friend of Darrow..

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  23. To Justice Card--he's already come calling.

    To everybody else--Denial is the name of the game, but it won't go on forever. Get ready for whole sale failure of government systems. And before you start thinking that the Chinese are going to bail you out--Beijing has just experienced a 31% drop in property values -- sound familiar? Australia is buying gold in anticipation of everything going south--really south.

    Hang on for the ride. It will be bumpy.

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  24. Somebody tell me the downside here. They take away a bunch of redevelopment money so we can't afford all that SB375 crap. And if they hit us up a few more times that Pasadena PD offer comes out of the file and we take another look at that. Can it be that the more money Sacramento takes the better off we are?

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  25. Looks like it's a good time to be grateful for what you've got - and maybe take some steps towards greater self-sufficiency.

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  26. Off topic, but does anyone know why the For Sale signs are gone from the Skilled Nursing Facility?

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  27. That's interesting. Suddenly the Fish isn't
    swimming away. Mondo Condo Mosca is in and
    the Downtown Investors are taking their
    properties off the market. So much for the
    authentic slow growth spiel from the election.

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  28. Steps toward greater self-sufficiency? Those countries have armed rebellion! People die trying to stand up for their rights! Is that what it's going to come to in California? Will we have unifored armed militia groups defending the rights of the developers? Just how much will a can of tuna cost? Just what is all of this emergency training about that the City is trying to foist on us? What are we getting ready for anyway?

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  29. Mosca and the Moscateers have been in office about a month and Dr. Sami's is before the Planning Comission, the water rates are going up, we're talking $6 million bonds for slurry sealing the streets, and the SNF is about to pop. With three years and eleven months to go who knows what will change in sleepy little Sierra Madre...

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  30. By greater self sufficiency I meant keeping the vegetable garden healthy, and keeping the 'earthquake' supplies together, including water (estimate 2 gallons per person per day, and you choose the length of time - but you do have to use & replace if the water is in plastic.) Those kind of precautions. That's what I come to after reading the article and some of the posts.
    We're lucky here, Might take some work to stay that way.

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  31. WhaaaaaaT about the SNF????
    Maybe they just switched brokers & are inbetwreen signs?

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  32. 3:31 - don't forget the $300,000 that the BIA Occupation Government (BOG) is going to suck out of our bank account to get some consultant to scribble all that SB 375 crap into our general plan.

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  33. channel 3 watcherMay 14, 2010 at 3:35 PM

    I agree 3:31, except the Dr. Sami part. That has been going on for a while. The appearances would have taken place no matter who was on the council because it pre-dated any election folderrol.

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  34. During the campaign, Ms. Walsh talked a lot about fiscal responsibility. The boys might not find her a pushover about spending money.

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  35. Oh good Lord. Nancy will never - not even once - cast a vote against anything John and Joe wants. There is not an iota of authenticity or conviction in her entire being.

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  36. Good to see the Tattlers on their toes on a TGIF afternoon!

    But this California economy thing is worrisome. Not that we here in Sierra Madre can forestall a meltdown but being forewarned is to be forearmed.

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  37. Let's see, $650,000 of our CRA cash now gone, $300,000 for a General Plan consultant. Almost a million right there. Auspicious start!

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  38. 3:39 I'm not as convinced as you are.
    If it turns out that there is no money spending that she will fight, I'll say you were right!
    But there's a chance she'll be sharp about budgets.

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  39. been there, done thatMay 14, 2010 at 3:49 PM

    The Shenanigan Councils don't think the money is real. It's just on paper, like the water for developers.

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  40. On his campaign literature Mosca claimed he was a no nonsense fiscal cop as well. It's just part of the dirt shtick. The rule of thumb I use is take anything they say and assume the opposite is true. Go slow = go hella fast. Fiscally prudent = spend like there is no tomorrow. Green = rape the hillsides. Civility = lie and slander. These people are just full of crap.

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  41. El presidente de city of industryMay 14, 2010 at 4:23 PM

    Anybody see the SGV story today on the poor little man the DA asked to wear a wire to get the goods on Perez, City of industry, land of Pacific Palms and our dear huff?

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  42. 3:27, downtown investors are taking their properties off the market - do you know of something besides the SNF that had signs that are poof gone now?
    Maybe the SNF was finally sold because the owner/s didn't want to run into the consequences of the blight ordinance.

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  43. Home sales in my neighborhood usually have the signs up with SOLD in big letters forever before they are poof gone. If the SNF was finally sold, wouldn't it make sense that the real estate broker would want everyone to know that they'd managed to sell that albatross?

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  44. All they have to do to get around the blight ordinance is hire a gardner and take down the plywood from the windows. Blight doesn't mean no empty buildings; it means no deteriorating buildings.

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  45. That place is a ricketier than you might think. The side that faces Hermosa looks repeatedly broken into.
    I know that there have been more than a few efforts to buy/sell that property. It's been in the works for a while.

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  46. They don't care about the blight ordinance. They just want to plow the thing into some dumptrucks and build some big condo complex.

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  47. It's expensive to violate the blight ordinance, and if things rolled out they way they should have, the owners already got notice that they had 3 months (?) to get it together.
    The key to ordinances is to make the punishment more expensive than noncompliance.

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  48. I don't think you can call a pile of rubble blight. My guess is it will be gone soon.

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  49. I wonder if demolition of the SNF might inspire some across the street in city hall to get busy on that dust ordinance. Or maybe they just will skip coming to work on the intense days - let the residents breathe it without them.

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  50. Seems sneaky to me. Suddenly the dirts are in office.

    And a Car and passengers lookin' as if The Sopranos are being filmed at the SNF were spotted not so long ago, and now, there is no FOR SALE sign.

    If Nancy wants fiscal responsibility she will say something. And, NO NONSENSE fiscal cop Mosca, will report to the citizens, because he never keeps the truth from being told.

    Bart will tell them all what to say. John will babble and Josh will not get any of it. The only person with knowledge and a brain is Maryann. She gets it and the other 4 are threatened. And all the realtors in town are wishin' and waitin'.

    But WAIT, what about the SGV water supply that Tom Love presented at the last CC meeting? He reported that we are low and we need to conserve water every day. Can we afford to build for more residents and pipe more water? We already have to conserve, so why create more water usage?

    And, what about the giant parking lot that is created on SMBlvd every afternoon between 4-6. Loads of traffic as people slowly travel down the street. Nope, a signal isn't going to make this faster. Only going to create a lot more traffic, and speeding. Changing a charming village to a speed way. Who wants more of this?

    Someone explain how all this fast paced mess took 3 weeks to happen? Well planned and ready to go with the cheekbook, cigar and handshake.

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  51. The CUP on DR. Sami's is dated 2006. The conditional use permit has expired and is illegal. It has to be resubmitted for 2010, if acted on it will have a date before Measure V was voted in. Since it would definitely be expired it is subject to CEQA (environmental issues), Measure V etc. If the city is telling you it conforms to Measure V with that date 2006 it is not subject to it. The Plans are different than the originals and a different architect has designed it (previously Fred Wesley who also designed the mixed use for the Skilled Nursing location). This CUP if is goes through will set a precedent for other previous plans to overide Measure V.

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