California and New York going bankrupt as well?

Last updated on Feb 1, 2009

Posted on Feb 1, 2009

People are making guesses on how long the “recession” will last – end of this year? or maybe 6 months?  And I often think that we probably have no clue!  Recorded history has never seen such a mess:

– the intertwined global economies.. all hurtling down at the same time
– over-leveraged banking systems (somewhere as much as 20 times! – the regular and the logical system of “Central banks being the bankers of the last resort seem useless!)
– countries going bankrupt [Iceland (!), Pakistan (?), Latvia, Bulgaria?, Russia (?)]

Now, comes news from two of the most important states in the US – California and New York.  California is economically the most important state in the country!  If it was an independent country, it would have been the 10th largest economy in the world.. that’s how important it is to the US and indeed the world.

The situation of its economy is in complete mess.  How much?  Well for example:

– it cannot pay the unemployment checks anymore – it has to borrow money for it (the unemployment fund has run out of money and needs extra $2.4 billion this year, and the shortfall will grow to $4.9 billion in 2010)[1] – taxpayers who file early awaiting their refunds,
– programs that help the poor and disabled and college students who rely on grants for tuition, housing and textbooks[2]

Meanwhile, New York is laying off 23,000 employees!  Government jobs.. GONE!  Most of them teachers.  Jobs that you would think are the safest… all gone.  Here is what Mayor Bloomberg said:[3]

Bloomberg said Wall Street firms are expected to lose a total of $47.2 billion for 2008, and even more in 2009. The figures are devastating for New York City.  The mayor said Wall Street’s losses will affect the city for years.
The city is also now projected to lose nearly 300,000 jobs through 2010. Some 46,000 will come from the financial sector.
The gap for fiscal 2010 is at $4 billion and growing

If California alone goes belly up, that is enough to devastate the US economy.. but if BOTH New York and California go…. then it is mighty serious!

Reference Links:

1. State must borrow to continue unemployment checks
2. Counting on your California tax refund? Don’t hold your breath
3. Mayor’s Plan Calls For 23,000 Fewer City Jobs

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