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Old 09-20-2010, 12:30 PM
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Default When do the states go bankrupt?



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I keep hearing little snippets of how California, Illinois, New York, etc are close to bankruptcy.

Can anyone enlighten me on how and when that could happen?

Are these states being propped up until after the election or is the bankruptcy talk overblown?

It seems to me they are just happily spending like they always do and will just issue IOU's forever.
Old 09-20-2010, 12:50 PM
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Could be that bankruptcy is just a mechanism to control people, framing it as raise taxes and/or cut services, get more out of them without giving them anything more in return. Financial doom-and-gloom notwithstanding, human productivity, agricultural techniques, manufacturing, transportation, communications, etc. are still light-years ahead of anything humanity new in the past. Either these bankruptcies are largely over-hyped as a control mechanism, or else they're quite real -- and we ought to wonder what the heck elected officials are thinking. I bet it's about 50/50.

For the portion that's real, the upshot is fairly clear. The more mismanaged states are being propped up by the more sensible states, at the federal level. So long as Uncle Sam keeps redistributing from the better states to the worse, there's little incentive for the poorly-administered states to get their acts together.
Old 09-20-2010, 01:01 PM
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The states must have spent more money than they had to begin with in previous years. If they are brining in tax dollars they will never really go broke. This recession might be a good way to shrink government down to a reasonable level.
Old 09-20-2010, 01:06 PM
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Montana is still in the black because by law we have to have a balanced budget. Perhaps some of the other states should try that. Heck, the feds should do that too.
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Old 09-20-2010, 01:06 PM
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States are certainly different than you and I.
WE,... would be bankrupt.
California.. unless it is williing to sell off state assets, is bankrupt.
I don't get it either. Who/what is keeping them afloat?
Thay cannot print money.. how are they meeting their obligations at all?
Help me here.
Old 09-20-2010, 01:46 PM
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Quote:
Originally Posted by WSierra View Post
States are certainly different than you and I.
WE,... would be bankrupt.
California.. unless it is williing to sell off state assets, is bankrupt.
I don't get it either. Who/what is keeping them afloat?
Thay cannot print money.. how are they meeting their obligations at all?
Help me here.
I thought Ca. was doing an IOU thing. maybe I'm wrong would not be the first time.
Old 09-20-2010, 01:53 PM
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CA has more millionaires in Los Angeles County than anywhere in the US. Selling off public assets -- while there's so much wealth in CA -- is all part of the game.
Old 09-20-2010, 01:56 PM
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As soon as they can no longer fund basic services (trash, water, prisons, etc.) At that point they appeal to the Feds, who will print to cover them. So in summary, never.
Old 09-20-2010, 02:55 PM
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Off the wall question. Could the Fed be buying state Bonds ?? Any large state going under is going to be bad news as far as Federal bonds. Can the Federal government "afford" to let a state go bankrupt.
Old 09-20-2010, 02:59 PM
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States can do a lot of "Creative accounting" to move money around and keep the budgets going. It's more of a delaying tactic than anything else; eventually they just have to cut services. In California the reason they were handing out IOUs is that they were in stalemates about approving a new budget. They don't necessarily have to have the money; they just have to agree what they are going to spend and whether it will be deficit spending.

I think with bigger entities like States or the FedGov, there is also a sense of "too big to fail" in that everyone assumes that the Government will pay their debts. They are the ones responsible for handing out welfare, after all. That's why you always hear of people trying to go fo a "cushy government job": less accountability and you're the last one to face layoffs or pay reductions.
Old 09-20-2010, 03:56 PM
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Illinois is borrowing billions and paying millions in extra interest rates because they are a bad risk. they are getting farther behind in their payments = used to be a month or two for most, now up to 6-9 months. they are talking about raising income taxes by 33 percent... towns and cities are all raising taxes and fees. this is pretty ugly, and i don't see it fixing itself quickly, even if we do get a conservative governor in the coming elections. when it comes time to slash spending and make a balanced budget there will be too many hands out and too many promises to keep. business as usual. I hate this state.
Old 09-20-2010, 05:01 PM
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Governments don't really bankrupt. When they are totally insolvent they monetize debt until societal collapse or, if unable to monetize debt, they are absorbed by a solvent government.
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Old 09-20-2010, 06:20 PM
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Quote:
Originally Posted by OldSchool View Post
As soon as they can no longer fund basic services (trash, water, prisons, etc.) At that point they appeal to the Feds, who will print to cover them. So in summary, never.
Absolutely correct

(Hey, you stole my reply)
Old 09-20-2010, 06:38 PM
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Quote:
Originally Posted by crankyfarmer View Post
Montana is still in the black because by law we have to have a balanced budget. Perhaps some of the other states should try that. Heck, the feds should do that too.
Ca. definitely has a constitution requiring balanced budgets. You can see how effective an actual law is when liberals are in charge of the spending.

To them, if they spend too much, the citizens will just have to make up the difference and pay higher fees, taxes, etc.

I am convinced that government, not having any idea of how to actually MAKE money like a business has to through sales of services, product, or whatever, has no clue about finance. Their biggest problems seem to be figuring out myriad ways to spend money. They think money grows on trees, literally.

So, I would imagine most of our states have a balanced budget law, if not all. It's the FEDs who don't have this particular little spending restraint.
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Old 09-20-2010, 07:10 PM
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Originally Posted by methemom View Post
Illinois is borrowing billions and paying millions in extra interest rates because they are a bad risk. they are getting farther behind in their payments = used to be a month or two for most, now up to 6-9 months. they are talking about raising income taxes by 33 percent... towns and cities are all raising taxes and fees. this is pretty ugly, and i don't see it fixing itself quickly, even if we do get a conservative governor in the coming elections. when it comes time to slash spending and make a balanced budget there will be too many hands out and too many promises to keep. business as usual. I hate this state.
At some point business and those who can just move. The way things are now there are many cities, and counties that wave all or almost all taxes (local) in order to get a business to relocate. Blue states will get way worse then collapse. Get out if you can.(while you still have any $$ at all)
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Old 09-20-2010, 08:03 PM
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Perhaps the companies that are accepting the IOU's as part of the cost of doing business with the state must go bankrupt first?

I suppose at some point these businesses have to say "no more" before the state resorts to threats first and when that doesn't work, bankruptcy?
Old 09-20-2010, 08:10 PM
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America went broke the second we got China to buy our Debt
Old 09-20-2010, 08:46 PM
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We started going broke in the 1960's-72's when a conspiracy assassinated the US president but the next administration didn't come clean on it, we left the Gold Standard, Nixon cozied up to the Chinese, fractional reserve banking, off-shoring our industry, and digital money. Far too many playgrounds for the unscrupulous to operate in.

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America went broke the second we got China to buy our Debt
Old 09-21-2010, 04:57 AM
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Quote:
Originally Posted by seawind View Post
At some point business and those who can just move. The way things are now there are many cities, and counties that wave all or almost all taxes (local) in order to get a business to relocate. Blue states will get way worse then collapse. Get out if you can.(while you still have any $$ at all)
unfortunately the only way to get out is to run from my responsibilities and moral obligations,( get a divorce and abandon my family), which i will not do, so we are stuck here. if i were doing the choosing we would have been gone a long time ago.
businesses have been bailing from Illinois for years. More leaving all the time.
this state can not continue with business as usual much longer. I vote Illinois as the first domino, with Ca right on our heels...
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