so true or get that all the people who were bundling illegal foreign contribitions for odumbie and hillary to get those saudis and asians to pay for it
On Sun, May 31, 2009 at 8:41 AM, rigsy03 <[email protected]> wrote: > > There are Hollywood idiots willing to pay $30,000. to dine with Obama. > Let them bail out California. > > On May 31, 7:33�am, bruce majors <[email protected]> wrote: > > �Obama (Should Say) to California: Drop Dead � by: Peter Schiff May 30, > 2009 > > > > � � [image: Peter Schiff > > picture]<http://seekingalpha.com/author/peter-schiff> Peter > > Schiff <http://seekingalpha.com/author/peter-schiff> > > > > During the height of New York City's financial crisis in the 1970s, > > President Gerald Ford had the good sense to turn down Mayor Abe Beame's > > request for a federal bailout. The refusal prompted the famous New York > Post > > headline, "Ford to City: Drop Dead." More than 30 years later, as > California > > Governor Arnold Schwarzenegger makes a similar plea to Washington, I hope > > President Obama will show similar restraint. Unfortunately, given Obama's > > recent string of unwise economic decisions, it's hard to imagine that his > > judgment will suddenly improve. > > > > A federal bailout would spare California from having to make spending > cuts > > needed to bring its budget into balance. The matter has become urgent > since > > California voters rejected several tax-hiking ballot initiatives. Rather > > than taking the vote as a signal to dramatically curtail spending, the > state > > turned to the feds. If they get a free pass, the politicians can avoid > > fixing any of their past mistakes or preparing California for the future. > > > > California, like many states, expended its bureaucracy as the nation's > > bubble economy inflated. When condos flipped like hamburgers and > homeowners > > flush with equity spent like lottery winners, extra tax revenue flooded > into > > Sacramento. However, instead of saving the money for a rainy day or > paying > > off prior debts, the state government simply ballooned its spending. Now > > that the bubble has burst, and revenues are severely depleted, it is time > > for California to reconsider its excesses. > > > > Governor Schwarzenegger's claim that a federal guarantee is not a bailout > is > > ludicrous. No one in the private sector will lend California any money > > because the state can't pay it back. Just like AIG and GM, it needs > federal > > help to stay solvent. And although the Federal balance sheet is in far > worse > > shape than California's, there is one crucial difference: Washington has > a > > printing press, and Sacramento does not. With the ability to pay off > debts > > with newly created funds, a federal default is not a concern. > > > > However, if Obama comes to the rescue, none of the needed cuts will be > made. > > Instead, California will continue to operate its bloated bureaucracy and > > will be in constant need of more bailouts. In other words, if > Schwarzenegger > > gets his bailout, look for him to utter his famous line - "I'll be back." > > > > But it's not just Schwarzenegger who will be back, but governors from all > > the other states as well. After all, if the Federal government bails out > > California, by what right can they deny similar aid to other states? The > > bailout will send a clear message that states do not need to cut > spending. > > > > Similar to the reckless behavior that resulted from federally guaranteed > > mortgages, federal guarantees on state debt will counteract the market's > > attempt to force states to act responsibly. As the market accurately > > prices-in the heightened risk of default, California faces staggering > > increases in its borrowing cost. Under normal circumstances, this > pressure > > would force the state to act prudently now to diminish the risk of a > future > > default. However, by allowing California to evade the "bond market > > vigilantes," the stage will be set for much bigger losses. > > > > The moral hazards created by state bailouts are tremendous. With federal > > guarantees given to profligate states, those states that had shown > greater > > fiscal responsibility will face higher interest rates - as their bonds > lack > > a federal guarantee. This creates the perverse incentive for all states > to > > act irresponsibly. > > > > Just as government-guaranteed mortgages lead the market to make overly > risky > > home loans, federally guaranteed state obligations will set the stage for > > yet another crisis. > > > > Federal backing of California bonds would effectively turn them into > > Treasury bonds, with the added appeal of being exempt from California > state > > income tax. Therefore, the Treasury will be at a competitive disadvantage > > when it looks to issue its own debt to Californians. If it then has to > > guarantee the bonds of all the other 50 states, why would any Americans > buy > > Treasuries when they can get identical credit quality on better terms > from > > the states? The only real buyers left would be foreigners, who are > already > > queasy about the Treasuries they own. > > > > The need to make good on state and federal obligations will further > depress > > the appeal of all U.S. dollar-denominated debt. As a result, as real > buyers > > flee the market, the Fed will have to run its printing presses even > faster > > to pick up the slack. This will set into motion a self-perpetuating > spiral > > of money printing and Treasury sales with a predictable result: > > hyperinflation. > > > > In the meantime, by redirecting credit to California that otherwise would > > have gone to more credit-worthy borrowers, the government will worsen the > > credit crunch for the rest of the country. Since there is only a finite > > supply of credit, money borrowed by California will no longer be > available > > to other borrowers. The effect is a less efficient allocation of capital > > that further undermines national productivity. > > > > The only rational policy choice for Obama is to send Schwarzenegger > packing. > > If he does, California will have no choice but to cut spending or default > on > > its bonds. My guess is that, with their backs to the wall, the California > > legislature will choose the former. However, even if they default, at > least > > the losses will be borne by those who freely assumed the risks. With a > > bailout, the losses will be shouldered by those who were not even parties > to > > the transactions. 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