According to Standard & Poor’s Ratings Service, California’s credit rating is at a “crossroads.” The new fiscal year will begin one week from today and there’s still no budget in place. “If a budget is not adopted in time for the state to issue its revenue anticipation notes (RANs) before its cash runs low,” warned S&P on Tuesday, “the state’s basic operating liquidity can become inadequate.”
If you are not familiar with California budget politics this may sound rather dire. But here in the land of fruits and nuts this sort of thing happens all the time. In fact, during the last budget meltdown in 2009, the state issued IOUs to government workers for several weeks so it could make cash payments to bond holders. No kidding…they really did.
No one seemed to really care…except perhaps, those receiving the IOUs. We didn’t notice any change at all. The sun still rose each morning over the San Jacinto Mountains. It still set each evening over San Pedro Bay. The mortgage bill still came each month. We still went to bed with a sore back after a hard day’s work. We told jokes with our friends. Took walks with our wife. And tucked our young son into bed each night with a kiss on the forehead.
We can’t think of anything we would have done any different had Sacramento not nearly gone broke. And now, here we are, just two years later, and it’s happening again.
But this time it’s more entertaining than ever…
“We Need More Welfare and Fewer Jobs”
The new Governor, Jerry Brown, is a retread. His first stint in Sacramento began in 1975…several years before we were even born. From what we were able to gather about “Governor Moonbeam,” as he was called…not only was he a total idiot, he was a complete moron too.
For this reason, we didn’t have much hope for him when he was elected this time around…but we are starting to warm up to the guy…
“Democrats who control California’s legislature last Wednesday approved a budget to close a deficit of about $10 billion on their own,” reported Reuters. “The next day Governor Jerry Brown, a Democrat, vetoed it, criticizing its ‘legally questionable maneuvers, costly borrowing and unrealistic savings.’”
Holy cow… We can’t remember ever seeing a governor, or a president for that matter, demur to their own party’s gimmicks. If we didn’t know this is the same man who less than a year ago uttered, “We need more welfare and fewer jobs,” we’d start campaigning to get him elected president.
For you know as well as we do, the Fed needs help. The current batch of miscreants can’t seem to pull their collective head out of their you know what. Obama, Biden, Geithner, Bernanke…they haven’t seen a ray of light or inhaled a fresh breath of air since taking office.
Economic Panacea Unveiled
For example, on Wednesday Federal Reserve Chairman Ben Bernanke was in a dour mood. While reciting the Federal Open Market Committee’s statement he mentioned the economic recovery was continuing “somewhat more slowly that the committee had expected.” Moments later the DOW dropped 80 points.
We don’t know if it was coincident, correlation, or causation at work. What Bernanke nearly admitted is what everyone’s already known practically since the recovery began…that it’s a farce. That printing up a trillion dollars from nothing doesn’t miraculously create wealth; rather it dilutes the monetary value of existing wealth.
Here’s what we mean…
Quantitative easing is a watered down lite beer. It’s an over breaded meatloaf. It’s Barrack Obama winning the Nobel Peace Prize for his extraordinary efforts to strengthen international diplomacy. It’s Barry Bonds hitting 73 homeruns during the 2001 season. It’s a Folex wrist watch. In other words, it’s a lie.
Yet to the Feds chagrin, after all of their scheming, the economy’s limping along like a three legged hunch back. Despite all of the highfalutin pretensions, all the stimulus and quantitative easing has been a monumental flop. The panacea for the economy was unveiled to be nothing more than a traveling quack’s snake oil elixir.
What the Fed has left to show for their enlightened knob twisting and lever pulling is a gigantic public debt, skyrocketing entitlements, and an unemployment line that wraps around the entire continent. Such is the handiwork of the smart and clever fellows, who undertook ideas that a third grader would know were fantasy, to prove they could save all of us and the economy from ourselves.
With the presidential election cycle heating up they might try any old thing next.
Enjoy your weekend! If you’ve had a week like we’ve had…it’s the least you can do.
for Economic Prism