kidmercury

I was looking through my web site analytics last night (i.e. where visitors are coming from, how many, how long they stay, etc) and I noticed there was a disproportionate number of regular readers from California. Two locations in particular: Mountain View and Los Angeles. Mountain View implies Google. Do we have some Googlers reading? If so, please check out this. And more disturbingly, this. I beg and grovel at the feet of Googlers, please make sure your company operates with the highest degree of virtue. The world desperately needs it.

Anyway, since California represents a relatively large constituency of this blog's tiny readership, I thought I'd do a post on the troubles of California, and what they portend for the rest of the US.

The basic story is that California is collapsing. The government has no money. And unlike the Federal government, they cannot simply print more money.

California stops paying bills as financial crisis deepens | thecalifornian.com | The Salinas Californian
Legislature adjourns with no budget; governor prepares to lay off 10,000 -- chicagotribune.com
California budget crisis jeopardizes 20,000 jobs - Feb. 17, 2009

But fear not! Our lord Obama is here to save the day!

So basically, the Federal government is working to bailout California.

Not good.

Where California goes, the rest of the nation will follow. And so I would expect the Federal government to "solve the budget crisis" -- meaning go to a Federal Reserve computer and magically create some money out of thin air (in spite of the fact that a bailout of states by the Feds is likely to be unconstitutional -- but hey, adhering to the Constitution is something that was tossed out a long time ago, so I should hardly be surprised). The impact of this will be dollar devaluation and higher interest rates as Treasury bonds become harder to sell (something we are already seeing as Treasuries are off to their worst start since 1984).

What I'm particularly interested in seeing is what the public's response to California's insolvency will be. I am expecting civil unrest, like we've seen in Iceland and Greece, to come here -- you may recall this was one of my 2009 predictions. I think California is a leading indicator here, and may be one of the first spots we see civil unrest in the US, if in fact it does happen.

For more on Californinomics, I highly recommend economist Mike Shedlock's coverage -- check it out.

Below is my favorite song about California, "California Love" by Dr. Dre and Tupac.