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Will California Sink the U.S. and Global Economy?

Com­ment: With the Grop­pen­fuhrer lead­ing the Gold­en State, one can but won­der to what extent this may have been by design. Schwarzeneg­ger has vetoed bill after bill that would have raised tax­es in order to relieve Cal­i­for­ni­a’s crush­ing fis­cal sit­u­a­tion, with the unwa­ver­ing sup­port of Cal­i­for­nia Repub­li­cans.

If Oba­ma and the Fed­er­al Gov­ern­ment have to shell out more mon­ey to bail out Cal­i­for­nia, that will great­ly exac­er­bate Amer­i­ca’s fis­cal woes.

“Cal­i­for­nia Is a Greater Risk than Greece, Warns JP Mor­gan Chief” by James Quinn; telegraph.co.uk; 2/26/2010.

Jamie Dimon, chair­man of JP Mor­gan Chase, has warned Amer­i­can investors should be more wor­ried about the risk of default of the state of Cal­i­for­nia than of Greece’s cur­rent debt woes.

Mr Dimon told investors at the Wall Street bank’s annu­al meet­ing that “there could be con­ta­gion” if a state the size of Cal­i­for­nia, the biggest of the Unit­ed States, had prob­lems mak­ing debt repay­ments. “Greece itself would not be an issue for this com­pa­ny, nor would any oth­er coun­try,” said Mr Dimon. “We don’t real­ly fore­see the Euro­pean Union com­ing apart.” The senior banker said that JP Mor­gan Chase and oth­er US rivals are large­ly immune from the Euro­pean debt cri­sis, as the risks have large­ly been hedged.

Cal­i­for­nia how­ev­er pos­es more of a risk, giv­en the state’s $20bn (£13.1bn) bud­get deficit, which Gov­er­nor Arnold Schwarzeneg­ger is des­per­ate­ly try­ing to reduce.

Ear­li­er this week, the state’s leg­is­la­ture passed bills that will cut the deficit by $2.8bn through bud­get cuts and oth­er mea­sures. How­ev­er the for­mer Hol­ly­wood film star turned politi­cian is look­ing for $8.9bn of cuts over the next 16 months, and is also hop­ing for as much as $7bn of hand­outs from the fed­er­al gov­ern­ment. . . .


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