California towards default?

Joseph Vranich writes on his blog:

California bonds are now viewed as one of the riskiest places in the world for investors to put their money. At least that is according to the latest “CMA Sovereign Risk Monitor,” which ranks the world’s most volatile sovereign debt issuers. The analysts, in a May 11 list, said California has the seventh highest risk of default.

The six with rankings more worrisome than California are Venezuela (the worst), followed by Argentina, Pakistan, Greece, Ukraine and the Emirate of Dubai. California ranks ahead of the Republic of Latvia, the Region of Sicily and Iraq. See the list under “Highest Default Probabilities.” (The report is issued by CMA Market, a “credit information specialist” with offices in London, New York and Singapore.)

And, to add another perspective for the benefit of the discussion, a quote from an article by Spencer Jakab in Financial Times:

On paper, California’s debt of $85bn supported by 37m citizens and the world’s eighth largest economy looks more manageable than Kazakhstan’s near-$100bn heaped on its poorer population of 16m. Go beyond headline figures though and Kazakhstan, with the world’s 11th largest oil reserves, an economy that grew more than 8 per cent annually from 2002 through 2007 and unemployment of just 6.7 per cent looks positively vibrant next to the Golden State’s joblessness of 12.4 per cent. And Kazakhstan’s modest budget deficit and $25bn rainy day fund make it a paragon of fiscal virtue compared to a state forced to pay bills with IOUs last year and possibly again this summer. Unlike US states, Kazakhstan has its own currency and central bank. If it were to raise taxes or cut public services, wealthy Kazakhs could hardly defect to Kyrgyzstan the way Californians, already facing some of the highest levies and worst schools in the nation, might decamp to, say, Utah.

So, how healthy is Hollywood really?

Simon Hedlin Larsson

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