California Has Run Out of Money
California has so degraded itself into a laughably Leftist socialist/commie- think nightmare that they have, as all socialist/commie-think countries always do, finally bankrupted itself. As Margaret Thatcher, erstwhile prime minister of England, once said, "The problem with socialism is that you eventually run out of other people's money." Hahaha! Exactly!
And now California has run out of money! Exactly!
Now, to demonstrate their complete worthlessness as thinking, rational beings, California has decided that it will not cut expenses overmuch, but will pay for things not with money, but with IOUs! Hahaha! IOUs! Hahahaha!
There is Something Beyond Surreal (SMS) about all this, and it's that very farcical stupidity that explains why hyperventilating conspiracy theorists like me come up with the weird conspiracy theories that we do; it is just too damned weird to be real!
I mean, the fiat currency of the USA has been so abused by over-issuance that it has lost about 96% of its purchasing power since the loathsome Federal Reserve took over in 1913, and is now about to be reprised by California issuing another paper money! Hahaha! Paper money everywhere! The state with two fiat currencies! Hahaha!
This may have something to do with how California has seen a precipitous drop in tax revenues, which in turn may have something to do with the Labor Department releasing its Metropolitan Area Employment report which shows that "In May, 112 metropolitan areas reported jobless rates of at least 10.0 percent," which I admit does not have much to do with California until we get to the part where El Centro, Calif., "recorded the highest unemployment rate, 26.8 percent," and "Among the 15 areas with job-less rates of at least 15.0 percent, 7 were located in California."
This is, as Margaret Thatcher said, because Californians have run out of money to support everyone who ever walked up with their hand out looking for a free lunch, and the wealthy people in California are leaving the state to keep from having everything they have taxed away. Bummer!
Actually, California is a beautiful place unfortunately populated by Leftist idiots, and as such is but a pale microcosm of the Whole Freaking Country (WFC), and as a result, as Bill Bonner here at The Daily Reckoning said, "America's position relative to the rest of the world is weak and in decline. She is not a creditor; she is a debtor. She is not a low-cost competitor; she is a high-cost competitor. She no longer has a free and flexible economy; she has one freighted with central planners, regulators and busybodies."
And California is not the only one hurting, as Byron King of Outstanding Investments writes that everybody has taken a whack to the wallet, as "There's no disputing the extraordinary shock to household wealth in the US. From mid-2007 to March 2009, according to the Federal Reserve, household net worth plunged $14 trillion, or 21.5%."
A fifth! A fifth of everything we thought we had is gone!
In fact, most of the losses were recent, as "Just during the second half of 2008, household net worth plummeted nearly $8 trillion - with an eye-popping $4.9 trillion dip in the fourth quarter."
Wow! No wonder people are being laid off! No wonder spending is down! No wonder we are screwed!
Until next time,
The Mogambo Guru
for The Daily Reckoning Australia
P.S. to get The Daily Reckoning direct to your inbox sign up to our free e-mail newsletter or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.
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About the Author
Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter - an avocational exercise to heap disrespect on those who desperately deserve it.
Comment by Nick on 14 July 2009:
"The problem with socialism is that you eventually run out of other people's money."
But surely if there is anything this current disaster has shown it is also "the problem with capitalism."
Socialism or Capitalism fail because of human nature - basically too much greed and too few ethics.
Time for the computers to take over!
Comment by dsylexic on 14 July 2009:
nick,
nobody is shedding any tears for phony corporatism that passed off as capitalism.we never had a free market and there will never be one.
Comment by Lachlan on 14 July 2009:
All I see of the last at least 70 years, are mixed economies ie.some free market strategies blended with some interventionist stategies. Fascists manipulate markets too similar to the socialists.
I dont let myself worry about what governments do, its beyond my control.
Comment by Dan on 14 July 2009:
Hi Guru, read your recent article in the Asia Times (http://www.atimes.com/atimes/Global_Economy/KG11Dj01.html) - very entertaining.
Comment by Ned S on 14 July 2009:
Nick - We've proven socialism doesn't work. While capitalism has its very brittle moments, it keeps bouncing back. I think it has something to do with which really most closely parrellels human nature?
Comment by Nick on 15 July 2009:
Ned - You are right of course. If true, unselfish socialism, or communism or call it what you will, had evolved in say the 14th century we would without doubt be living in 15th/16th century style today. Gradually advancing, happy perhaps but hungry and diseased still.
Capitalism gets things done through higher highs and lower lows; but oh the pain of those lows for so many people.
Game theory suggests that in any society the dedicated cheat will always win except where the honest truly cooperate. We have had our fill of dedicated cheats. If only capitalism could evolve a means whereby transparent cooperation could still reward the innovators and risk takers but at the same time include the interests of the rest we may get somewhere.
What we have at the moment is a system in which the foot soldiers are not only completely expendable but one in which the commanders are not only guaranteed 100% protection but rewarded whatever the outcome of the battle.
Comment by kathy on 15 July 2009:
I agree with Nick, capitalism has the better prospects of advancing societies, but only if it is truly 'free'. The more intervention by governments the more socialistic and greater the possibility of corruption. When those in society are responsible for both the governance of socity and allocation of wealth the power base is too small and opportunities are limited to an elite that is self protective and exclusive. This creates a 'serf system' which is exactly how a large part of the world already live and the other half will learn to.
Comment by Richo on 15 July 2009:
Few societies allow extremely imbalanced distribution of wealth and an elite who abuse power for long. Unfortunately civil war is usually the result. E.g French revolution.
I can't understand why the rich and powerful don't see that if they take it too far, there are some serious risks. In hindsight I'm sure the French Aristocracy would have agreed to tone it down a bit to avoid the guillotine.