Friday, December 5, 2008

California Dreaming: State May Pay With IOUs for Second Time Since Depression

all the leaves are brown
and the sky is grey
I've been for a walk
on a winter's day

I'd be safe and warm
if I was in L.A
California Dreamin'
on such a winter's day

stopped into a church
I passed along the way
well, I got down on my knees
and I pretend to pray...

The prosperity was an illusion. The state's best pal was serial bubble blower Alan Greenspan. From's (Netscape IPO, Aug. 9, 1995 to Nasdaq 5048, Mar. 10, 2000) to housing, to commodities, the state benefited inordinately, either directly or through portfolio investment.
It was all a fantasy and nowhere was the fantasy more beloved than in the (formerly) Golden State.
Today Bloomberg reports:
California, the world’s eighth-largest economy, may pay vendors with IOUs for only the second time since the Great Depression, State Finance Director Mike Genest said.

In a letter to legislative leaders Dec. 1, Genest said the state “will begin delaying payments or paying in registered warrants in March” unless an $11.2 billion deficit is closed or reduced. California, which approved its budget less than three months ago, may run out of cash by March, state officials say.

Governor Arnold Schwarzenegger warned that the state may issue the warrants, which are a promise to pay with interest, to suppliers and contractors as the seizure in credit markets may make it too costly to borrow.

“It’s getting worse very quickly,” Schwarzenegger, a 61- year-old Republican, told reporters Dec. 1 after declaring a fiscal emergency and ordering the Legislature into a special session to find ways to close the deficit. “It’s like an avalanche in that it gains momentum. And that’s what we’re in right now, so it’s a real crisis.”

California is reeling more than any other state from budget woes that pushed the nation’s governors to seek help from Congress. States say federal money is needed to ease the pain from spending cuts and tax increases that would be a further blow to an economy in the throes of a recession.

The warrants would be given to landscapers, carpet cleaners, construction firms, food-service companies and other state vendors....MORE

Here's the version from D.A. Pennebaker's documentary "Monterey Pop":