Is California Going Bankrupt?

I read an interesting news release today that forebodingly declared that California may well be on its way to bankruptcy - which would be unprecedented, to say the least.

"The State of California will run out of money within two months, forcing Governor Arnold Schwarzenegger to start settling bills and paying employees by issuing "IOU" notes, his chief financial officer has revealed."

This could happen in as little as 2 months - which if you think about it is unheard of - a whole state going BANKRUPT? Especially a prosperous state like California? The likelihood of this seems impossible, but if we look back at the last few months, some pretty unbelievable things have been happening all around us - Wall Street breaking down, a 700 billion dollar bailout bill by the federal government, prominent banks closing and going bankrupt - then the ensuing scams and scandals taking place across the United States. So perhaps there is something to this after all. If California is indeed on the brink of insolvency - what would this mean for the average Californian? What would this mean for the United States and the world at large?"

"It sure seems like California is insolvent. Just today we heard that Arnold Schwarzenegger contacted Hank Paulson to let him know that the State is having liquidity problems (see pdf) and needs help. California ranks as the world’s 9th largest economy with a population of over 30 million people, so this is quite worrying." (from Oct. 2008)

Yikes, we are the worlds 9th largest economy??? Eeeeeee.....

I've lived in California all my life - born and raised in the San Francisco Bay Area. I've seen many highs - and many lows - as the dot com days boomed then exploded. I remember when people were making outlandish offers to buy the only house available - paying sometimes $80,000 and more above the asking price just to get a rundown 2 bedroom house - and now, a few years later, I'm watching as some of these same houses are going into foreclosure, with no one to buy them now. There were days when no one wanted to take that $10 an hour job at In and Out Burger....and now you'd be lucky to get a job at all - and if you do, you'll probably be competing with ex network engineers to flip burgers.

What an odd odd thing to be witnessing....and now I suppose the next thing may be Bankruptcy?

The thought of my state going bankrupt is absolutely shocking, to say the least. The thought of our multi-cultural diverse state running out of money seems impossible - or is it?

"California's fiscal house is burning down," State Treasurer Bill Lockyer said in a statement." (from The Wall Street Journal - Dec. 18th)

Burning Down? Doesn't sound very reassuring, does it?

"The city of Vallejo, Calif., gained national attention earlier this year by filing for Chapter 9 bankruptcy protection. Now, two neighbors are fighting to avoid the same fate, as the state's economic crisis spreads."

Everyone remembers the shocking news of just a few months ago when the city of Vallejo here in California declared bankruptcy. Now I've got to ponder.... will we soon be hearing that the whole state of California is declaring bankruptcy too? Is this going to be another bombshell that lands in our email box one day like the bailout bill did? Not being a financial guru, I don't know exactly what the ramifications of this will be - but they are surely not good.

And I'm extremely suspicious that the mainstream media is not talking much about this - just bits and pieces of information from what I can glean - much like the lead-up to the events that preceded the financial meltdown we are now experiencing globally.

My suspicions say that something is rotten in Denmark............ or should I say in California?

UPDATE FEB. 1, 2012 (Yes we are right back where we were 3 years ago):

"If anyone is tired of the daily European soap opera with surrealistic tragicomic overtones, they can simply shift their gaze to the 8th largest economy in the world: the insolvent state of California, whose controller just told legislators has just over a month worth of cash left. From the Sacramento Bee: "California will run out of cash by early March if the state does not take swift action to find $3.3 billion through payment delays and borrowing, according to a letter state Controller John Chiang sent to state lawmakers today. The announcement is surprising since lawmakers previously believed the state had enough cash to last through the fiscal year that ends in June." ....uh, oops?" from http://www.zerohedge.com/news/california-run-out-cash-one-month-controller-warns

(Dorsi Diaz is a freelance writer and blogger in the SF Bay Area)