02/19/10 Tampa Bay, Florida – Eric Fry here at The Daily Reckoning is “reporting from the Golden State with the tarnished finances”, which was a riddle that I instantly knew was, of course, California. But, for some reason, I never get asked a question when I know the answer. I usually get asked, instead, something like, “For 40% of your final grade, what is the principal export of California and total tonnage exported, expressed in kilograms per fortnight?”
Well, as much as I have enjoyed this jaunt down memory lane, the fact is, as Mr. Fry points out, that California “is facing a budget deficit this year of about $40 billion, which is roughly equivalent to 2% of the state’s $2 trillion economy (GSP). That’s”, he says, “dismal.”
At that display of stoic calmness, I held aloft a shot of tequila and toasted his amazing serenity in labeling California’s $40 billion budget deficit to be merely “dismal”, mostly because there are less than 100 million workers in the entire private sector of the US, and this $40 billion represents $400 for each and every one of us private-sector workers in the Whole Freaking Country (WFC)!
My voice a sudden peal of thunder, I shout, “In the Whole Freaking Country (WFC)!”
Immediately, I thought Mr. Fry’s eyes would glaze over in one of those, “Oh, hell! The Mogambo is yammering about something and he never shuts up!” expressions of disrespect and outright loathing, but instead he decided to just change the subject, and with that, he left this global hemisphere, and went to Greece, completely on the other side of the globe!
As my brain skidded to a shuddering stop at the sudden change of vector, he went on, “But over on the Mediterranean, Greece’s budget deficit is on track to hit $50 billion, which is a very big number for an economy that is one fifth the size of California’s. In fact, that’s a horrific number.”
At this point, I think that vomit, tinged with blood, coming out of my mouth and crapping all over myself in pure terror about such financial calamity speaks more eloquently than mere words allow, and Mr. Fry filled the sudden void with, “What’s more, Greece’s accumulated debt totals $443 billion – a whopping 113% of GDP.” Gaaaahhhh!
So, to distract both you and me from any acts of hysteria caused by such fiscal insanity, I ask you the following question, that will constitute 40% of your final grade: “If you were the prancing, preening, know-nothing, government-leech blowhard who wanted a shot at fame and glory by fixing what cannot be fixed, with lots and lots of other people’s money, while paying yourself and your friends handsomely, what would you do?”
Well, since this constitutes 40% of your final grade, I decided to get a little help to make sure I knew the answer, and I emailed Mr. Fry this very question. Either he did not know, or he just rudely decided not to answer either my original email or the follow-up phone call where his stupid answering machine said that he was “not available” and that I could leave a message “at the beep” and that he would call me back, which I did, and where I said, quite plainly, so there would be no mistake, “Call me back, and if I am not here, keep calling me and leaving messages proving that you called, or I’ll kick your butt, Fry! I’m not kidding!”
Well, whether or not this means anything, he does seemingly answer the question when he writes, “Well, the correct answer is the pricing of credit default swaps (CDS) on 5-year bonds from California and Greece. (Simply stated, a CDS is an insurance policy against default. The higher the CDS price, the higher the cost of the insurance).”
Of course, I understand none of this because I am tragically stupid, pathetically ignorant, am too lazy to do anything about it, and thus totally disinterested in the whole concept, which means that it all sounds like gibberish to me, especially since the bottom line is always the same; losses are on the books, somebody is going to have to take the hit.
Fortunately, mastery of such complexity is unnecessary for me, as I just buy gold, silver and oil, which will benefit mightily as the government and the Fed ruin everything with their deficit-spending of more and more fiat money. Whee! This investing stuff is easy!
The Mogambo Guru
Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning , and other fine publications. For podcasts featuring the Mogambo, click here.
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Oh,very good! I get it! California’s doing OK, Greece is not…ummm,I think I misssed a step or two there in this discussion.
…Goes back to think it over…..Sorry I think this is gonna take me til April 1st when, if they could California would declare Bankruptcy…
Exalted Mogambo Guru(EMG) I’ve caught up with your recent posts and see you now have a comment box and a lot of fans. All this time I thought I was your only groupie, pretty egotistical eh.
Why does everyone only look at cali looks like they have lots of company
Arizona still faces a $1.5 billion dollar deficit this year, and a projected $3.4 billion dollar shortfall next fiscal year.
The latest count puts Illinois’ unpaid bills at around $5 billion.
And here in supposed prudent Texas.
The identified reductions would make only a partial dent in the expected budget gap, estimated at somewhere between $11 billion and $19 billion. The 5 percent cut requests apply to only about a quarter of the state’s two-year, $182 billion budget
Example: Montana is facing “only” a $2B deficit this year….but….in 2011 it will be close to $12B……That’s a huge jump for a small state….
Unfortunately (or fortunately?) states don’t own a “printing press” and MUST balance their budgets…
That means lots of PAIN in the future for all…..
(Funny that the TRILLION dollar military budget is “off the table”!)
Might kind of take care of some unemployed as they fall off the unemployment payments’ roles.