Michael Milken spoke to CNBC's Maria Bartiromo and warned that the markets were indicating inflation concerns. He also said he expected the Federal government would step in to bailout states like California, at the cost of states giving up autonomy to the federal government.
I expect that he's correct. But even so, the notion of a state bailout is distressing.
ReplyDeleteHe also went off on the popular "we need better education for growth" fallacy. I'm sorry to see you neglected to mention that.
ReplyDeleteThe analogy to the EU is idiotic. The countries that are financially falling apart in the EU, save Spain, are the smallest members economically speaking. The states in the US that are failing are the largest economies, and would be the equivalent of Germany or France failing. Secondly, the bailouts in the EU are not working and are band aids or can kicking exercises and at some point these countries will be kicked out of the EU when the EU has had enough of their antics and unwillingness to address the root cause. That isn't going to happen in the states.
ReplyDeleteMost of the states in trouble today have structural issues that can not be solved with a bailout alone, unless that bailout will come each year. They have allowed their fixed costs to grow beyond even the best tax revenue stream they could hope for in a near perfect economy. The problems in nearly all of the states and the federal government run deep and until they are addressed, there is no way for the Fed to bail the states out, just as there is no way that the EU is going to save its weakest members without them fixing the same kind of structural issues.
California can be saved by the rest of the states in the "union" telling California, "No assistance" for you - you're on your own. In fact, the rest of the states ought to tell California that if they don't shape up, their membership in the "union" will be cut off.
ReplyDeleteA national shaming of California is necessary, and they need to be isolated and forced to solve their own problems. If they can't solve their own problems, then they can join Mexico as a new Mexican state.