California Bet 2% Of Its Budget On Facebook's Stock Price Remaining High

Here's a great example of why California is teetering on the edge of bankruptcy and will likely end up in bankruptcy a few years out.

The state is running its budget like an out of control gambler.

The state's projection for 2012 revenues is $91.3 billion, but that was made on the assumption that Facebook insider sales would bring in $1.9 billion in tax revenue. With the price of Facebook stock collapsing, tax revenues from Facebook stock sales are not going to come anywhere close to projections.

Thus, another leaky hole in the states projected revenue stream. Either, Bernanke starts printing very aggressively, which will allow states like California to pay off their debt in cheap dollars (which will of course be price inflationary for all of us) or states like California are going to have to default. Illinois will probably be first.