We reported on California’s exploding debt problem back in 2008.  Since that time, the problem has gotten magnitudes worse, not only for California, but for numerous states in the nation.


The world can use Iceland and Greece as examples of what happens when government debts get out of hand.  Both countries have introduced painful and widespread austerity measures to bring their books in order, or more accurately, to get them through the next few days or few months.

Back to the states, we witnessed California avoiding the austerity measures in recent years by issuing IOU’s to vendors instead.  California is not alone in their budget woes, as reported by the NY Times recently.

California, New York and other states are showing many of the same signs of debt overload that recently took Greece to the brink — budgets that will not balance, accounting that masks debt, the use of derivatives to plug holes, and armies of retired public workers who are counting on benefits that are proving harder and harder to pay.

Eventually, those derivatives will come back home to roost, and the government outlays and liabilities will only increase.  The fraudulent government accounting schemes will be exposed to the masses, and probably sooner than most people think.  Much of the world was surprised over the last few years with the financial crisis and the partial unraveling of the largest bubble in world history.  Are we really going to act surprised when the rest of the cards come tumbling down?