"While I have long predicted the collapse of the euro and eventually the European Union, I have to admit that Greece was not even on the periphery of my radar as a potential economic flashpoint. ... The response of the European Commission and the European Central Bank has been to take a page from Henry Paulson, former secretary of the Treasury in the Bush administration, and attempt to bluff the markets. ... State bankruptcies and monetary exits from the euro may not have been envisaged, but both are going to happen anyway. ... And it should be kept in mind that this is not an abstract exercise in American schadenfreude, as the more serious question is if the [US] financial system is itself strong enough to survive further economic pressure, since a number of US states, including Illinois and California, are now facing situations very similar to Greece. There is no known mechanism for a sovereign American state to declare bankruptcy", Vox Day at WorldNetDaily, 14 February 2010, link:
So the states won't file bankruptcy. They just won't pay their bonds.
1 comment:
Much nicer to just extend and pretend than worry about such complicated things.
Or maybe California and the other states just need some "resolution" mechanism like Chris Dodd is cooking up for the banks?
Presto magic roll the mess onto the fed balance sheet!
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