meek-investor

Its the world's ninth largest economy. Its six times the size of Greece. Its actually bigger than India. And its hopelessly bust . Yet; we aren't hearing much about it. Only because ,  its not a country. Its a state. The State of California. The world's biggest basket case ! This has been a favourite topic of mine having blogged before here and here . California has a state budget of some $90 bn. And it just projected a deficit of $15 bn. What sort of an economy runs a deficit of 18% of the budget ?? This has been going on for years . And what does that state do - simply borrow . And borrow. And borrow.  And with no hope of ever bridging that gap. If California had its own currency, I would be merrily shorting it. It would be a prime candidate for begging at IMF's door.  For once you can't blame the political leaders for the mess, although they are the ones being vilified and quartered. The blame must squarely rest on the citizens of California. For they are the on...

The end of the world is near. On Aug 2 to be precise. Repent and thou shall be saved. Every year, some nutter prophecies the end of the world on some artificial date and his followers prepare for Armageddon. Come the day and nothing happens. We live on till the next prophecy. Is this what is going to happen on August 2nd, the latest doomsday deadline ? Somewhere on August 1st or so, America will reach its legally approved debt ceiling of $ 14.3 trillion. Ninety times in the past, this ceiling has been raised by the US Congress and the Senate and life goes on. This time however, there is a real possibility that it may not be raised. Hence the doomsday. Do I see you yawning ? Surely some technicality of American debt ceiling cannot affect you and me. Who cares ? Unfortunately you should. You should care very much, wherever in the world you are. It won't be the end of the world, but you will have a vision of what the end of the world might look like. For this is what will happen if th...

Conventional wisdom has been that a sovereign guarantee is the best form of security you can have when you lend money. You can be pretty much sure that your money is safe if you buy government debt. Doesn’t matter which government, if you leave aside rogue states like North Korea or Myanmar. Conventional wisdom that is. That was before the financial crisis. As the crisis spread, Iceland was the first country to go virtually bankrupt. When that happened, it was viewed as an isolated instance of an insignificant country that didn’t matter. Then came Dubai. Well technically, not Dubai the Emirate, but Dubai World, the company. But then in that part of the world, it’s the same thing. Didn’t people see it coming ? – virtually anybody who’s been to Dubai would know that it was a place gone financially crazy. Of course, everybody knew that. But then everybody expected that Abu Dhabi, the oil rich emirate would always stand by Dubai. That was the mistake. The really startling thing about the ...

A few days ago I posted on the Cash for Clunkers scheme that is just closing in the US (Click here ). In the post, I jokingly asked the question – “Why not cash for clunkers for TVs, washing machines, dishwashers, or for that matter, kidney machines”. It turns out that this wasn’t a joke. Or else somebody in the US administration is reading my blog (Ha Ha). There is such a scheme coming – Cash for refrigerators . Usual rubbish being given on improving energy saving. Cost ? Some $300 m. It IS becoming a joke. What next ? For some prosaic speculation, click here . Where will this all end ? The wallet is empty. You are borrowing from your children. And then recklessly spending like this . When the history of our generation is written, it shall be said of us – that was the most irresponsible, reckless generation in all of human history; a generation that committed the unpardonable sin of bankrupting its children before they were born. The United States Constitution is the one of the most d...

Amazing things have been happening in California, economically speaking. You have to rub your eyes in disbelief at what is happening in supposedly the region with the most brilliant people in the world. I had posted about the mess that California as a state is in here . Usually after a lot of brinksmanship, California does pass a budget before the fiscal year begins and life somehow carries on. Unfortunately this year, even the brinksmanship failed. The budget is not passed and technically the government should have shut down. But to keep things going somehow, California just issued its own currency. These are called IOUs. They are being issued to all and sundry in California, including people receiving tax credits. Now Californians, and other Americans being as smart as they are, saw an opportunity to trade in these IOUs. The SEC quickly stepped in and declared that non registered traders would be in contravention of federal law. Banks in the state have compounded the mess by refusing...

The Indian Union Budget was presented yesterday – normally this is presented on the last day of February, but this year because of the elections and the new government, it is being presented now. A zillion columns have been, and will be, written on the budget. The stock market reacted yesterday by tanking 6%. Many experts will dissect the budget and depending on where they come from, will either laud it or criticize it. The budget is full of jargon and incomprehensible to a layman. It also carries tons of detail and is a very tough read. I had argued some months back on the budget being “the Great Indian Rope trick” – Click here and here to read it. And when Pranabda presented the interim budget in February, I argued that even the rope is gone . In this post I’m focusing on one theme, and to me the dominant theme – the borrowing binge that’s going on. After rehashing the government presented numbers, the overall situation is somewhat like this. Government will get cash inflows of Rs...