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Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

Samizdata quote of the day

“There is an almost universal assumption that the next government, of whatever stripe, will be imposing new taxes to avoid a junk-bond future. This easy option should not be allowed to run its course without challenge, because it ignores the risk of turning Britain into a junk economy of high taxes and low growth. It is no coincidence that the pressure to bring tax havens to heel has become intense over the past six months. So panicked were the finance ministers of the G20 nations about the risk of capital flight from the grabbing State that a campaign of bullying was launched against a small group of nations that refuse to accept that the State has the power to achieve absolute dominion over private wealth.”

Carl Mortished. He is writing about California, and the lessons of that indebted US state for the euro zone and Britain.

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9 comments to Samizdata quote of the day

  • On this side of the Pool, Obama at least has the Chinese cornered – they know their growing pile of dollar assets will be devalued, but have little choice as to where to park their trade surpluses. Britain is in worse shape, since the Chinese do not really care to invest in pound-denominated debt. Thus, my humble forecast is that Britain will be the prequel – California will get bailed out by Obama, but I have trouble seeing the Germans bailing out Britain (and Hungary, and the Baltics, and Ireland, and Greece, and Spain). Public sector cuts will come, but they will be insufficient – higher interest rates, inflation, and falling pound will be there too. It’s hard to bet on currency movements, and yet, my capital preservation advice for my British friends would be to go short the pound, long Canadian and/or Australian dollar.

  • Regional

    Don’t touch the Pacific Peso, the government has emarked on a high borrowing program to build white elephants.

  • Kim du Toit

    It’s difficult for foreigners to understand quite how much California is loathed and despised by the rest of America (excluding the Peoples’ Republics of the East Coast).

    Here’s a prediction (mark my words): if Obama bails out California, the Republicans will retake the House, and possibly even the Senate, in the next election.

    That’s why he’s downplaying talk of bailout.

  • K

    Bailing out CA will scuttle the USS Republic. It is taking water already.

    CA seems in the worst shape at this moment. But that is more about more visibility than actuality. Michigan is on life support, sustained by the auto bailouts and other federal money.

    Watching CA descend into a new Dark Age may spur the more responsible states and citizens to consider their own conduct and perhaps avoid the same fate.

    I expect nothing of that sort in the Midwest which will just demand more Chrysler type bailouts. And the NY, NJ, MA complex will try virtually anything except cutting spending.

    Meanwhile, Metropolitan Washington D.C. will remain the most prosperous booming part of America. I wonder why that is.

  • perlhaqr

    I wonder if we could see the US try to split up again if The Great One tries to tax us to bail out his friends. No, wait, no one so much as twitched when he bought GM and Chrysler, so probably not.

  • Eric

    Here’s a prediction (mark my words): if Obama bails out California, the Republicans will retake the House, and possibly even the Senate, in the next election.

    You have a lot more faith in the American voter than I do. I live in California, and I see no indication the voters are interested in facing the truth, and they have 49 electoral votes. If the feds bail out California and the other bankrupt states they’ll have greased most of the electorate.

  • James

    “Watching CA descend into a new Dark Age may spur the more responsible states and citizens to consider their own conduct and perhaps avoid the same fate.”

    CA’s fiscal demise should certainly prompt the other 49 states to get serious, truly and finally, about managing the untrammeled immigration trends that were the proximate cause of so many of problems in the Golden State.

    -James

  • Eric

    CA’s fiscal demise should certainly prompt the other 49 states to get serious, truly and finally, about managing the untrammeled immigration trends that were the proximate cause of so many of problems in the Golden State.

    We tried everything we could to control illegal immigration, but the courts struck it all down. Can’t be done unless the feds are interested in doing it, which they most decidedly are not. That, apparently, would be racism.

    But in any event that isn’t the problem. We have (last I checked) a 21 billion dollar deficit. If spending had been held to the level it was when Ahnold was elected, adjusted for population growth (including illegals) and inflation, we would now have a fifteen billion dollar surplus. It’s not the illegals, it’s the spending run amok.

    The spending isn’t really the fault of the legislators, either. The voters have, over the years, turned out anyone who implied we might be better off living within our means. So the legislature did what legislatures always do when confronted by conflicting voter demands of no new taxes yet increased services: They issued bonds to keep the lights on. It’s been obvious for about a decade this was not going to end well. We would still be in trouble even if the economy was booming.

  • Paul Marks

    Of course, like the rest of the mainstream media, the “Economist” magazine presented the situation in such a way as to give the impression that higher taxes were the way out of the mess the Californian government has put itself in (although, to be fair, the front cover of this week’s issue of the Economist admits that big government is a problem for the United States – so perhaps the people at the Economist are finally seeing the light).

    In any case, the mainstream media are avoiding the basic point about Califorina – this being that its taxes are already wildly high. This is also true of Britain.

    Any attempt by either California or Britain to get out of its deficit problem by yet higher taxes will lead to economic collapse – and even worse deficits.

    The same is ture of any attempt to “solve the long term deficit problem” of the United States by higher taxes, or a new American national sales tax – “Value Added Tax”, long supported by the “Economist” and “Financial Times” of course.

    Government spending must be cut.

    Not “the increase in government spending must be cut” – government spending must be cut (period).

    “But we can not do that”.

    Then the fate of this civilization is sealed.