By Mike "Mish" Shedlock | 31 July 2008
The New York Times is reporting Paterson Warns of Economic Crisis.
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Era Of 'Buy Now And Pay Later, And Later' Is Over
New York is the second state in five days to declare a fiscal emergency. See Schwarzenegger Announced Intention To Slash State Workers' Pay Till Budget Passes for more on the crisis in California. The most stunning thing about Paterson's announcement is how rational it is. He is not begging Washington for handouts, asking for higher taxes, or praying for miracles. This is pretty stunning too: In June 2007, the 16 banks that pay the most on their business profits remitted $173 million to the state treasury. "This June, just a month ago, they sent us $5 million— a 97 percent decrease."
Unlike Schwarzenegger who has for years resorted to floating bond or proposing various lottery schemes to "fix" the budget, Paterson has the correct solution. Of course Schwarzenegger has at times vowed to "cut up the credit cards" but in the end has delivered nothing but promises and schemes of floating $500 billion in bonds to "rebuild California the way it needs to be rebuilt".
Can Paterson Deliver?
I hope Patterson can, but the state legislature is likely to resist all the way. However, saying these things is one thing, and doing them is another. Regardless, of whether or not all of those things happen, some forced austerity is all but assured. The same goes for California as well. And the word that describes the process best is the one word nearly everyone is in denial over: deflation.
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Normxxx
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