The world is breathing a sigh of relief now that the financial crisis in Greece is “over.” Yeah, right. Greece’s financial misdeeds — the country has racked up a lot of
But we in America shouldn’t be too smug, because U.S. states have their own , many of them worse than anything facing Greece — and the problems at home are starting to erupt!
In fact, there are steps you might want to take RIGHT NOW to protect yourself from thefinancial earthquakes these debt volcanoes could unleash.
Let’s put things in perspective. Greece’s (GDP) is approximately $357 billion. Meanwhile, the state of Illinois has a GDP of around $633 billion — and, on Monday, Fitch Ratings downgraded Illinois’ and warned of possible further action, leaving the state’s credit on negative watch.
Why? Because Illinois has a $13 billion budget deficit and is careening into a liquidity crisis.
Is Illinois not big enough for you? California is the largest U.S. state with roughly $1.8 trillion in GDP — the eighth largest in the world. That puts it roughly on par with Russia, Spain, or Brazil. How bad are things in California?
California is wrestling with a $22 billion budget deficit.
The deficit is expected to get worse, and hit $25 billion in 2012. And that’s a CONSERVATIVE estimate. Other estimates put it over $40 billion.
Including state pension obligations, California’s debt burden is 37% of its economic output.
The crisis is so bad, the — or against default — on California general obligation debt now show California’s bonds are at greater risk than the bonds of Kazakhstan, Croatia, Bulgaria and Thailand. That’s right, Kazakhstan! Where Borat comes from!
The financial situation is so severe that California is paroling prisoners early, slashing what once were deemed essential services, and doing the equivalent of rifling the couch cushions (shifting funds temporarily) to try and bridge the fiscal gap.
Across America, the big picture is just scary. According to the Center on Budget and Policy Priorities, 48 states face shortfalls in their budgets for fiscal year 2010 that total $196 billion or 29% of state budgets — the largest gaps on record.
it can’t pay — will probably come back to haunt Europe, and soon.