Sacks argues California, Illinois, and New York are all in fiscal death spirals driven by structural government waste and patronage, and without federal bailout or bankruptcy mechanisms, these states face collapse, making their debt increasingly risky.
California, Illinois, New York, these states are all in a death spiral. They're all in the process of collapsing. And they will try to get bailed out by the feds. That's their only potential savior because they're not allowed to declare” ⚑
Friedberg argues California's half-trillion in bonds outstanding, an $18B deficit heading toward $30B, and hundreds of billions in unfunded pension obligations make the state's fiscal position structurally unsound and reliant on a bond market that may not absorb further issuance.
California has half a trillion dollars of bonds outstanding, and the state of California is looking at an $18 billion deficit. They're going to continue to issue bonds over the next year. That number is going to climb to $30 billion.” ⚑
Chamath warns that California's combination of massive fraud, rising deficits, looming pension obligations, and potential billionaire tax will cause the bond market to reprice state debt risk dramatically, leading to failed bond auctions and a fiscal death spiral that politicians cannot escape.
Wait until the bond market sniffs out how fake and propped up the California economy and balance sheet and pension system is. And he said, you're gonna see these bonds run because those folks don't care about anything other than the ones” ⚑