Just in from the West Coast:
California’s debt is seen by investors as riskier than Kazakhstan’s, according to Bloomberg News. Five-year credit default swaps tied to California’s debt, which are a key measure of the market’s belief in the likelihood of default, are actually trading at 100 basis points above those of Kazakhstan. In other words, the market believes a developing country of just 15.7 million people is actually less likely to default on its debt than California, which makes up the eighth-largest economy in the world.
And last week, Jamie Dimon, the CEO of JPMorgan, the nation’s second largest bank, warned that California’s $20 billion budget gap could pose a bigger risk than the Greek debt crisis.
In other news, here in the Midwest, where rational people live:
During the fat years of the mid-2000s, while most governors went on spending sprees, Indiana Gov. Mitch Daniels was trimming Indiana’s payroll, slowing the state government’s growth, and turning a $800 million deficit into a consistent surplus. Now that times are hard, his fiscal rigor is paying off: the state’s projected budget shortfall for 2011, as a percentage of the budget, is the third-lowest in the country.