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We Have Warned you …US States = PIGS

Wed March 24 2010

This articles tracks the cost of Credit Default Swaps on state debt. A CDS is a bet that the bond may default. When the premium exceeds 3% of the underlying value of the bond, this is  apparently a trigger point of no return, or as Gladwell would say, a tipping point. California and other states are apparently there now. We have written at length on this blog about potential state defaults, they are coming. 

PIGS are the Portugal Ireland Greece Spain countries in financial trouble, news on the wires about Portugal downgrades as I write this morning. 

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2 responses to “We Have Warned you …US States = PIGS”

  1. Dawn Vrana Avatar
    Dawn Vrana

    WOW! With all the news and wires about the financial troubles of several countries, including PIGS, I am amazed at how non-chalant investors and the governments are re-acting. Why has the U.S President’s focus been all on “healthcare”? With a national deficit of over three trillion, do the debt-laden states honestly think the U.S. government will be able to “bail” them out? When the states declare bankruptcy, doesn’t that hugely “increase” the national deficit? There has to be something the government can do besides “bail-out.” Can the governments keep out the bond “vultures” that have smelled the blood, and “are circling? At what point of the state’s downward debt sprial can the U.S. government step in and say enough is enough? HA! Who am I kidding?…Who wants financial advice from an entity that is 3 trillion in debt itself?! 😦

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  2. Dennis Elam Avatar
    Dennis Elam

    Now you’re getting in the spirit of things! Good post Dawn, seriously, as you say it is the height of irony to expect the govt to bail you out but that is what Bear, Lehman, Goldman, B of A, Merrill all thought, and with CA and NY voting solid Dem, I suspect they have a reason to believe the Admin will bail them out. But as you say, will that be possible, I honestly do no know.

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