Debt for Dummies

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12.29.10

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Debt for Dummies



Adding further to the mounting problems facing our state, California's credit rating is the lowest in the nation. The state pays a 1.1 percent interest rate—1.1 percent higher than other states—which leads to an added $12 billion in interest to pay off $54 billion in debts.

Jerry Brown's newly named controller, John Chiang, says the state does not appear to be facing a cash crisis through the end of the fiscal year, but thereafter, "we see a very different story."

Rich people have borrowed themselves into debts that they can never repay. Poor people have done the same. Middle-class people have done the same. So if the slightest little thing gets out of balance or goes off in any way, the whole thing crashes like a bunch of dominoes! Everyone loses, except the ones who loaned the money and now own everything. The mortgages that were sold to banks, pension funds and investors were packaged in such a complex way that they practically defied understanding. As a result, many financial firms aren't even sure how much money they've lost yet—or how much the remainder of their mortgage-backed assets are worth.

Ted Rudow III,MA

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