California Controller John Chiang, a Democrat, warned last week that the state was "less than 50 days away from a meltdown of state government."
While that's music to my ears in many ways, I wonder just how culpable California is in all this. Or for that matter the auto industry, the financial industry, and the housing industry. What if they are all ultimately caused by a fundamental shift in consumer preferences, i.e. a real business cycle? I think we are all aware of the shift in living patterns that has occured over the last decade or two. Sometime in the mid to late 1990s, the seemingly inexorable pattern of rich folks leaving the city for the suburbs started to reverse.
Understandably, this was not widely predicted, indeed it appears unprecendented at least in the US and Brittain. The car companies, domestic and foreign, lost this bet. Suburban homeowners and the suburban housing industry lost this bet. The financial industry, by facilitating these bets, also lost. States with a disproportionate share of suburban development, i.e. the sun belt states, lost this bet. Ultimately, this may the explain the downfall of the US as a car centric economy. Although non-car centric Europe has suffered just as much in the initial crash and aftermath, it remains to be seen who will emerge stronger.