California, the world's eighth largest economy is in serious economic trouble and wants the U.S. Government to guarantee its bonds.
Since the U.S. Government is broke, what California appears to be really saying, is that they want U.S. Government to beg China for more financial assistance. China currently holds most of all U.S Debt. It would appear doubtful the U.S. Treasury would guarantee California bonds without first getting permission from China, America's number one creditor.
Should U.S. Government unilaterally guarantee California's billions in bonds, China may prudently consider the risks of those "bonds" before making new loans to the United States; reconsider whether to renew a trillion in outstanding U.S. debt, and could raise its interest rate now charged U.S. Taxpayers caused by U.S. Government borrowing. Any increase in China's interest rate charged on U.S. Government debt, could further devastate the U.S. operating budget, depleting funds needed for Americans.
California Gov. Arnold Schwarzenegger and Democratic lawmakers say they are asking for help from the U.S. Government only until the California economy turns around. If California's economy does not turn around, U.S. Taxpayers will be more chained to China and forced to guarantee worthless California bonds.
Yesterday there were two conflicting TV news reports. The first, "The Recession is close to ending", the second, " Expect gasoline to go to four or five dollars a gallon." Obviously should gasoline hit four or five dollars a gallon during the recession, many workers in CA and America could not afford to drive to work, or buy many retail products and services: much of America would not recover from the recession. Under such circumstances it is foreseeable California could default on its U.S. Government "Guaranteed" CA Bonds.