So now it's official. California, America's basket case state, is now a bigger risk than Kazakhstan, according to this graph from Seeking Alpha.
Comparing 5-year credit default swaps on bonds issued by the State of California and the government of Kazakhstan, the market seems to be saying that California's are 50% more risky.
Credit default swaps are important because they serve as a kind of insurance and measure the market's belief in the likelihood of a default.
In case you're wondering, California is the world's eighth largest economy. The Golden State's budget is bleeding about $20 billion in red ink through fiscal 2011.
What's even scarier is the warning from JP Morgan Chase CEO Jamie Dimon that California is more a worry than Greece. "Greece itself would not be an issue for this company, nor would any other country," Dimon was reported saying. But given California's size, any problems it would have servicing its debts would result in "contagion".
Still, as commentator Desmond Lachman says, you can't compare California oranges with Greek apples. California's budget deficit presently amounts to less than 2 percent of its US$ 2 trillion economy, Greece's budget deficit has now reached a staggering 12 ¾ percent of its US$300 billion economy.
But investors are nervous and that means California's problems are not going to disappear.
no comment untill now