FROM GOLDEN STATE TO GREEN STATE TO A STATE SANS ANY LUSTRE, THE STATE OF CALIFORNIA CONTINUES TO TUMBLE. ANCHAL GUPTA UNRAVELS THE DETAILS
In the 1510 romantic novel Las Sergas de Esplandián (The Adventures of Esplandián) by Spanish author Garci Rodríguez de Montalvo, he describes a land on the east of the Asian mainland very close to the ‘Terrestrial Paradise’. The land was inhabited only by black women (Amazons), who were led by a queen named Califa. All the possessions of these women were made of gold. He called that island California. Well, modern day California isn’t an island, but being home to Hollywood, and being a land of immense natural beauty, the name does fit in. In fact, if California would be a state, it would, in itself, be the world’s 10th largest economy, with its Gross State Product (equivalent to GDP) of $1.9 trillion, larger than the GDP of the Indian sub-continent. Today, the state is reeling under the effects of a spiraling debt crisis and the global recession, and the Terminator superstar’s various tactics are coming to nought faster than expected. But being the Golden State that it is, California’s economic issues are expectably on a dramatically different plane as compared to other economies in our analysis.
Till late 2006, California was riding high on a never before seen real estate boom, just like the rest of America. This was spurred by two factors. Post the bursting of the IT Bubble in 2000, the Federal Reserve under Alan Greenspan reduced interest rates to historically low levels while George Bush made huge tax cuts to spur a spending boom. This started a chain of events. US households took mortgage loans; many of them at subprime rates, to buy new houses, hence making financial giants invest in subprime mortgage backed securities. The asset bubble kept on expanding until it burst with a bang in late 2007 and culminated in the global recession. California was one of the worst hit, with average residential prices losing nearly 40% of their value by early 2009. Massive foreclosures followed, as people were thrown out of jobs and unemployment rose. As is evident from the table, economy took a nosedive and unemployment soared to newer heights. The state government was the only panacea that citizens looked up to. But, this time, the last bastion of safety and hope is also on the verge of crumbling and the Golden State could enter the darkest period in its history.
In the 1510 romantic novel Las Sergas de Esplandián (The Adventures of Esplandián) by Spanish author Garci Rodríguez de Montalvo, he describes a land on the east of the Asian mainland very close to the ‘Terrestrial Paradise’. The land was inhabited only by black women (Amazons), who were led by a queen named Califa. All the possessions of these women were made of gold. He called that island California. Well, modern day California isn’t an island, but being home to Hollywood, and being a land of immense natural beauty, the name does fit in. In fact, if California would be a state, it would, in itself, be the world’s 10th largest economy, with its Gross State Product (equivalent to GDP) of $1.9 trillion, larger than the GDP of the Indian sub-continent. Today, the state is reeling under the effects of a spiraling debt crisis and the global recession, and the Terminator superstar’s various tactics are coming to nought faster than expected. But being the Golden State that it is, California’s economic issues are expectably on a dramatically different plane as compared to other economies in our analysis.
Till late 2006, California was riding high on a never before seen real estate boom, just like the rest of America. This was spurred by two factors. Post the bursting of the IT Bubble in 2000, the Federal Reserve under Alan Greenspan reduced interest rates to historically low levels while George Bush made huge tax cuts to spur a spending boom. This started a chain of events. US households took mortgage loans; many of them at subprime rates, to buy new houses, hence making financial giants invest in subprime mortgage backed securities. The asset bubble kept on expanding until it burst with a bang in late 2007 and culminated in the global recession. California was one of the worst hit, with average residential prices losing nearly 40% of their value by early 2009. Massive foreclosures followed, as people were thrown out of jobs and unemployment rose. As is evident from the table, economy took a nosedive and unemployment soared to newer heights. The state government was the only panacea that citizens looked up to. But, this time, the last bastion of safety and hope is also on the verge of crumbling and the Golden State could enter the darkest period in its history.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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