California could be broke by July, state official warns

http://www.latimes.com/news/local/la-me-california-budget-crisis8-2009may08,0,7342537.story

California could run out of money as soon as July, the Legislature's chief budget analyst warned Thursday, as a new poll showed voters poised to reject five budget-related measures on the May 19 ballot.
If the propositions do not pass, the state could find itself as much as $23 billion short of the money it needs to pay its bills over the next year, according to a new forecast by Legislative Analyst Mac Taylor. The poll, from the Public Policy Institute of California, found that even as voter interest in the ballot measures rises, all are trailing except the sixth one -- Proposition 1F, which would bar pay hikes for lawmakers in deficit years.
The other measures would provide the state with as much as $6 billion in the coming year through borrowing against the California State Lottery and temporarily reducing some social services.
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As the ballot measures lag in the polls, the administration of Gov. Arnold Schwarzenegger has begun revealing the cuts it is weighing as an alternative.
On Thursday, the administration advised law enforcement officials that it was preparing plans to commute the sentences of 38,000 state prison inmates, including all illegal immigrants. It also is considering closing some prisons and sending inmates to county jails, according to a copy of the proposal obtained by The Times.
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"It's all about fear," said Jon Coupal, president of the Howard Jarvis Taxpayers Assn. "This week it's firefighters; next week they'll threaten school closures."
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The only measure that voters back widely would do little to help the state budget -- but it would send a clear message to Sacramento. The poll found that 73% plan to vote for Proposition 1F, which would freeze the salaries of lawmakers in deficit years. [... :D ...]

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If no buyers are found for government bonds, debt interests could bankrupt the UK

http://business.timesonline.co.uk/tol/business/economics/article6164694.ece

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As John Wraith, the head of sterling rates product development at RBC Capital, says: “If investors get worried, and start to think this is the norm, they may sell the market or demand much higher yields. At the moment, interest payments on the national debt are 3 per cent of GDP, but you could easily see it get to 6 per cent. Six per cent of £1.2 trillion is more than £70 billion — and that’s just the interest bill.

“That is unaffordable. If you get to that, that is IMF territory — it means that you, as an economy, have gone bankrupt and can no longer afford to run your country’s finances. That’s a scenario, not a forecast, but it’s a perfectly feasible one.”

For the time being, most international investors see the current crisis as still being global, rather than Britain’s fault. But the Government — or a Conservative successor — will need to make tough decisions in coming years to prove that it has brought the fiscal situation under control.

If not, it is perfectly possible that the IMF will do it for them, relegating Britain to the stature of a Latin American banana republic in the process.

Read all of it, here...