andalusian
Season - Restarted
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- Sep 24, 2008
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The American economy has improved only built on the Federal Reserve's stimulus program. Its not real, the economy is totally dependent on the FED. As the state with the largest economy in the US, California bears the most of this imaginary success.
So, you are telling me that in order to have a healthy business model someone had to invest money... When you can show me a business or country that can have a positive cash-flow without investment - we can talk. I never believed in the model that you need to let it all burn to the ground so it will restart new and fresh - the Japanese tried this approach in their economic recovery at the end of the 80s and it took them 20 years to regain their footing.
Is there going to be a downturn at some point, certainly - things can not go on all roses for ever. Is California going to bear the most of this crash? It depends where the crash comes.
California's biggest industry is finance, real-estate, insurance and rental. It will certainly hurt if this is the cause of the downturn - but I believe New York has a bigger portion of this industry than California.
If there is a tech crash - it can certainly hurt California, but it is only the 5th largest sector of the California GDP - so it is not like the entire state is dependent on it.
Manufacturing is California's 4th largest sector - if there is a crash because of trade that hurts manufacturing - I suspect there are states that are a lot more reliant on manufacturing than California.
But "it is the biggest and will thus bear most of it" is a nonsense argument. This basically suggest that it is best to be a super-poor state - because when the downturn comes - there is little to be lost.
The reality is that California's success in the recent years was because it has high taxes, has a positive cash flow and properly invests this income. It is certainly a lot better than states like Kansas that lowered taxes to stimulate the economy and saw it fall to pieces.

