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When budgets absolutely need to be cut, public safety and education are at the forefront of the cuts, while unsustainable union pensions and healthcare benefits simply go in the lockbox and are not to be touched. Our own Governor Granholm has done nothing but bloat the Michigan budget, resulting in a recession that has lasted the entirety of her two terms in office. Under Granholm, Michigan's largest employer is now the government, she will by her own admission have lost more than 1,000,000 jobs at the end of her 2 terms, and has by her own admission used schoolchildren as human shields for tax increases. Same old same old in California, where 2nd grade schoolchildren are being coached during school time to write letter to the Governor demanding that cuts not be made. No mention of the unsustainable union benefits. I guess the coaching of human shields only goes skin deep. From Story Balloon: Kids: Pwetty Pwease Stop With Ta Budget Cuts, Mr. Schnitzelager, Snockledoodle..Schwarzenegger.
Now that every trigger happy, red-bull OD'ing HiFTer is keenly following every lockbox in possession of Greek bureaucrats to see how many billions more in debt will “suddenly” appear out of thin air, many have forgotten about that “other” sovereign bailout – Dubai. The reason: Dubai World, which was supposed to present a restructuring offer for $22 billion in debt in a meeting with lenders in December, never did. January wasn't any different. February, by the early looks of it, will also be a dud. So as the world grinds along and creditors have no clue what the hell is going on in Dubai, and increasingly so in Greece, everyone has their fingers crossed that not only will there be no default anywhere, but that anyone who dares to mention just what a great big castle in the air the entire sovereign debt arena has become, funded by overt and covert cash transfers by the Federal Reserve, will be (in)voluntarily swept under the rug.
Unfortunately for the Xanaxed conventional wisdom, CDS traders tend to not enjoy the view from under the rug, and are making their presence felt. The result: Dubai CDS, since the Thanksgiving crisis, has crept 25% wider from the lows in the low 400s, and is now at 518 bps. Dubai still has a commanding lead over Greece, although the 100 bps advantage seems rather tenuous. We expect this race to the sovereign default bottom to become much more exciting once everyone's cards are on the table, and both the Petrodollars and Europe acknowledge that without Bernanke subsidizing a global bailout, things are about to become a whole lot worse.
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