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California is on the Brink of Financial Ruin - Literature review Example

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This review "California is on the Brink of Financial Ruin" discusses arguing for three things the state of California can do to save itself from the imminent collapse. There is much discussion about how to survive this period-from economic bailout to increased taxes…
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California is on the Brink of Financial Ruin
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Download file to see previous pages Our income has gone up every year, but the rate of spending has gone up greater than the income,” as reported in News Blaze by Ward. Whether it is true or not, economic bailouts and increased taxes are not the solutions to come out of the financial ruin. Depending all-in-all on government initiative for coming out of the crisis will blur the financial screen and is ethically risky too. Should Wall Street be given a blank check without taking a guarantee; after all, it is the democracy. Why the tax-payers should be penalized by paying high prices for lousy assets. Pretensions for economic bailout plan are false. Buying bad loans by the administration just because private bankers have no idea on how to measure their worth, may keep the banks alive but wouldn’t clean the market infection. Capitalism need not be that naked to restore the confidence in the market; it needs to be rescued from the financiers who are ready to undermine the functioning of the free market for their interests through economic bailouts and increased taxes. For the state of California to come out of the crisis, there are ways – better options than economic bailouts and increased taxes that should be tried (Zenilman, 2008).
Economic bailouts would permit the Treasury to buy such assets that are not easy to be valued in the current shaky environment. The number of such institutional assets that would cost the treasury hundreds of billions of dollars would have long term repercussions. There is doubt on the wisdom of following such a policy that would bailout financial institutions from the crisis. According to Luigi Zingales, a Professor at the University of Chicago School of Business, such a move “might achieve the final outcome, but it will do so at an enormous cost.” The government doesn’t have an equity stake in the financial institutions and Wall Street is not promising anything in return. ...Download file to see next pages Read More
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