Austin, TX (PressExposure) July 02, 2009 -- There's another federal bailout on the horizon, this time for California's state government, financial adviser Todd Kernaghan writes on his most recent blog post.
Think General Motors, Chrysler and the banks were tough for President Obama?
California's looming financial meltdown may make that look like a walk in the park, Kernaghan writes on his financial services blog, http://www.toddkernaghan.com.
The effect of the imminent financial collapse of the state - which is the seventh or eighth-largest economy in the world - will have global implications.
What are some of the potential ramifications?
"Seriously, can you imagine the economic impact should California default on their municipal bonds? How many millions of people hold California bonds either directly or indirectly? The number of workers at GM pales in comparison," Kernaghan writes.
And if California runs out of money and literally can't staff essential government positions, such as law enforcement and fire personnel, the results could be devastating.
"Think third world anarchy," writes Kernaghan.
Because of its size, the collapse of California's economy would not only affect the United States but would be felt worldwide.
So what's the solution?
There are no easy answers. Unlike the federal government, the state of California can not print its own money. It can't raise its already high taxes any higher, Kernaghan writes.
"I'm definitely not one for bailouts, but I think one is coming," according to Kernaghan. "Regrettably, the Fed has shown its hand: bailouts for everyone; we can't have any pain in the good old USA!"
Adds Kernaghan: "In my opinion, anyone that thinks this recession is over for good and the bad times are all behind us is a fool. Some smart people out there are choosing to raise cash on rallies, buying hard assets to hedge against future inflation and using absolute returns investing strategies."
Kernaghan is the owner of Austin Wealth Resources, a full-service financial, estate and tax planning firm based in Austin, Texas. He's been helping individuals and companies meet their retirement, investment and tax planning goals for more than a decade.
Before starting his own company, Kernaghan worked for Ernst & Young LLP in their tax consulting group. He graduated magna cum laude from Arizona State University with a bachelor's in accounting. While working for Ernst & Young, he obtained a Master of Taxation from Arizona State.
If you're interested in learning more about Kernaghan's services and about his investment philosophy and strategy, visit his blog, http://www.toddkernaghan.com.