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The Biz Roundup February 27

Why is it all the bad news we’re getting keeps coming with the adjective “unexpected”?

The U.S. economic contraction in the fourth quarter was deeper than the government first estimated, with other reports today signaling little prospect of relief until at least the middle of 2009.

Gross domestic product shrank at a 6.2 percent annual pace from October through December, the most since 1982 . . .

(“U.S. Economy: GDP Shrinks 6.2%, More Than Estimated,” Bloomberg, February 27) Real Politics has a short piece on how big Obama is gambling with his stimulus and bailout plans, but when you compare them to numbers like this, they’re pretty modest as gambles go.

What happens when California goes out of business? Part 10.1.

California’s unemployment rate rose to 10.1% in January, its highest level in a quarter century, as recession tightened its grip on the most populous U.S. state. . . .

Economist Jon Haveman of the consulting firm Beacon Economics said he expects California’s jobless rate will climb to the mid-10% range and settle there for much of this year.

(“Calif. jobless hits double digits,” CNN Money, February 27) California is a bit like Florida (a bit). Florida was essentially a giant Ponzi scheme built on development. Almost the entire economy in Florida was built on people moving to the state; like a Ponzi scheme, once people stopped moving to the state, the whole thing crashed. California is like a half-Ponzi scheme, and the collapse in the residential and commercial real estate sectors has sunk the state faster than others. You just can’t build a business — or a state — on a Ponzi-type scheme. Period.

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