A third California city has declared bankruptcy:
The California city of San Bernardino has filed for bankruptcy protection amid a $46m (£30m) budget deficit and ongoing criminal investigations.
The city listed assets and debts of over $1bn, court documents show, and becomes the third in the state to go bust in just over one month.
When the previous California city declared bankruptcy I was expecting more to follow (although not quite this soon). This is the only possible result of following Keynesian economic ideas. One cannot spent themselves back to prosperity.
Savings are resources that have been set aside for future use. What’s being spent today isn’t actual savings, we’re not spending saved up resources, we’re spending nonexistent resources. One of the failures of Keynesianism is believing savings are bad for the economy. When somebody saves they are foregoing current consumption for future consumption. A city may save in order to buildup enough resources to construct a community center or a road. The key is that resources need to be available in order to do either, something debt spending doesn’t do. Eventually the shortage of resources, that is the misallocation of resources, catches up and people quickly find out that they don’t have enough resources to complete projects. Towns find themselves unable to afford finishing the new community center or road.
We will see more and more stories like this as more and more municipalities collide head on with the reality that there aren’t enough available resources to continue existing projects.