July 6, 2009
The Unthinkable has happened. California, the biggest US state, had to declare insolvency and a state of fiscal insolvency. As of July 1st, it will have to pay in newly emitted treasury bills. Its public debt will rise by another $ 26 billion in fiscal year 2009.
Governor Schwarzenegger had desperately tried to convince, first its parliament, then its citizens to avert the financial catastrophe by raising taxes or reducing expenditures. Neither the political class nor the citizens listened to his dramatic calls. Wide-spread gerrymandering had made this next to impossible.
The sequence of events in California speaks volumes about the short-term concerns of the American society. Everywhere the political class is afraid of imposing even modest extra charges upon its voters, even if these are indispensable for securing society’s long-term sustainability.
How can we expect global political leaders to impose on world citizens tiny extra costs for fossil energy in the interest of viable living conditions on the planet, if the democratically elected leaders in California cannot agree on the terms of preventing a financial disaster!
Compared to what will be at stake in Copenhagen, the California insolvency is a minute issue that will find a solution in the coming months, if necessary with the help from the Federal government. It has no systemic consequences, neither for California nor for the USA. It only adds a few more billion of US dollars to the public debt and a burden on the next generations. That can be repaired, if necessary by inflation.
But if humanity fails to agree to substantial reductions of green house gases at the end of 2009, this will trigger a self-perpetuating process of climate change, which will cause irretrievable damage for the planet.
What the developed countries have so far laid on the table is absolutely insufficient to protect future generations from disaster. Humanity needs effective action by the major emitter countries. Diplomatic formulas will not do! Have the major emitting countries – USA, China, and EU – fully understood the stakes?
Brussels, 06. 07 of .09 Eberhard Rhein
Author : Eberhard Rhein