So I am sure you’ve heard that if Italy fails under its current debt crisis that it could be a huge problem for the entire world right? Further with the current situations in Italy and Greece combined we could have a real mess on our hands that could have global implications. Now I am not saying anything about the above isn’t true, but how bad do you think it would be if say the states of California and Washington collapsed in a debt crisis?
Here is a shock, according to a new resource provided by The Economist numbers wise it would be about the same as Greece and Italy going under.
The GSP (gross state product) of Washington State is about the same as the GDP (gross domestic product) of Italy, the same comparison can be made between California and Italy. This is why I am so concerned about a domestic crisis in the municipal bond market. Some other shocking comparisons.
- The state of Texas is roughly equivalent to the nation of Russia
- The state of New York is roughly equivalent to the nation of Australia
- The state of New Jersey is roughly equivalent to the nation of Switzerland
This begs the obvious question, if the nations of Italy, Greece, Russia, Australia and Switzerland all fell at the same time how bad would it be for us and for the world as a whole? While we can’t make a direct comparison in many ways the same crisis could be caused by just 5 US states.
All in all “The Economist” was able to create an interactive map that accurately correlated 50 different nations to each of our 50 states. In short a US collapse would be equivalent to 50 different nations going down at once. Again it isn’t a direct 1 for 1 comparison but it should give us pause when the talking heads on TV tell us there is nothing to worry about from a stand point of state, city and county municipal bond based debt.
You can find the map and get a better perspective of this situation on The Economist website at this link.