How Do California and Greece Compare?

The WSJ’s ‘Heard on the Street’ has an interesting item today comparing California and Greece from the standpoint of the bond markets . Bottom line is that California fares far better than Greece in investors’ minds. It’s a question, of course, how much of that is attributable to how investors see the underlying economies of each place and, instead, how investors are pricing the sugar daddi, er , the US government and EU-Eurozone institutions that might be called upon to offer a bailout. But in terms of spreads, take a look at this chart from the story: Thus the article notes with respect to Greece’s dire situation: Adoption of the euro, by removing the threat of currency fluctuations, encouraged yield-hungry investors to bid up Greek bonds. Leverage allowed Greece to run big current account deficits, despite low productivity growth.