If you think that the bankrupticies of the mid-sized California Stockton and San Bernardino are minor news in the grand scheme of things, think again.
The bankruptcies of these two places seem to have made one of the world's richest and most powerful men blink.
Warren Buffett's Berkshire Hathaway had made big bets on the health of municipal bond markets -- effectively wagering that all the dire predictions of municipal and state bankrupticies in the U.S. were overblown.
But in the wake of the California bankruptcies, Berkshire Hathaway terminated more than $8 billiion in contacts -- about half of this bet, according to the Wall Street Journal.
Why? Buffett in a TV interview made clear that he had been spooked by Stockton and San Bernardino. Their willingness to go into bankruptcy had made the once unthinkable possibility of massive municipal bankruptcies significantly more thinkable.
"The stigma has probably been reduced when you get very sizable cities like Stockton or San Bernardino to do it," Buffett said.
Buffett is a famous resident of Omaha, Nebraska, but he knows California well and spends significant times here. He owns a home in Orange County.
So if he's spooked by these bankruptcies, maybe the rest of us should be.
Lead Prop Zero blogger Joe Mathews is California editor at Zocalo Public Square, a fellow at Arizona State University’s Center for Social Cohesion, and co-author of California Crackup: How Reform Broke the Golden State and How We Can Fix It (University of California, 2010).