Fiscal facts aren't all that matters. Investors' perceptions can also have an impact--if California is perceived to be in trouble, investors demand higher prem

Fiscal facts aren't all that matters. Investors' perceptions can also have an impact--if California is perceived to be in trouble, investors demand higher premiums on bonds, and the costs for California to borrow money increase. This can lead to a detrimental cycle of destruction, akin to what happened to Lehman Brothers.