Like a heroin addict needing one last fix, California wants to stop. But, just one more injection of that sweet bond income and then tomorrow it'll get its financial house in order, really, that's a promise.

California has huge debt and obligations it cannot possibly meet, and default is inevitable, says financial analyst Chris Whalen. The old dodge of selling yet more bonds to pay current obligations isn't really working anymore. California's credit rating is low, which means the state must pay more interest on those bonds. Plus, the municipal bond market is nervous now, wondering what icebergs are lurking unseen, and that means fewer buyers. This is precisely what happened over a week ago when California sold $10 billion in short-term bonds, less than the $14 billion they offered, and were forced to offer higher interest rates.

California is the poster child for financial irresponsibility. The official estimate of the deficit is $20+ billion or more each year for the foreseeable future. I call it the Magic Expanding California Deficit Estimate, because it grows ever larger as the financial gnomes in Sacramento discover they've made yet more erroneous assumptions or somehow forgot to include relevant data in their previous estimates. For far too long both parties have been playing a cynical game of kicking the state's problem into the future with bogus numbers, issuing more debt, and pretending everything is fine.

But that game is over. California's financial problems can no longer be hidden. Band-aid solutions will no longer suffice. Neither will leaving the problem for those a few years later to figure out. California has obligations it must meet now. But it no longer has the money or the borrowing power to fund them.

Well, you say, maybe California could file for bankruptcy? Nope. There is no provision in the law for a state to do so. Perhaps the authors of the bankruptcy code thought it absurd that a state could ever go bankrupt, so they didn't include it? But then, they wrote it before the days of modern finance, with its massive securitization, cheerful lack of ethics, and absence of regard for future consequences. Did I mention that investment banks make billions brokering municipal debt? Just so you know.

When California isn't looking for the next fix of bond debt, it fancifully imagines that Uncle Sam may soon come to the rescue with bailout money. Given the huge Republican gains in the recent election, that's hardly likely. Plus, if the feds bailed out California, several other states would demand a bailout too. Plus, the terms the feds impose might be onerous.

The obvious answer is that California defaults on its debt. Terms are renegotiated. Bondholders take a haircut. Wall Street and hedge funds will squeal loudly here with more of their tiresome "Too Big To Fail" litany, howling that losing money on the bonds would just be too hideous to bear. But the needs of citizens and the states must come before Wall Street. The restructuring will be painful, but somehow states must become solvent again.

This hardly means pain just for bondholders. State salaries and pensions will take major hits too. A mighty howling will come from the public unions at such an outrage. The state budget will be slashed with yours and my favorite pet projects maybe getting axed too.

For all practical purposes, California is already insolvent, and the financial world knows it. With bankruptcy not an option, default looms as the eventual outcome.