Those who buy these bonds face greater risk of default or delayed payments, which amount to a partial default. It is not rocket science to figure out that no business can buy high and sell low for very long. But it is always politically expedient to impose price controls on business, in order to look as if you are protecting consumers. Price controls created a gasoline shortage in the United States in the 1970s, food shortages in France in the 1790s, and housing shortages under rent control in cities around the world at various times in between. The same shortsighted politics that created an electricity crisis for California can be followed to create a more widespread shortage of electricity around the country.
Politicians know better.
They just are not likely to do better. As California's Gov. Gray Davis said, in one of his rare candid and rational statements, ''Believe me, if I wanted to raise rates, I could have solved this problem in 20 minutes.'' In other words, the economic problem is simple. It is the political problem that gets complicated. The economic problem is how to keep electricity flowing to California consumers and the California economy. That is how we get other things that we want.