State constitutions typically provide that the state first has to service its debt, then make it pension payments, and then pay for services. What we don't know is whether that order will be enforced. And ultimately, the busted state is going to be looking to the federal government for a bailout. Think Greece, but on a much bigger scale.

In an efficient market, at any point in time, the actual price of a security will be a good estimate of its intrinsic value.

Economies typically do not function well in hyperinflation. The real value of government debt might disappear, but the economy is likely to disappear with it.

Eugene Fama Quotes