Jul 12
California Started Issuing IOUs
Posted by Kristjan Velbri | Posted in General | Posted on 12-07-2009
Comic by Tom Toles.
California is in a very big mess, but there are other states that might have to take the same path as California – i.e. issue IOUs. One gentleman from New York (can’t remember his name) jokingly said that California makes us [New Yorkers] look good. Here’s more on California:
Economist: Legally unable to declare bankruptcy as a company would, the state has begun paying many of its bills with IOUs instead of cash. One of the three big credit-rating agencies, Fitch, this week downgraded the state’s bonds, already the lowest-rated such bonds in the country, to BBB, within spitting distance of “junk”. Government offices are closed on some days, as state workers take involuntary and unpaid furloughs. Taxpayers are still waiting for refunds.
WSJ: Big Banks Don’t Want California’s IOUs: A group of the biggest U.S. banks said they would stop accepting California’s IOUs on Friday [ie. July 10th, the article was published on July 7th – comment mine), adding pressure on the state to close its $26.3 billion annual budget gap.
Jct: There’s nothing wrong with small denomination California State IOUs if anyone can pay their taxes with them. When Argentina’s government workers were faced with cuts, their unions talked 6 state governments into paying them with small-denomination state bonds which could be used to pay for state services and taxes by everyone.
When the local currency is pegged to the Time Standard of Money (how many dollars per unskilled hour child labor) Hours earned locally can be intertraded with other timebanks globally! In 1999, I paid for 39/40 nights in Europe with an IOU for a night back in Canada worth 5 Hours. U.N. Millennium Declaration UNILETS Resolution C6 to governments is for a time-based currency to restructure the global financial architecture.
See http://youtube.com/kingofthepaupers
Too bad California IOUs won’t be accepted in payment for state taxes and services like state bonds were in Argentina. Too bad California IOUs will be denominated too big to use as local currency. Too bad Argentina people were smart enough to avoid the tent-cities catastrophe and California people are too stupid to follow their example.
If they make IOUs legal tender, I take it all back.
Well if the purchasing power of the bonds falls, there will definitely be something wrong with California’s IOUs. That’s a scenario you can’t rule out as it is the same thing that happened in Argentina, as I’m sure you’re well aware of. Fitch just rated Cali’s bonds as BBB, only one step away from junk. If bonds are to be used as currency, they have to be trustrworthy. The only thing that makes any currency work, fiat or not, is trust. I’m not in the position to make predictions or estimations as to whether or not California’s IOUs will be trusted, but it certainly makes me anxious about the state and the country as a whole.