Cali: Back to the IOU Game

[don]

June 25, 2009
California to Pay Creditors With I.O.U.’s

By JENNIFER STEINHAUER

LOS ANGELES — Signaling that California is slipping deeper into financial crisis, the state’s controller said Wednesday that his office would soon be forced to issue i.o.u.’s to scores of the state’s creditors, the first time since 1992, when 100,000 state employees were paid with them.

Before that budget crisis — which pales in comparison to the current shortfall, even with inflation adjustments — the last time California issued the documents was during the Depression, something the controller, John Chiang, alluded to in his news release announcing the impending action.
“Next Wednesday we start a fiscal year with a massively unbalanced spending plan and a cash shortfall not seen since the Great Depression,”

Mr. Chiang said in a written statement. “The State’s $2.8 billion cash shortage in July grows to $6.5 billion in September, and after that we see a double-digit freefall. Unfortunately, the State’s inability to balance its checkbook will now mean short-changing taxpayers, local governments and small businesses.”

The issuing of the i.o.u.’s would reflect the state’s lack of cash flow and its legislature’s inability to agree on a way to close a roughly $24 billion budget gap, as tax revenues have continued to fall in the state. On Wednesday, as Mr. Chiang made his announcement, legislators continued to debate ways to close the gap in preparing for a vote on a budget presented by Democrats that was all but certain to fail on the floor.

http://www.nytimes.com/2009/06/25/us/25calif.html?hp

[grapejelly]

Re: Cali: Back to the IOU Game

Section 10. Clause 1. No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

Just thought I'd put in some humor. Belongs in the joke thread

[charliebrown]

Re: Cali: Back to the IOU Game

My friend's dad was a teacher during the depression when the school board ran out of money. He was paid in IOU's. Now you could buy groceries and dry goods with the IOU's except the merchant did not give you face value for your IOU's. I can't remember the details of the story but I think it was somewhere around 80 cents on the dollar.

This brings up a real interesting point. If the state is going to pay in IOU's and we're a family living pay check to pay check, how do I convert my IOU's to cash? Find some late night TV loan shark, to convert my IOU's to US bonars? Will Walmart take a letter of credit for a purchase? Will the IOU's be transferable? If I'm a vendor same thing goes. I need the state's check to pay my employee's, buy some new tools, lumber etc. This just doesn't make sense. This just passes the insovency from the state to the people.

Oh, and if I'm a tax payer, I'm going to adjust my witholding downward so I don't end up with a credit at the end of the year that the state can't refund. The rope tightens

[BigBagel]

Re: Cali: Back to the IOU Game

My friend's dad was a teacher during the depression when the school board ran out of money. He was paid in IOU's. Now you could buy groceries and dry goods with the IOU's except the merchant did not give you face value for your IOU's. I can't remember the details of the story but I think it was somewhere around .80 cents on the dollar.

This brings up a real interesting point. If the state is going to pay in IOU's and we're a family living pay check to pay check, how do I convert my IOU's to cash? Find some late night TV loan shark, to convert my IOU's to US bonars? So I can buy stuff? Will the IOU's be transferable? If I'm a vendor same thing goes. I need the check to pay my employee's, buy some new tools, lumber etc. This just doesn't make sense.

Oh and if I'm a tax payer, I'm going to adjust my witholding so I don't end up with a credit at the end of the year that the state can't refund. The rope tightens

I would guess some enterprising individual will buy the IOU's. Maybe a vulture fund will buy them up. If your a tax payer you'd want to owe some money at the end of the year. The last thing you'd want is a refund. You could buy IOU's off your state employee neighbor and pay what you owe on your taxes with them. It'll be great.

[GRG55]

Re: Cali: Back to the IOU Game

Just a temporary measure until the Federal bailout. The Administration needs justification for another national stimulus package leading into the 2010 mid-terms. Bailing out the States is as good as it gets for Washington...

[don]

Re: Cali: Back to the IOU Game

My friend's dad was a teacher during the depression when the school board ran out of money. He was paid in IOU's. Now you could buy groceries and dry goods with the IOU's except the merchant did not give you face value for your IOU's. I can't remember the details of the story but I think it was somewhere around 80 cents on the dollar.

This brings up a real interesting point. If the state is going to pay in IOU's and we're a family living pay check to pay check, how do I convert my IOU's to cash? Find some late night TV loan shark, to convert my IOU's to US bonars? Will Walmart take a letter of credit for a purchase? Will the IOU's be transferable? If I'm a vendor same thing goes. I need the state's check to pay my employee's, buy some new tools, lumber etc. This just doesn't make sense. This just passes the insovency from the state to the people.

Oh, and if I'm a tax payer, I'm going to adjust my witholding downward so I don't end up with a credit at the end of the year that the state can't refund. The rope tightens

The infrastructure is already in place- the Pay Day Advance Stores, the biggest chains of which are owned, I believe, by some of the central banksters. Under an assumed name, of course, to protect the innocent.

[BigBagel]

Re: Cali: Back to the IOU Game

The infrastructure is already in place- the Pay Day Advance Stores, the biggest chains of which are owned, I believe, by some of the central banksters. Under an assumed name, of course, to protect the innocent.

Walmart can have IOU ONLY cashiers.

[WildspitzE]

Re: Cali: Back to the IOU Game

June 25, 2009
California to Pay Creditors With I.O.U.’s

Lloyd Christmas as the Governor: