Federal Reserve Bank Warns Against Competing Currency!

[radon]

Re: Federal Reserve Bank Warns Against Competing Currency!

Arenīt BOFA, Morgan, Wells Fargo, etc owners of the FED?
If that is so, then the FED, for now "indirectly" is becoming to pressure the State of Californai on the issue.
And that was a predictable thing to happen.
California warrants are money, and their rate of exchange against the dolar is the same thing as the ER of any other currency. The difference is that in this case tha face value of the currency is one to one with the greenback. As time goes on, if the currency is not cancelled, ERates shall oscillate, as they do with any other currency.
Something which aroused my surprise is the arrogance with which a private entity, BOFA, refers to a democraticaly elected constituency, the legislature of California.
Quite shocking, and a sign of the times.
Isnīt there any Californian to protest?
That does not mean any judgement respect the acts of such body, which Iīm in no situation to do.

How is it shocking? Why should banks accept them at all? Indeed why would anybody? Without fiat to force someone to accept them in settlement of debt their usefulness as currency is decidedly limited. The bank is taking on a risk that these warrants will not be honored. Why shouldn't they be compensated?

[ricket]

Re: Federal Reserve Bank Warns Against Competing Currency!

The bank is taking on a risk that these warrants will not be honored. Why shouldn't they be compensated?

Because they created this mess in the first place. They are literally loaning us our own money and charging us interest to do so.

Ignorance of the realities of our banking system is what is going to bring about the end of the United States of America.

[blazespinnaker]

Re: Federal Reserve Bank Warns Against Competing Currency!

Actually, what I'd like to see is California issuing the IOUs as "bearer" currency so you don't have to sign them over to the next dude.

However .. let's face it. The whole IOU thing is just a ploy to freak people out and get them to accept a drop in services.

[radon]

Re: Federal Reserve Bank Warns Against Competing Currency!

Because they created this mess in the first place. They are literally loaning us our own money and charging us interest to do so.

Ignorance of the realities of our banking system is what is going to bring about the end of the United States of America.

I don't follow that logic. California is in trouble because of their profligate spending. The banks didn't force them to take on all those unfunded, even unfundable, obligations, the voters did.

Californians ate more pie than they could bake everyday for years, and now they are surprised that there is no more. It turns out that a pie tin with IOU stamped on the bottom of it is not quite as filling. Ignorance is indeed tough, but life is about to present them with some quality instruction.

[radon]

Re: Federal Reserve Bank Warns Against Competing Currency!

Actually, what I'd like to see is California issuing the IOUs as "bearer" currency so you don't have to sign them over to the next dude.

However .. let's face it. The whole IOU thing is just a ploy to freak people out and get them to accept a drop in services.

Me too, if California fails to redeem them I'd like to grab a bunch on ebay and wallpaper my bathroom.

[ricket]

Re: Federal Reserve Bank Warns Against Competing Currency!

I don't follow that logic. California is in trouble because of their profligate spending. The banks didn't force them to take on all those unfunded, even unfundable, obligations, the voters did.

Californians ate more pie than they could bake everyday for years, and now they are surprised that there is no more. It turns out that a pie tin with IOU stamped on the bottom of it is not quite as filling. Ignorance is indeed tough, but life is about to present them with some quality instruction.

Funny, because how could they have "spent" so much without borrowing it from said banks?

Also, the major portion of revenues for local municipalities (property taxes) is being hammered because home prices are falling so bad due to the bad real estate bets that the banks made. Now that those bets have gone bad, the banks got their bailout, and California is getting screwed...

[newnewthing]

Re: Federal Reserve Bank Warns Against Competing Currency!

The real crunch comes during Septermber when $10B of cash needs occur. Without a budget resolution a much wider range of debt will have to be paid with IOUs. Calif. gen. obligation bonds are senior to almost all other debts. For instance The prisons are junior to bond debt. CA hypes their bonds (see the treasurer's site) by pointing this out. But anyone that still believes that didn't notice what happened to GM's senior debt holders.

So we are a few months away from the sword coming down. Prepare for a haircut.

[radon]

Re: Federal Reserve Bank Warns Against Competing Currency!

Funny, because how could they have "spent" so much without borrowing it from said banks?

Borrowing from banks as opposed to issuing bonds to cover the short fall?

California is a big boy, they knew what they were getting into with reckless bond issues and tax policy. I might have some sympathy for an individual borrower who's agent committed fraud and whose bank didn't do due diligence, but I have none for a state that knew better. California has no excuses.

Also, the major portion of revenues for local municipalities (property taxes) is being hammered because home prices are falling so bad due to the bad real estate bets that the banks made. Now that those bets have gone bad, the banks got their bailout, and

Property tax revenue is getting hammered because prices were outlandishly high and now they are reverting to historical income ratios. This was inevitable. So really you have that backwards. Prices aren't falling because of bad bets, the bets are bad because prices are falling.

Now California wants a turn at the trough? Lets just send them a blank check every year to meet whatever shortfall they have. I guess we can afford it. Suzanne researched it, what could go wrong?

California is getting screwed...

Yep, but they put themselves in that position by refusing to adopt sound fiscal policies. So now economics is forcing California at long last to put its house in order, and we are supposed to cry a river.

[ricket]

Re: Federal Reserve Bank Warns Against Competing Currency!

Borrowing from banks as opposed to issuing bonds to cover the short fall?

And where exactly do the bondholders get the FRNs to purchase said bonds? Oh right, the currency is issued, ie created, by banks.

California is a big boy, they knew what they were getting into with reckless bond issues and tax policy. I might have some sympathy for an individual borrower who's agent committed fraud and whose bank didn't do due diligence, but I have none for a state that knew better. California has no excuses.

The banks *themselves* have stated that they didnt exactly know what the risks of layers of derivatives and such were. Alot of CA investments blew up in the market meltdown which left them with budget shortfalls all over the place. Theyre just as guilty of not saving in the boom times as many other people in the public.

Property tax revenue is getting hammered because prices were outlandishly high and now they are reverting to historical income ratios. This was inevitable. So really you have that backwards. Prices aren't falling because of bad bets, the bets are bad because prices are falling.

Prices were outlandishly high because banks were lending to anyone with a pulse. This drove up home prices, and California, jumping into the hysteria like everyone else, assumed housing prices (and thus property taxes) would continue to go up and planned their budgets accordingly.

Now California wants a turn at the trough? Lets just send them a blank check every year to meet whatever shortfall they have. I guess we can afford it. Suzanne researched it, what could go wrong?

[sarcasm]Why not? We already did that for the banks...[/sarcasm] But seriously, interest-free semi-blank checks are a start...

Yep, but they put themselves in that position by refusing to adopt sound fiscal policies. So now economics is forcing California at long last to put its house in order, and we are supposed to cry a river.

Didn't say to cry a river, just to understand the cause of their fiscal woes in a more accurate, less finger pointing-ish way.

[radon]

Re: Federal Reserve Bank Warns Against Competing Currency!

And where exactly do the bondholders get the FRNs to purchase said bonds? Oh right, the currency is issued, ie created, by banks.



The banks *themselves* have stated that they didnt exactly know what the risks of layers of derivatives and such were. Alot of CA investments blew up in the market meltdown which left them with budget shortfalls all over the place. Theyre just as guilty of not saving in the boom times as many other people in the public.



Prices were outlandishly high because banks were lending to anyone with a pulse. This drove up home prices, and California, jumping into the hysteria like everyone else, assumed housing prices (and thus property taxes) would continue to go up and planned their budgets accordingly.


[sarcasm]Why not? We already did that for the banks...[/sarcasm] But seriously, interest-free semi-blank checks are a start...


Didn't say to cry a river, just to understand the cause of their fiscal woes in a more accurate, less finger pointing-ish way.

Yes yes, we get it. You don't like fractional reserve banking. Now you want to blame all the evils of the world on it. But banks don't force people to borrow. Money is pulled into existence through the demand for capital. Without this demand its creation slows or stops and everyone rushes to discharge their obligations from a static or even shrinking pool. Why do you think the government is borrowing trillions of dollars?

When I was younger people lived in modest homes, and if they wanted something they didn't have the money for there was a thing called layaway. Credit cards and swimming pools were for rich people. People who spent more than they made were usually whispered about sympathetically. What happened to personal responsibility? I guess that doesn't exist in California.

Is it the banks fault that Suzie committed fraud when she lied about her income? I suppose it is the banks fault that Fred couldn't be bothered read his loan papers or used a financial instrument that was inappropriate because it fit into his "how much a month" lifestyle. It was the banks fault the John took out mortgage after mortgage on his home, without ever planing to pay it back, to buy expensive toys. I suppose everyone needs motorcycles and jet skis, and a trailer to tow them and a shiny new SUV that gets 8 miles to the gallon.

Obviously the banks forced states to rely on a tax model that requires continuous unsustainable growth in property values. Remarkable that even during the bubble growth in revenues they still managed to spend every last cent and even had to issue bonds to make up shortfall. And yet, in your view this is somehow justified. Extending over generous welfare and unbelievable pensions to civil servants is somehow the banks responsibility. I worked for hookworm beach for 20 years I deserve that 150K pension for the next 50 years, my job was hard.

They could have rented a cheap apartment and driven a small reliable car. They could have lived below their means, but they didn't, almost the entire state didn't. You act like someone held a gun to their head an forced them to borrow that money. They could have just saved up for something like generations before them, but they wanted it now, and by god they are entitled to it. I don't feel sorry for them. Not one bit.

Last time I was in CA I witnessed an appalling amount of hubris. I felt like marlin perkins on a wildlife show. I seemed to be in the natural habitat of an interesting species that has lived far beyond their means for years and is fully absorbed into an entitlement culture. One that will soon be extinct. Not planing for the future and expecting someone else to pick up their tab is only a small example of their conceit.

Now that they are finally getting their comeuppance they must scramble to find someone else to blame. Of course for the past 10 years people have had to listen to their horsehit about how smart they are and everyone who didn't sign a suicide loan is just a bitter renter. There are many people who were "priced out forever" who can barely contain their schadenfreude. At least at the end of this honest people will be able to buy a house again in that state without signing themselves into destitution.

It takes two to tango and there is plenty of blame to go around. But I'm at a loss when someone wants to absolve people like that of any responsibility. Even worse they want to steal my saving by diluting the currency further to pay for a lifestyle that is far better than mine; and, all the while , oblivious to the fact that it comes at my expense. I'm not immune to the suffering of others. I would even go so far to say I am pretty sympathetic but I really can't find it in me to shed a tear for a society like that or the government they spawned.