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Move Over Fed, California's Now Printing Its Own Money
Seeking Alpha ^ | July 02, 2009

Posted on 07/03/2009 3:14:41 AM PDT by mylife

Move Over Fed, California's Now Printing Its Own Money

Watch out Ben Bernanke, the Federal Reserve now has competition in the currency game. California is planning to create its own money in the form of IOUs, just like the Fed. What is the California IOU – currency or an interest bearing note?

Officially the IUOs will be called “registered warrants”. State Controller John Chiang planned to issue $3.4 billion, maturing on Oct. 1 to replace state payments. The interest rate is set to be determined on Thursday, but cannot exceed the statutory limit of 5%.

The San Jose Business Journal “California banks ponder their stance on state IOUs” reports that banks are equally perplexed about whether to accept the IOUs and how to process them. But the banks are loath to upset the state with the largest economy in the nation; the state capable of generating the largest investment banking fees.

Bank of America (BAC) issued a statement saying they will honor the IOUs through July 10. Wells Fargo (WFC) and JP Morgan (JPM) have not decided. The smaller banks were mixed.

California’s ingenuity poses an interesting dilemma for the Fed. The IOUs would be structured as short-term tax-free bills, but trade like cash. Banks are being asked to accept the IOUs and advance customers interest. Should the Fed sanction alternate forms of money?

Disclosures: Author is long BAC and WFC.


TOPICS: Business/Economy; Government; News/Current Events; US: California
KEYWORDS: iou
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But hey, the recession is easing...
1 posted on 07/03/2009 3:14:41 AM PDT by mylife
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“will you take a registered warrant?”


2 posted on 07/03/2009 3:17:08 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: mylife

Get out your wheel barrows! It’s time for Arnie Bucks!


3 posted on 07/03/2009 3:20:21 AM PDT by spikeytx86 (Pray for Democrats for they have been brainwashed by their fruity little club.)
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To: spikeytx86

Soon to be “little orphan Arnie”


4 posted on 07/03/2009 3:21:24 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: mylife

These sound more like junk bonds than currency.

Once my severance runs out, I’m going to start paying in MoleMan money. That’s a currency you can bank on. (Well, you could burn it on a river bank to keep you warm.)


5 posted on 07/03/2009 3:21:34 AM PDT by MediaMole
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To: spikeytx86

I went to pick up some tuna for my dawg yesterday.
It was like 50c to 75c a can... Now? $2.09 a can.

Here comes inflation.


6 posted on 07/03/2009 3:24:03 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: MediaMole

No kidding!


7 posted on 07/03/2009 3:24:41 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: mylife
And yet, with all of this, does anyone think the damned DemocRATS will seriously consider cutting spending?

Not a chance!

8 posted on 07/03/2009 3:25:22 AM PDT by Jimmy Valentine (DemocRATS - when they speak, they lie; when they are silent, they are stealing the American Dream)
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To: Jimmy Valentine

I Predict Obama calls for yet another “stimulus”

Kinda like in the cartoons when they hold you upside down and shake you to get the “change” in your pockets.


9 posted on 07/03/2009 3:28:22 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: mylife
So the IOUs are like Savings Bonds? Can individuals buy them, or just banks? (Not that I would want to invest in anything the California government has control of)

Maybe this isn't such a bad idea. In fact, why not raise taxes, with the provision that the additional tax would be repaid in full, plus a certain amount of interest, within a certain period of time? I have a feeling that most people would not mind paying the extra taxes quite so much, if they knew they would get it back with interest, in a few years. Of course, I would much rather see the state cut wasteful spending, but how likely is that to happen? Even if by some miracle we elected a Republican majority, they would never have the cajones for that.

10 posted on 07/03/2009 3:31:15 AM PDT by giotto
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To: giotto

It is my understanding that they will only be issued to banks and businesses.


11 posted on 07/03/2009 3:32:21 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: mylife

Thank you. Wow—fast reply.


12 posted on 07/03/2009 3:34:00 AM PDT by giotto
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To: giotto
Tyrannosaurus Debt
13 posted on 07/03/2009 3:35:06 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: mylife

La Raza and the ReConquista’s have won and no one sees it.


14 posted on 07/03/2009 3:35:35 AM PDT by knarf (I say things that are true ... I have no proof ... but they're true)
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To: mylife
I Predict Obama calls for yet another “stimulus”
Kinda like in the cartoons when they hold you upside down and shake you to get the “change” in your pockets.
Stimulus = Stealfromus

15 posted on 07/03/2009 3:36:22 AM PDT by Stand Watch Listen
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To: Stand Watch Listen

BINGO!


16 posted on 07/03/2009 3:37:19 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: knarf

Yeah but now we have Pollo Loco’s on every corner!


17 posted on 07/03/2009 3:37:59 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: mylife
Will these California things survive an Article I test? These notes may fall under the several things that States bound themselves under Article I not to do, including the prohibition against making anything but United States money (or "gold and silver") legal tender.

IOW, California can't do this?

18 posted on 07/03/2009 3:38:50 AM PDT by lentulusgracchus
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To: mylife
I would like to know how federal banking law and regulations restrict federal and state chartered banks in their treatment of these IOUs. They are not “money” so if a bank accepts an IOU must it essentially buy it from the customer in exchange for real money. Will the bank discount it as was done in the old days? And is the bank restricted in doing this? Also, a California IOU cannot possibly be covered by FDIC insurance, I would think.
19 posted on 07/03/2009 3:41:58 AM PDT by Aldebert
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To: lentulusgracchus

I dont know


20 posted on 07/03/2009 3:44:48 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: Aldebert

It’s quite a mess.


21 posted on 07/03/2009 3:46:25 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: mylife
I Predict Obama calls for yet another “stimulus”

< sputter>But, there are so many inflationary strategies we haven't tried! < /sputter>

It would be funny, if it wasn't so serious.

0: "I predict unemployment will rise to 7, maybe 8 percent. No wait, make that 9. Okay, 10 is possible, but 11 will be the highest. After 12, we shouldn't see 13 for a while."

J. Carter is heaving a HUGE sigh of relief, now that he's off the hook as the biggest clown in modern presidencies.

22 posted on 07/03/2009 3:48:43 AM PDT by Quiller (When you're fighting to survive, there is no "try" -- there is only do, or do not.)
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To: Quiller
J. Carter is heaving a HUGE sigh of relief, now that he's off the hook as the biggest clown in modern presidencies.

Obama is no Carter. Carter was a misguided rube, This guy is calculating and purposeful in his destruction of America.

23 posted on 07/03/2009 3:52:59 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: mylife

No State shall... coin Money; emit Bills of Credit;...


24 posted on 07/03/2009 3:55:24 AM PDT by djf (Go tell everybody its calm before the storm Can you hear the distant thunder baby....)
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To: mylife

Registered warrants are the root of all evil.


25 posted on 07/03/2009 3:57:55 AM PDT by Mr Ramsbotham ("Baldrick, to you the Renaissance was just something that happened to other people, wasn't it?")
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To: djf

Yeah. Seems like Ahhnald kinda got the cart ahead of the horse here.


26 posted on 07/03/2009 3:57:55 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: mylife
“Obama is no Carter. Carter was a misguided rube, This guy is calculating and purposeful in his destruction of America.”

I was on the fence for a while on this but with each passing day I'm coming to the same conclusion. What is happening may be due to naivete but it certainly isn't occurring by chance.

27 posted on 07/03/2009 4:10:28 AM PDT by RU88 (Bow to no man)
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To: mylife
Obama is no Carter. Carter was a misguided rube, This guy is calculating and purposeful in his destruction of America.

Good point -- 0 continues to blatantly lie while he cynically plays to the entitlement mentality of a large section of American populace.

It's sad that he's getting away with it so cleanly, with a compliant press and worshipful interviews.

It's gotten to the point of rediculous. When he's speaking, even during a press conference, it's like he's watching a tennis match -- teleprompter left, teleprompter right, glance down, teleprompter left, teleprompter right, glance down.

28 posted on 07/03/2009 4:14:08 AM PDT by Quiller (When you're fighting to survive, there is no "try" -- there is only do, or do not.)
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To: RU88

It is my personal opinion that Obama’s motivations go back to his Kenyan roots.
He was likely raised on a steady diet of how the “west” oppressed the third world and amassed wealth on the backs of the down trodden.

IMHO his intent is to destroy that wealth in order to “level” the playing field.


29 posted on 07/03/2009 4:17:33 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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Sadly, China is likely to become the dominant power in the world if he continues.

Does anyone really think China will be a more benevolent super power than the US?


30 posted on 07/03/2009 4:19:12 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: Quiller

His actions to date have been reprehensible.


31 posted on 07/03/2009 4:20:42 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: mylife

Morgan and BOA can take those warrants, buy others, bundle them into CDOs and then sell them on the exchanges maybe as Californicated CDO maturing 10/1/09.

Just think of all the MBSs that could be written off the Cali IOUs! It could ignite another round of home building.

Why, we could have infinite fiat between this and the ClownBuck. Whatta job! /s

*Yeah, it’s sarcasm.


32 posted on 07/03/2009 4:30:09 AM PDT by OpusatFR (Those embryos are little humans in progress. Using them for profit is slavery.)
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To: RU88

Obama doesnt surprise me, he isnt an American anyway. but what about the Democrats in the House and Senate who are going along with this BS.?


33 posted on 07/03/2009 4:31:50 AM PDT by Venturer
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To: OpusatFR

/s taken, but I dont think JP Morgan will bite.

They are still standing because they have avoided most of the foolishness.


34 posted on 07/03/2009 4:32:51 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: mylife

Here’s an article written by a woman from Nigeria, I believe, who talks all about Hussein, his African roots and the effects thereof.

http://www.americanthinker.com/2009/06/obama_the_african_colonial.html


35 posted on 07/03/2009 4:33:00 AM PDT by jsh3180
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To: jsh3180

Yes. I have seen that article.
Thanks


36 posted on 07/03/2009 4:34:00 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: mylife

How on Earth is a Republican going to be elected governor next time around after having to follow Arnold. This is so embarassing that Arnold is Republican...I wish he was at least Independent so the poor Republicans who are running for governor does not have to hear from constituents “Arnold was a Republican...look at the mess...And you want ME to elect another Republican?” I really feel sorry for the Republican candidates in the next governor’s election. They are going to have a very difficult time.


37 posted on 07/03/2009 4:34:13 AM PDT by napscoordinator
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To: jsh3180

BTW, I formulated my opinion prior to seeing that article.


38 posted on 07/03/2009 4:34:44 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: napscoordinator

All Ahnald has to do is say he “inherited” the mess from Gray Davis /s


39 posted on 07/03/2009 4:36:08 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: djf

The US Constitution ALSO says that “No State shall make anything but gold and silver coin legal tender”.


40 posted on 07/03/2009 4:37:29 AM PDT by 2harddrive (then)
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To: Aldebert

No state can print money. It is a Federal Task. These “notes” are really worthless kinda like bad checks....


41 posted on 07/03/2009 4:39:14 AM PDT by Sacajaweau
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To: Mr Ramsbotham
-- Registered warrants are the root of all evil. --

Biblicly speaking, it's the love of registered warrants that is the root of all evil.

Constitutionally speaking, governments figured out, long before there was a USA, that the power to make money out of thin air is an ingredient of financial disaster. States agreed not to have it, and the US Congress is directly on the hook to "coin money and regulate the value thereof."

North Carolina Bill of Credit - 1778

42 posted on 07/03/2009 4:44:23 AM PDT by Cboldt
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To: Sacajaweau

Something about coastal waters that breeds democrats and stupidity. The bigger the coast, whether it be ocean or large lake, they will flock.

http://www-personal.umich.edu/~mejn/election/2008/


43 posted on 07/03/2009 4:47:04 AM PDT by bintenn
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To: mylife
California’s ingenuity poses an interesting dilemma for the Fed. The IOUs would be structured as short-term tax-free bills, but trade like cash. Banks are being asked to accept the IOUs and advance customers interest. Should the Fed sanction alternate forms of money?

If they are traded like cash, this is clearly unconstitutional: it was declared such in 1830 Craig v. Missouri. The Fed notwithstanding, this was forbidden the states period. The "Consent of Congress" begins the next clause.

44 posted on 07/03/2009 4:51:43 AM PDT by ALPAPilot
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To: ALPAPilot

It sure has gotten to the point where they just consider the written law to just be a minor impediment to what they really want to do - they just go ahead and do it.


45 posted on 07/03/2009 4:52:49 AM PDT by MrB (Go Galt now, save Bowman for later)
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To: ALPAPilot

We’ll see how it all plays out.

This administration has demonstrated over and over that it has NO regard for the constitution.


46 posted on 07/03/2009 4:55:00 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: Quiller

Back in November there were two kinds of voters, those who remembered the Carter administration and those who were going to find out what it was like.


47 posted on 07/03/2009 4:55:30 AM PDT by Lonesome in Massachussets (AGWT is very robust with respect to data. All observations confirm it at the 100% confidence level.)
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To: napscoordinator
This is a good question and one that deserves a response.

California, indeed the rest of the U.S., did not get this way from one administration. California is in its current mess because the voters themselves created or allowed it to be created.

Wasteful government spending, immoral government spending comes from one set of sources. Interest groups, groups that are able to twist the english/spanish language into whatever, ‘for the common good’ they want. They inject and infest true public morality with their version of public guilt.

I keep thinking about something I read from the 5,000 Year Leap. It was the question if the people had the moral character to deserve freedom. Our founder's felt they did at the time, for without moral character in the whole of the people, their efforts would have been for nothing. They would trade one master (the crown) for another master.

The moral character of Californian society has been bankrupt for some time now. It took nearly 100 years to get to this point and if we want to fight for the Republic, it will take another 200 years to get morality back.

Even if there is a second revolution, I believe we need to ask the same question the founder's had.

Principle 4 - Without religion the government of a free people cannot be maintained.

“Of all the dispositions and habits which lead to political prosperity, religion and morality are indispensable supports.... And let us with caution indulge the supposition that morality can be maintained without religion.” - George Washington

To start changing the culture we will need to find the Missionaries for America.

Arnold did indeed inherit the mess that is California, there is no mistake in that statement. Many of the laws and bureaucracies he did not create and could not eliminate behemoth institutions that crashed the system. Even in their death throws, they refuse to recognize their “common good” rhetoric is their own hell-fire.

48 posted on 07/03/2009 5:01:43 AM PDT by EBH (it is the Right of the People to alter or to abolish it, and to institute a new Government)
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To: mylife
We are losing the last, best hope of mankind at a pretty fast clip here. So sorry, Mr. Madison, Mr. Jefferson, and Mr Lincoln. Nice try, but it appears a government conceived in Liberty and dedicated to the proposition that all men are created equal (a government of the people, by the people, and for the people) may be able to endure only until the evil heart of man (and the stupid heart of man) ushers in the age of Obama and his groupies.
49 posted on 07/03/2009 5:15:13 AM PDT by olrtex
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To: spikeytx86
Photobucket
50 posted on 07/03/2009 5:15:49 AM PDT by Kozak (USA 7/4/1776 to 1/20/2009 Reqiescat in Pace)
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