Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

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
Navigation: use the links below to view more comments.
first 1-2021-4041-6061-8081-84 next last
But hey, the recession is easing...
1 posted on 07/03/2009 3:14:41 AM PDT by mylife
[ Post Reply | Private Reply | View Replies]

“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)
[ Post Reply | Private Reply | To 1 | View Replies]

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.)
[ Post Reply | Private Reply | To 1 | View Replies]

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)
[ Post Reply | Private Reply | To 3 | View Replies]

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
[ Post Reply | Private Reply | To 1 | View Replies]

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)
[ Post Reply | Private Reply | To 3 | View Replies]

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)
[ Post Reply | Private Reply | To 5 | View Replies]

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)
[ Post Reply | Private Reply | To 1 | View Replies]

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)
[ Post Reply | Private Reply | To 8 | View Replies]

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
[ Post Reply | Private Reply | To 1 | View Replies]

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)
[ Post Reply | Private Reply | To 10 | View Replies]

To: mylife

Thank you. Wow—fast reply.


12 posted on 07/03/2009 3:34:00 AM PDT by giotto
[ Post Reply | Private Reply | To 11 | View Replies]

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)
[ Post Reply | Private Reply | To 10 | View Replies]

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)
[ Post Reply | Private Reply | To 1 | View Replies]

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
[ Post Reply | Private Reply | To 9 | View Replies]

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)
[ Post Reply | Private Reply | To 15 | View Replies]

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)
[ Post Reply | Private Reply | To 14 | View Replies]

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
[ Post Reply | Private Reply | To 1 | View Replies]

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
[ Post Reply | Private Reply | To 1 | View Replies]

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)
[ Post Reply | Private Reply | To 18 | View Replies]


Navigation: use the links below to view more comments.
first 1-2021-4041-6061-8081-84 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson