California Prints Its Own Currency - A Satire?

Real Clear Markets ^ | 7/6/2009 | Bill Frezza

[Red Dog #1]

California to the laws of economics...”I reject your reality and substitute my own!!!”Oh well, putting off the bad news will only result in a bigger train wreck later.

[ctdonath2]

Again, satire is indistinguishable from reality.

The paper dollar was long an IOU for gold/silver coin ... until one day the gov’t declared it wasn’t. Now CA is issuing IOUs with no apparent way to fullfil all of them (struggling to merely balance the budget, CA will be unable to reduce spending, or increase taxation, far enough into the black to pay off these IOUs), which can only lead to a “pay on demand, but it’s more to convenient to use these” model, which will inevitably give way to declaration that it is its own base currency - to wit, CA just introduced its own currency in violation of the Constitution.

[mvpel]

Technically speaking, these are debt instruments - essentially state-issued bonds. Aside from the long-dead letter of “gold & silver coin,” the Constitution only forbids states emitting “Bills of Credit.” Since the state doesn’t “intend” them to circulate as money, odds are it doesn’t run afoul of the prohibition.

It might be an interesting question for a federal court to resolve, though.

[Lysandru]

Have the jerks running Kaliforniya ever heard of Gresham’s Law???

[Liz]

Anticipating a flood of cash-strapped recipients, Payday Loan companies began advertising instant redemptions. Liquidity will come at a stiff price, with exchange rates discounted at 40% off face value. "Given the high probability of default and the inevitable public vilification of anyone who makes a profit buying IRWs, we feel this discount rate is appropriate," explained a Payday Loan officer who would only give his name as ‘Vito.'

THE (cough) COLLECTOR---Vito's first cousin (flying in from South Jersey).

"Lessee, where'd I put dem cement overshoes."

[Liz]

"Ach der lieber, mama mia.Dat sobanagun Veetoe's gonna collect
Kaleefirneeah's IOU's? Duz he knowh hez puttin a Kennedee in dainjah?
Ai getda nasheenul sumpatty ven anudder Kennedee goz kaputz.....ifn Mariah
chokhes on dah tahkeoht peezah."

" Chonny and Wooty, ai gotda vunny veeling dah Reepublucan Potty tinks
RINOS are pure crapola. Ai hear RINOS kin getz jops ass Val-Mart greetahs,
Home Depot paint mixahs, McD's ketchop pumpahs, undt vaitahs at Ved Lopstah."

[Kozak]