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.
“will you take a registered warrant?”
Get out your wheel barrows! It’s time for Arnie Bucks!
Soon to be “little orphan Arnie”
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.)
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.
No kidding!
Not a chance!
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.
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.
It is my understanding that they will only be issued to banks and businesses.
Thank you. Wow—fast reply.
La Raza and the ReConquista’s have won and no one sees it.
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
BINGO!
Yeah but now we have Pollo Loco’s on every corner!
IOW, California can't do this?
I dont know
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