I have solved the state budget problem.. I've written IOU $24,000,000,000 on a piece of paper and faxed it to the gubbenator. CA solvent for another 12 months, thank you.

• splat

but will the Fed will accept the warrants?

Solving the budget still means deep cuts across the board ...

Oh and GM sales only down 33% after declaring bankruptcy...that doesn't seem so bad in light of bankruptcy.

"Lest you think that the failure of political leaders to reach an agreement on balancing the budget is so much tears and flapdoodle, state Treasurer Bill Lockyer points out that if the state is forced to issue IOUs and its infrastructure bonds in turn are downgraded by the credit ratings agencies to a BBB-plus level, it could cost California an additional $8 billion in credit costs on its public works bonds.

How much is that? Lockyer says it's:

· More than the total combined amount the state spent on the University of California and California State University System last year.
· 52.5 times the amount spent on state parks in a year.
· More than it would take to give taxpayers a 15 percent cut in personal income taxes.

That's a lot."

Capitol Alert: Downgraded bonds cost a bundle

"...there aren't an infinite # of stable states. "

I thought zero.

"Useless" is hyperbole. I mean that the notion in economics that there is some state of equilibrium that is best for most people is more wrong than right. A light bulb that uses less energy, provides the same light and can be produced at the same cost is more efficient. That's simple. Doesn't mean that more of those light bulbs turned on is a good thing.

Does anyone know if Californians can use IOUs to pay California state taxes?

Squad Leader we have IOU's inside the wire...

Most banks will probably accept warrants from established customers ...

At first. And that's the rub. Once this scrip starts floating free in the wild there's no calling it back. It would be in everyone's best interests to not accept these warrants. Tomorrow we find out what interest rate the State will grant for these post-dated checks. If it is laughably small they risk exposing the scam. if it is too high they risk the wrath of the Feds and challenges as to the legality of warrants without a vote.

I still want mine in the form of a debit card that I can swipe to pay the sales tax portion of my purchases.

I wonder if Scottrade will take IOU's for margin calls?

"...there aren't an infinite # of stable states. "

I thought zero.

There's at least one--the zero-human zero-economy global state is stable, at least economically.

One thing everyone here in the Golden Bear Chit State can do is immediately increase income tax deductions to the limit of what is legally defensible. Make sure you get as close to zero as a refund next year. Starve the beast.

The Omega Man economy is also stable.

I wonder if I can use my warrants to purchase California General Obligation Bonds?

ghostfaceinvestah (profile) wrote on Wed, 7/1/2009 - 1:25 pm

Aren't the states barred by the Constitution from issuing their own currency? Effectively, this is a currency.

It's cute the way you say "Con-sti-tu-tion" as if it meant something.

Aren't the states barred by the Constitution from issuing their own currency?

Bills of credits are only considered currency if backed by the full faith and credit of the state. These are someone like GO bonds, backed by the "unlimited" taxing power of the state.

Puff the Magic Dragon, this is squad leader.
Gawdamnit yes! on OUR position.

Careful out there California posters.
Could get ugly on you real quick.
Like IOUs inside the wire.

Make that state paycut magically go from 10% to 15% in a blink of an eye. Glad the State Univ peeps I know spent a lot of time worrying about the proposal they put in front of them. As I said, they'll take that, and come back for more later. Didnt think theyd wait all of two weeks. Geez.

"The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money."

--- Adam Smith

Arnold, there's no need to feel down.
I said, Arnold, pick yourself off the ground.
I said, Arnie, 'cause you're in a new town
There's no need to be unhappy.

Arnold, there's a place you can go.
I said, Arnold, when you're short on your dough.
You can stay there, and I'm sure you will find
Many ways to have a good time.

It's fun to stay at the y-m-c-a.
Gimme that IOU!... y-m-c-a...

Niall Ferguson on California: It is a Latin American economy that just happens to be in the U.S
Bwaaahhh!

+

Niall Ferguson: No One Has The Faintest Idea When The Economy Will Recover
Niall Ferguson: No One Has The Faintest Idea When The Economy Will Recover

He thinks Obama's economic forecasts are as much of an outlier possibility as another Great Depression.  He's also concerned, as we are, that there's just not enough money in the world to finance all the borrowing the U.S. and other big countries will be doing over the next few years.

Ferguson argues that rates are rising because the US is planning to borrow at least $10 trillion over the next 10 years (which we can't afford to do).

Is CA going to use IOUs to pay coupons on bonds?

what is the effective paycut with the third furloughed day?

some smiths for your rockn wed afternoon

I owe you nothing....

YouTube - The Smiths - I Don't Owe You Anything - Live

"It is certainly way too early to say the Obama administration is right that the economy is going to grow at 3% next year and 4% in 2011."

That is the question, isn't it?

Which is worth more: an IOU from Arnold (perhaps illegal) for a dollar, or a number on your screen representing what a dollar could buy in any commodity, assigned to you by a Firefox/IE/Linux/MS shared program that anyone in the world can download, recording every comex, forex, globex transaction everywhere?

HomeGnome,

Puff the Magic Dragon was so sixties! In my time (the 90s) we had Spooky (AC-130). Now they just loiter Predators with Hellfires. Maybe they can find a way to mount a minigun on a Predator.

I hope the Legislature has the backbone (not the word I'd choose in personal convo) to tell Arnie to stuff his veto of their law that could have prevented warrants/bond downgrading et.al. GW Bush at least had a majority in the House and Senate when he said 'my way, or the highway' on tax cuts, Iraq, "homeland" defense, etc.

But they'll fold, quite likely. The only thing the governor can't do is pass spending legislation, unless he wants to call and raise GWB on inherent powers of the executive.

I mean that the notion in economics that there is some state of equilibrium that is best for most people is more wrong than right

Hahaha.
You've interjected the notional of morality into a mathematics debate.

Shame on you.

All systems tend to equilibrium.
They have to be default, it's the definition of a system.

Right and wrong are a moral, not quantitative, argument.

Lear files for Chapter 11 bankruptcy

JimPortlandOR (profile) wrote on Wed, 7/1/2009 - 1:44 pm

I hope the Legislature has the backbone (not the word I'd choose in personal convo) to tell Arnie to stuff his veto of their law that could have prevented warrants/bond downgrading et.al.

Jim, not to be combative but i don't think you understand the relative positions of the player in this drama. It is the Legislature that is out of control and dealing in fantasy and brinksmanship. Gubernatorial veto is necessary because of the rampant extraconstitutionality of the bill on his desk. The Legislature took some taxes and reclassified them "fees" and then because they weren't taxes anymore raised them by simple majority. Then they used the fact that they eliminated some taxes to raise other taxes to balance the loss of tax revenue. A perverted contortionist couldn't put on a better show.

How long can this last?

"Daddy, I'm hungry"

1. What happens if my financial institution will not accept the registered warrant?
   You may decide to open an account at another financial institution that will accept registered warrants, or you will have to hold the warrant until it matures on October 1, 2009.

[ The only thing the governor can't do is pass spending legislation, unless he wants to call and raise GWB on inherent powers of the executive]

Oh, I don't think he needs to. The democrats have done a bang-up job in that department and don't need any help.

The Lear bankruptcy is old news....the new news is Crabtree and Evelyn's bankruptcy. (nobody seemed to care though on the last thread....what, you got something against perfumed triple milled soap, huh???)

Kung.fu.panda

I think they know full well that they are just kicking the can down the road by allowing 125% refinancings. They don't care they are "saving" homes.

Graphs: Auto Sales in June

So, now every business and bank in the world needs to add an overlay ledger that breaks out money from provisional money. I don't know for sure but it could be something trivial like a foreign flagged freighter getting a refund from their port docking fees in the form of a warrant rather than a real check and the whole canard implodes.

The perverted contortionists in Albany are trying VERY hard.......

justaskin (profile) wrote (in reply to...) on Wed, 7/1/2009 - 1:57 pm

The perverted contortionists in Albany are trying VERY hard.......

Ahhh yes. Albany. The condom of New York City.

One other thing - this wouldn't be the first time Calif. has resorted to IOU's. They did it back in '92 if I'm not mistaken. Back then, they lined up the major Calif banks to accept the IOU's in advance, like Golden One Credit Union is doing now. I haven't seen much "pre-selling" of the IOU idea this time, so it remains to be seen how the banks handle it. My expectation is that the banks will credit your account same as cash when you deposit the IOU's.

If I remember correctly, the banks even securitized the IOU's back then and sold them to investors.

How will the FDIC and other banking regulators treat IOUs on the balance sheets of banks that accept them? What kind of interest rates will payday lenders charge to "cash" your warrants?

Well of course the deposit constitutes a liability, but usually in exchange the bank usually receives money that it can then lend out. The IOU itself is an asset, but it ISN'T part of their cash reserve. Exacty what kind of asset IS it?

"Frank Zappa said politics was the entertainment branch of business."

One of my fave quotes of all time.