What would you do if instead of receiving your state tax refund you were given an IOU by the state? That is exactly what California is doing by issuing their own currency. The money is called “Individual Registered Warrants” which is an IOU from the California government that will mature in October, assuming California is liquid by then.
When I first read about this new program I thought it sounded like a crazy pipe-dream. Schwarzenegger said, “When faced with these exact same challenges, Congress started printing money. If it’s good enough for Washington, it’s good enough for Sacramento!” and I thought it sounded like a tongue in cheek joke. Then I read that New York is in the advance stages of the same plan, Goldman Sachs is creating an exchange division in anticipation of many more state currencies’s, and payday loan companies are already advertising to purchase these instruments for a 40% discount.
The real kicker to this story is that the Fed’s are preparing to support state issued currencies and a bill is being prepared that seeks to allow any company that the government owns at least 10% of to accept state issued currencies. New Corvette anyone? Maybe I’ll refinance my home to a bank with government ownership and pay my mortgage with state currency.
I wonder how this would affect real estate values. Governments lease a lot of their real estate so what would I do as a landlord if I was given state money instead of regular dollars? I think I would be very upset, and so would the people that received the money from me for the bills I had. It will be interesting to see how this progresses and what affect is has on the economy as a whole.
More information on California Money Printing
Tags: california, IOU, money printing, state currencyCategories: Business, Economy, Politics.
I knew about the California IOUs but not about the other proposed state currencies. Are you sure about this? Printing money is a power that is supposed to be reserved exclusively to the Federal Government. If the Federal Government allows this to happen, it would be a serious cession of Federal authority to the States. It violates the Constitution. I also believe it would be a threat to the economic integrity of the United States and takes us back to the days when the US was under the Articles of Confederation.
I am going to do a search for more stories on this issue but please provide reference for this story if possible. Good article . By the way California’s Muni Bond rating has just been reduced again.
The primary source of information in regards to other states considering the program is the reference to New York considering a similar plan in the link provided at the end of the article. I think the ability to print money lies in the definition. I don’t think states can print federal money but I believe they have the power to coin their own denominations. Technically it is not money it is more like a bond in the sense that it matures and you can trade it in for federal money. The backing of the “money” would then be the ability of California to collect revenue through taxes and other means, otherwise it will be worthless. There has been a smaller community printing currency of their own for a couple of years now. Check out this link if interested: