California IOUs to be legal tender: another nail in the dollar's coffin

This is a fascinating and scary article...

According to the San Diego Union-Tribune, Republicans and Democrats alike embraced legislation last Friday that would make California IOUs legal tender for all taxes, fees and other payments owed to the state.

Effectively, California is using its IOUs to create a currency. If this bill passes it would allow California to deficit spend just like the Federal Government and with the IOU's acceptable as payment of state taxes, it instantly imparts value to them (see here and here). In effect, what you have is a state of the union creating a sovereign currency right under the noses of Treasury, Fed. They are stumbling their way into it, and as they do so, some of the true nature of contemporary money is being revealed. It will be viewed as a stop gap measure at first, and then could very well become entrenched as states realize

There are rumours of plans to crash the dollar sometime in November. Rumours. But this is real and here and now and it's another step on that slippery slope, in fact it might be a desperate attempt to flail our way back up that slope, but if so I fear it will be misinterpreted and unsuccessful.

The rest of the article is just as good as those first two paragraphs. In fact the next section tells you the real function of tax in a fiat currency economy. It's not what you think tax is for at all, at all. And it goes on from there. I'd wind up quoting the whole thing.

[edit on 13-7-2009 by rich23]

Does this mean that if I were to place an order with a Californian based company, all I have to do is write on a post card "IOU"?

Sweet!

Wonder if this works for my credit cards as well...

I think that "Legal Tender" is being used in too loose of a way here.

The SEC (Securities Exchange Commission) has expressed concerns that California's recently issued IOUs are 'securities' and should be regulated as Municipal Securities under federal securities law. As such, holders of these IOUs and those who may purchase them are protected by the provisions of the federal securities laws that prohibit fraud in the purchase or sale of securities.

These regulatory provisions also require these IOUs to carry an annual interest rate of 3.75% and be regulated as Municipal Debt, a form of security, by the Municipal Securities Rulemaking Board.

Identifying the IOUs as securities creates a regulated secondary market for them, which make it easier for their holders to sell them at a fair price as investment commodities.

This is indeed very similar to Federal Bonds, but these are not the same as Bearer Bonds, but rather Debt Securities. What this means is that you can't take an IOU to your store or to your Bank and cash them. All you can do is sell or trade them on a SEC regulated Market until they are purchased back by the issuer for face value + 3.75% annual interest.

This is by no means a validation of a new form of currency!

I think i read on another thread, or maybe an article on internet.... that some of the banks would not take those IOU's after a one week period. Even if the state makes the IOU's legal tender, the banks, dont really have to accept them. I know that your article says that it would permit payment (money owed to the state), and it's a way to create currency...
Again, that does not mean the banks will go along with it....



[edit on 13-7-2009 by lagenese]

that would make California IOUs legal tender for all taxes, fees and other payments owed to the state.

I don't see where they are saying much of anything...definately not making them equal to $$ in status...

the state owes me 3,000 refund on my taxes....and I owe them $2,000 in some fee or whatever...it just means that I can use part of that $3,000 IOU that they gave me, since that don't have the money to give me what they owe me....and use it to pay them...

thus, instead of them owing me $3000, they now owe me only $1,000

or at least that's how I am reading it. I don't see how it is gonna help that many people getting stuck with these IOU's instead of tax refunds or whatever...since well, unless they can find a way to convert them to cash, they ain't gonna pay the grocery bill, or the electric bill, or, if it's a business who has recently done contract work for the state, their payroll.

as far as I am concerned anyone who had the nerve to give me an iou instead of what they owed me certainly better not come around asking me for money till they pay me what they owed, or I ran up a big enough bill on services they provided me, or sold me, whatever, to balance the account! I don't see why governments should be any different!

So you trade your labor for IOUs that in turn can be used to pay off fees demanded by the state. Why work at all? How about not working, incurring no taxation, and hitting up the welfare while you're at it.

Under Article I of the Constitution only the federal government has the power to "mint money." What California is doing is clearly unconstitutional.

It's also unconstitutional for the FED to be printing money, but then there's that whole Federal Reserve Act that kinda muddies things up.

IT'S ALL A JOKE. There's almost no point in discussing it...

[edit on 13-7-2009 by kadugen]

[edit on 13-7-2009 by kadugen]

reply to post by kadugen


Yes, it a big joke, but nonetheless, very serious as well. This type of behavior from the State of CA could spread very fast across the USA and abroad... So, yes, it's important to discuss the issue. When will the "madness" end?

As I am a loyal resident of Southern California I must demand... WHERE HAS ALL THE MONEY GONE!!! The state brought in billions of dollars during the housing boom on both corporate taxes and state sales taxes. They made billions in property tax. And now it is all gone... Some may blame immigration, or the schools, or whatever misdirection that they point a finger at, but the truth is that they stole it to get re-elected. The country should look at CA to see what earmarking is all about. Our politicians are the best at it!

reply to post by rich23


that's funny....

Big Banks Don't Want California's IOUs

July 7 2009
A group of the biggest U.S. banks said they would stop accepting California's IOUs on Friday, adding pressure on the state to close its $26.3 billion annual budget gap.

online.wsj.com...

now I'm confused!

reply to post by warrenb


Thanks for the link. It supports my claim. I could not remember where i read the info... So, the banks refuse the IOU's, now the State is in hot water, or should i say, the residents stuck with the IOU's are in hot water,....

I can see States pulling away from the union with what is going on. And in doing so putting forth there own money!
Now I know this is a leap but if push comes to shove they may not have a choice.
And a State like Ca. could run just like a nation of it's own.
Also they can open State run banks that will take there money or IOU's. And just bypass the Larger Fed banks.

Now I do not know what is going to happen anymore than the next, but if they are in a mess that there is no way out , well I guess we will see. But I am going to keep an eye on this as I think it will be something big, just my thought though.