Wikinvest Wire

A secondary market for California IOUs

Wednesday, July 08, 2009

The story of California's budget crisis and the issuance of, what is likely to be, a steady stream of IOUs totaling billions of dollars should produce all sorts of interesting subplots, the first and most obvious one being that a secondary market is now developing.

Apparently, legislators will soon pass a law to make the IOUs "legal tender" in California so they can be used to make payments to the state for such things as taxes and DMV fees, both of which have been rising. All of this effectively creates a new currency in the Golden State and, after a few more days of active trading on Craigslist and eBay, it should be interesting to see how large a discount is applied to the IOUs relative to the U.S. dollar.

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Support said...

Amazing, I can't decide if this is deflationary or inflationary. Since it's new "legal tender" it must be inflationary.

Anonymous said...

So when can you and I print our own bearer's script?

But What do I Know? said...

@Anonymous 8:45--You can print your own script anytime you want to--the trick is getting people to treat it as money.

The CA thing is a great sandbox for a study of Gresham's Law--oh, and BTW, the state couldn't make it legal tender for *all* debts, just public ones. Only the Federal government has the power to enforce its currency for private debts--for now.

Anonymous said...

Here is a new site dedicated to California IOU's

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