California IOUs don’t look so hot anymore

July 20, 2009

Reuters is reporting that California lawmakers are close to inking a deal to close the $26.3 billion budget gap. You know what that means: no more IOUs. So don’t expect to see the IOUs popping up on a trading screen near you.

While a deal will bring the IOU drama to an end, it should create a new one in financial markets: a jump in California muni bonds since an agreement takes the prospect of default – no matter how unlikely it was in the first place – off the table.

From Reuters:

SACRAMENTO, California (Reuters) – California’s top lawmakers told reporters on Monday they were confident an agreement with Governor Arnold Schwarzenegger on a state budget that closes a $26.3 billion deficit would be reached later in the day and voted on by both houses of the legislature on Thursday.

The government of the most populous U.S. state, also the world’s eighth-largest economy, began its fiscal year on July 1 facing the massive shortfall due to a plunge in revenues propelled by the recession and rising unemployment.

2 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

The only way the economy will ever recover for the consumer is for the US to become energy independent. I found this website to support the 5-year Plan to develop offshore oil and domestic gas resources http://tinyurl.com/mh5p36

Posted by Jordan W | Report as abusive

Jct: Of course, California IOUs are wanted. There’s nothing wrong with small denomination municipal or California State IOUs if anyone can pay their taxes with them. When Argentina’s government workers were faced with cuts, their unions talked 6 state governments into paying them with small-denomination state bonds which could be used to pay for state services and taxes by everyone.
When the local currency is pegged to the Time Standard of Money (how many dollars per unskilled hour child labor) Hours earned locally can be intertraded with other timebanks globally! In 1999, I paid for 39/40 nights in Europe with an IOU for a night back in Canada worth 5 Hours. U.N. Millennium Declaration UNILETS Resolution C6 to governments is for a time-based currency to restructure the global financial architecture.
See http://youtube.com/kingofthepaupers
Too bad California IOUs won’t be accepted in payment for state taxes and services like state bonds were in Argentina. Too bad California IOUs will be denominated too big to use as local currency. Too bad Argentina people were smart enough to avoid the tent-cities catastrophe and California people are too stupid to follow their example.
If they make IOUs legal tender, I\’ll take back every joke I ever made about Girlieman Governor Musclehead if he engineers the California state currency lifeboat.
B