Comments on: When IOUs become currency

By: mei

mei — Wed, 30 Sep 2009 14:24:58 +0000

Can’t state enough how important the sacrifices that go into wealth creation are.

Curious if anyone has caught this book yet? “The Richest Man in Town” by W Randall Jones. I’ve read half of it so far and let me tell you it is well worth it. Would like to hear what everyone else thought of it?

http://www.richestmanintown.com

By: Michael Murphy, CFA

Michael Murphy, CFA — Wed, 15 Jul 2009 18:47:56 +0000

California IOUs are bid 97 cents on the dollar on Sacramento Craigslist – multiple buyers.

By: Noumenon

Noumenon — Wed, 15 Jul 2009 04:41:41 +0000

I have to say it too: Ctrl-A, Ctrl-C. It’s a reflex for me before I hit submit on anything.

By: mrmeercat

mrmeercat — Wed, 15 Jul 2009 03:19:16 +0000

If you are a Californian it makes sense to advocate a bailout for your state, but for others, what would be the logic of subsidizing a process that makes poor choices? Why would a non-Californian go along with a bailout?

I don’t see the IOUs degrading US currency unless the Federal Reserve tries to peg the exchange rate. It is much more likely that the market price of IOUs will be 50% to 90%, and so therefore California will experience inflation of 100% or so. Or, you could look at it as a movement of money from the pockets of the recipients of IOUs to the State. In other words, a stealth tax.

By: Mark Herpel

Mark Herpel — Tue, 14 Jul 2009 22:26:30 +0000

They are unconstitutional, that’s easy to see..however, I suspect before anyone can clear that up in court it will be past October already. No Fed money for CA is what DC is saying. Community currency would be very helpful for towns, counties and even regions but NOT statewide.
Mark
Editor Community Currency Magazine

By: glory

glory — Tue, 14 Jul 2009 15:54:14 +0000

what you’ve lost in rhetorical flourish, you’ve (more than) made up for in succinctness; I wish you’d lose more posts to Ecto! or, at least, provide an Ecto-loss-like (what’d you want to say if you lost your post, but in short form) concise summary ahead of your longer posts :P

also fwiw…
http://www.winterspeak.com/2009/07/sorry -state-of-mark-thoma.html
http://neweconomicperspectives.blogspot. com/2009/07/berkshares-buckaroos-and-bea r-dollars.html

By: jzw

jzw — Tue, 14 Jul 2009 13:05:24 +0000

>>No way the rest of the country is on the hook to “rescue” the state with the 8th highest per capita income

Isn’t that the American way – for the poorest to bail out the richest.

By: Craig

Craig — Tue, 14 Jul 2009 12:17:35 +0000

No bailout for California. They voted themselves bread and circuses, no tax increases, and no way for their government to fix things. No way the rest of the country is on the hook to “rescue” the state with the 8th highest per capita income (my state, for instance is 23rd), just so they can go on keeping their property taxes low.

Chrysler and GM had to go through bankruptcy to get their books cleaned up. California should have to reform its Constitution and budgetary process before this is even on the table. –Of course, if they did that, there wouldn’t _be_ a crisis. Or at least, no more in California than anywhere else.

By: Matt Sherman

Matt Sherman — Tue, 14 Jul 2009 02:17:07 +0000

I use Windows Live Writer for blog posting. It’s like Word but built specifically for blogs.

By: anonymous

anonymous — Tue, 14 Jul 2009 01:39:50 +0000

IOUs will now be the next level of sophistication in “financial innovation”. [...] Now that the California has discovered a new mechanism to create money out of thin air, I expect other states to follow and they could all be traded in the exchanges pretty soon.

Why not take this further? You could combine IOUs from all 50 states (and maybe a few Argentinian provinces) and securitize them as IBS (IOU-backed securities). Then pool the IBSs into CIOs (collateralized IOU obligations) and divide those up into tranches…

By: anonymous

anonymous — Tue, 14 Jul 2009 01:31:25 +0000

Before posting a blog comment, I always select the entire text and use Ctrl-C to copy it to the internal Windows clipboard. If anything goes wrong after clicking Submit, I can bring it back instantly with a Ctrl-V. Simple and effective.

By: Lord

Lord — Tue, 14 Jul 2009 01:01:18 +0000

As debt there is nothing unconstitutional about them. I was thinking about what would make them currency though. Requiring they be treated as legal tender would. Disavowing any repayment in the future other than in more IOUs would. Short of that, it lacks the defining characteristics of currency.

By: otto

otto — Mon, 13 Jul 2009 23:04:09 +0000

Easy to laugh at the Patacón, but it patched over the gap it was supposed to patch quite efficiently.

As for Ecto, why not got luddite for a while, write your posts in Gates’ Word then paste ‘em in. Automatic failsafe that way. You’re not a big charts’n'photos blogger anyhow, Salmon.

By: RN

RN — Mon, 13 Jul 2009 23:02:20 +0000

I guess, IOUs are more like bonds with open ended maturity or zero maturity. If bond prices can go up or down, price of IOUs also can also go up and down. So technically it should be possible for the IOUs to be bought / sold at a discount or a premium compared to the “federal” dollars. I do NOT see anything illegal with that, as a “monetary” concept.

Bonds are in existence for decades. IOUs will now be the next level of sophistication in “financial innovation”.

Now that the California has discovered a new mechanism to create money out of thin air, I expect other states to follow and they could all be traded in the exchanges pretty soon.

By: Donald A. Coffin

Donald A. Coffin — Mon, 13 Jul 2009 23:00:47 +0000

California’s IOUs pay 3.75% per annum interest and have a projected 90 dat maturity, so they are more bond-like than currency-like. Except, of course, that people aren’t buying them, but being forced to accept them. I have read that some people/businesses are already offering to buy the IOUs (at a discount, of course). Does anyone have any details on the prices being offered?