California About To Start Issuing IOUs

The Associated Press reports that California lawmakers remained at an impasse over the state's deficit.

(emphasis mine) [my comment]

Controller: IOUs show Calif. fiscal mismanagement
By JUDY LIN — Friday, June 26, 2009

SACRAMENTO (AP) — California lawmakers remained at an impasse over solving the state's $24.3 billion deficit Friday as the state controller prepares to hand out roughly $3 billion in IOUs to vendors, low-income seniors and others.

A morning vote on a portion of the Democratic budget plan fell short of the necessary two-thirds support in the Assembly for the second time. Lawmakers were scheduled to work through the weekend, with the beginning of the new fiscal year and an impending cash crisis just days away.

State Controller John Chiang said he will have to start issuing IOUs as soon as Thursday without a budget revision because California will lack enough incoming tax revenue to meet all its payment obligations.

Among those who would not get paid until after October are students expecting college grants, low-income seniors and the disabled, and vendors that provide an array of services. Counties also will have to wait to be paid for administering social services.

The IOUs, also known as registered warrants, offer only a temporary fix to the state's cash-flow problem. Even if California issues the warrants, the state will be $600 million in the red in September, according to the controller's office.

It's not clear whether banks will honor the state's pledge to pay later.

The IOUs will look similar to a check but have the words "registered" printed on the front. If the state has enough cash in October, the state treasurer will pay the IOUs with interest.
[The key word here is "IF"]

"We're not aware of any banks that (have) made a decision yet on whether they will honor those registered warrants," said Beth Mills, a spokeswoman for the California Bankers Association. "It's up to the individual banks."

Mills said banks will determine whether they will cash IOUs depending on how much the state will pay in interest. A state board is not expected to announce the interest rate until July 2.

The last time the state issued IOUs was during a protracted budget fight in 1992. Some banks initially honored the registered warrants but stopped cashing them as the stalemate dragged on.

On Friday, legislative leaders indicated they may make a second attempt to avoid having the state issue IOUs through a complicated cash-saving maneuver that includes delaying billions of dollars in payments to K-12 school districts, community colleges and universities. The vote passed the Assembly on a bipartisan vote Thursday but failed to get enough support from Republicans to pass in the Senate.

Without a new budget, Chiang said Friday that he will have to start issuing IOUs. Students expecting college grants and low-income seniors would not get paid, along with vendors providing services to the state.

Chiang said taxpayers will also owe interest on IOUs.

US news reports that 10 Things You Didn't Know About California's Budget.

10 Things You Didn't Know About California's Budget
The Golden State is facing a large budget deficit
Posted June 26, 2009

1) California's economy is larger than that of many countries, including Canada and Brazil.

2) The state's deficit is estimated at $24 billion for the fiscal year that begins July 1.

3) Gov. Arnold Schwarzenegger's budget proposes slashing health and welfare spending by 26.5 percent and closing 80 percent of state parks.

4) To cut the deficit, Schwarzenegger has stated that he would eliminate the state's basic welfare program, which serves 1.3 million residents.
[there are going to be drastic cutbacks on welfare programs across the nation]

5) Democrats are seeking alternatives to major cuts, such as rescinding $1 billion in corporate tax breaks, enacting a 10 percent tax on oil pumped in California, and tapping into a $4.5 billion rainy-day fund.

6) Californians pay the second-highest sales tax in the nation; the state's gas tax is the third-highest in the nation; and California's top earners have the second-highest state income tax rate in the country.
[Despite all these high taxes, California is still running out of money... That is a show of staggering incompetence]

7) California residents with incomes of more than $500,000 pay nearly 40 percent of the state's personal income tax revenue.

8) A state ballot initiative approved by voters in 1978 limits property tax rates, the primary source of revenue for school districts and local governments, to 1 percent.

9) California has the highest research and development tax credit in the country, which will cost the state $1.2 billion in potential tax revenue this year.

10) State officials have said that California will run out of cash by the end of July. Schwarzenegger sought a $6 billion loan guarantee from the federal government, but his request was denied.

My reaction: California is slipping deeper into financial crisis and is about to start issuing IOUs. There are two key points to realize from what is going on in California:

1) California's crisis has implications for all government debt

Two weeks ago, I reported on how California is leading nation to bond default abyss.

My reaction: As Kevin Hassett writes, "The California budget crisis may well lead to a second financial calamity that would be far worse than anything experienced over the past 18 months."

1) California is more than $24.3 billion in the hole.

2) On Monday, California Gov. Arnold Schwarzenegger ordered a halt to funding for state contracts on everything from pencils to office space.

3) California's state controller has warned about the state running ou t of cash in two weeks (this warning happened last week).

4) The likely scenario (also the nightmare scenario) is that all California's lenders disappear, and the state is unable to roll over its debt.

5) If the unofficial eighth-largest economy fails on its debt, it will cast doubt on all government debt, especially treasuries.

6) The US government's fiscal situation is in worse shape than California's.

Conclusion: The 'bad' phase of the financial crisis is on the verge of beginning. It involves the dollar's collapse, soaring commodities, and skyrocketing interest rates.

The time frame for everything to really start falling apart is the next two or three months. California budget crisis is one of many factors which sets this time frame (default is likely within three months). A default by California would drag the bond market into the abyss.

It is virtually certain that lenders will desert California at some point later this year, and the state will be unable to roll over its debt. When this happens, borrowing cost for US governments on all levels (local, state, and federal) will go up. The dollar will also be hurt as lenders look outside the US for more credit worthy governments to lend to.

2) California's problems aren't unique

Unfortunately, California isn't the only state in trouble. As I reported last year, the vast majority of states are facing budget troubles.

1) The vast majority of states cannot run a deficit or borrow to cover their operating expenditures. As a result, states must close to budget shortfalls by either drawing on reserves, cutting expenditures, or raising taxes.

2) States have already begun drawing down reserves, and the remaining reserves are not sufficient to weather a significant economic downturn. Also, Many states have no reserves and never fully recovered from the fiscal crisis in the early part of the decade.

3) State budget cuts often are more severe in the second year of a state fiscal crisis, after reserves have been largely depleted.

4) When states cut spending, they lay off employees, cancel contracts with vendors, eliminate or lower payments to businesses and nonprofit organizations that provide direct services, and cut benefit payments to individuals. These cuts, like taxes, drain an enormous amount of money out of the economy.

5) Expenditure cuts and tax increases are problematic policies that cause economic downturns to deepen. They both leave business and individuals with less cash and thereby remove demand from the economy, causing state and federal GDP to shrink.

6) The federal government will eventually be forced to step in and offer states some form of assistance to prevent economic collapses and humanitarian disasters. This means more bailouts, and these bailouts will only marginally help state deal with their enormous budget shortfalls.

7) All the state budget troubles also apply to local governments. In fact, local governments with their reliance on property taxes and crushing pension obligations are in an even worse financial position.

As local and state governments across the country cut back on spending, unemployment will rise and US gdp will shrink.

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25 Responses to California About To Start Issuing IOUs

  1. VegasBD says:

    Love seeing this collapse from ground zero. The last 3 years Ive lived in Las Vegas, South Florida and now Inland Empire....luckily (not really luck) i sold my last property in Dec07. Been renting since!

  2. Anonymous says:

    what the hell, 24 billion isn't a lot anyway. The last 2 years we have seen trouble in Trillions figure. But still no apocalypse happened. So just relax Eric.

  3. kenneth says:

    i hope that anonymous is being sarcastic, because if not it's one of the dumbest statements i've heard lately. california is in real trouble. constitutionally california's budget must be balanced, and if not taxes that are already among the highest anywhere must skyrocket, or some programs and services slashed to the bone, or totally eliminated. many will suffer greatly, unemployment will soar, economy crashes, and the rest of the country will suffer. if 24 billion is such a small amount why did the us gov't refuse the treasurer of california any help?

  4. Anonymous says:

    Love seeing the collapse as well, but not from ground zero. California is the place of high taxes, generous benefits and other fruitcake ideas. This is just an unsustainable way of life and to watch members of the CA state legislature unable to comprehend this just astounds me. Also as the state is driving residents out because they can't make it there anymore (economically), what does some members of the state government want to do: RAISE TAXES!?! So here's the bottom line, when there are riots amongst the burning hulk of every major CA city, all's I'll be able to do is have a beer and say: You reap what you sow. Cheers.

  5. Anonymous says:

    Unfortunetely the rest of us won't be far behind this train wreck.

  6. Numonic says:

    State shutdowns loom as deadlines near
    At least 19 states still have to approve their fiscal 2010 budgets before next Tuesday. If they don't, staffers might not be paid and services might shut down.

  7. James says:

    Almost every State in the US has a budget deficit. The following States do NOT have budget deficits: Alaska, Oregon, Montana, Wyoming, and North Dakota. Some of these States will start to have a deficit if unemployment keeps rising, and the States have to pay more money in unemployment benefits.

    Not that it is a good idea, but why won't we bail the States out? I know States' governments have asked for money, why do you suppose that is not being considered by the federal gov't?

  8. Numonic says:

    The states won't be bailed out because they can't be bailed out. It's called failure and the printing press is not immune. More people need to realize and accept that the govt. can print as long as it wants but it can't print as fast as it wants. And if you can't print as fast as you want, you can't print as much as you want(at least not in the time period you want). Hypothetically, If the printing presses can only print $100/second at max with all the printing presses running, the govt. can't produce more than $6,000/minute. Now I don't know the rate at which the govt.'s printing presses can print in total at max speed but I do know that they can't print as much as they want in the time they want(not without larger than $100 bills, probably much larger). Which is why we have this credit crunch, budget deficit and etc.

  9. stibot says:

    I don't underestand printing physical notes still.

    Who should request so many banknotes? Printing dollars for bailout purposes is a matter of keystroke. Do people/institutions change their habits so they need more notes in wallets and shelves? Is there already run on banks in States?

  10. James says:

    I understand that the printing presses can only produce so much paper money in a given amount of time, but aren't most bailouts done electronically? Also, isn't it true that for every electronic $100, there is only $10 in paper money backing it (maybe not this drastic, but not an even trade)?

  11. Jimmy says:

    It seems to me that we are indeed heading into a depression. There are still arguments if it is inflationary or deflationary depression. What do you think? I personally believe that it is a hyperinfaltionary one, as USD will be completely debased.

    I am really worried about the social consequences now, namely social unrest.

  12. Tyrone says:

    I think Anon's comment on $24B not being a lot is semi-sarchastic. Just a few years ago people would pause at the idea of a few billion being spent on this or that. The new standard is 10's or hundreds of billions, and a LOT is trillions.

    Is this how hyperinflation takes hold?

    I think it's a subtle warning sign that things are terribly broken. (in addition to all the "not so subtle" warning signs)

  13. Numonic says:

    Stibot, the bailouts are done by printing physical notes NOT electronically. And it's not that there are people withdrawing massive amounts of physical notes, it's that that small amount that is withdrawing money( you and me who withdraw the little we do from the ATM), that little bit of withdrawing has become too much for the system, NOT because that little bit has grown but because the debt to physical note ratio grew too large. The dollar was stretched too thin. And when that first failure to deliver dollars happend in the Credit Default Swap market, it triggered a domino effect of defaults in the CDS market causing the debt to explode larger as the CDS promised to pay so much in case of default and as that default increased the debt stretched the dollar even further to the point it effected anything that promised to deliver physical dollars. Now you can say, why not just write off this debt like some jubilee or something but I've been saying for a while DEFAULT IS DEATH TO THE BANKING SYSTEM. If/When these defaults happen, interest rates/risk premiums/borrowing costs would rise high especially because of the massive amount of debt that would be destroyed. Massive companies that can't afford to pay these rising borrowing costs would close down. The amount of debt that is deleveraging is many times more than the total price of everything on earth. So if we allow the deleveraging to run it's course without trying to stop it, it will eat up everything on earth. We will all starve. We can speed up this deleveraging beast's feast by raising prices or printing larger bills. Prices are the main course on this deleveraging beast's menu. The prices we are feeding it though are just appetizers, prices need to rise allot higher before the beast can be full and stop eating. The beast has a hunger for $1 quadrillion, that means prices of everything must rise to total $1 quadrillion or we must print up to $1 quadrillion physical notes to stop this deleveraging beast's feast. If we choose to let this deleveraging beast's feast run it's course while we feed it nothing but appetizers(low prices or low denominated notes), it's going to eat up everything on earth. All projects would come to a halt as the companies would not be able to afford the borrowing/production costs. I don't believe people want to starve, infact I believe there is a self preservation mechanism in all of us. This is evident in news i read when i googled "bankrupt/cash strapped companies raising prices" and found out that the "going out of business sales" that they have are usually to lure more people to the store and that when people come to the store they find higher prices instead of lower prices. Soon they'll stop trying to hide that they are raising prices and will come straight out and tell you they are raising their prices. They will have to to be able to afford the rising borrowing costs to keep the doors open or shelves stocked. So far they are cutting costs by eliminating employees. But that method is not enough to save the money needed. Prices will have to go up dramatically or the government will have to print larger bills as the current ones can not be printed fast enough to feed this deleveraging beast. If neither of these things are done we will continue to watch companies close down and projects halt all over the world. We would have starved ourselves. As I said I don't believe people will choose starvation. If the govt. doesn't print enough to bring borrowing costs down, companies will raise prices to meet those rising borrowing costs.

  14. Numonic says:

    Now I know the question is, how long will it be before we reach that point where that self preservation mechanism is triggered, well I admit this country is full of allot of things we got durring the boom from imports but the world is not rich, far from it. China is not able to rely on exports anymore and are trying to move from major exporter to major importer but the world's manufacturing sector is poor and when China starts importing, all these things we think we are rich with will be gone. So you'll have the massive deleveraging beast along with China's and other emerging economies move to major importer that will diminish us and the rest of the world of it's goods. That's why Eric says hyperinflation will start in China. The speed that the deleveaging beasts is moving suggests to me that we won't go another year without seeing dramatically rising prices. That self preservation mechanism will be triggered within a year. Some defaltionists believe that we have so many things in this country that the removal of it all will take a long time(10 years). Our self preservation mechanism will not allow that to happen, we will try to stop this deleveraging beast's feast by moving things faster. The emerging countries have a need for more things and we have more things. We will sell our things to these emerging countries that need them but soon after we do we will find that the deleveraging beast's hunger is far greater than the price of everything we sold and we will have nothing to sell while the deleveraging beast is still hungry for more. The things we sell although seems much in our country of our population, in the emerging countries with a larger population than ours will need more and we will not be able to provide it. This is when the self preservation mechanism kicks in and the govt. and the people will do anything to stop this beast's feast. The govt. will print larger bills and the people will raise prices. This will subdue the deleveraging beast but credit and the paper currency will be destroyed but it will be for the good of the world as the world will have just avoided starvation and will now begin rebuilding and enjoying the fruits of their labor instead of feeding it to the deleveraging beast.

  15. Anonymous says:

    Much as I take this seriously, I'm also old and experienced to KNOW that most changes to the status quo overwhelmingly happen gradually.

    Not that I'm fact I spend my weekends working furiously to have a "Plan B" ready in case its needed.

    Still, folks have been calling for ARMAGEDDON since I was a kid. First it was religious zealots.
    I totally discounted that.

    Currently it's Financial Armageddon that's predicted.
    Granted times are unsettled enough such that I am taking precautions, but realistically ... I say 20% or less chance of a significant meltdown happening.

    As for California, I live in SoCal along the coast.
    Truth is, if I didn't watch TV/read newspapers/get on the Internet ....I wouldn't know anything was out of the ordinary.
    And I'm a average working guy (well, except I am not in debt at all).

    So reconcile my daily observations with calls for impending doom.

  16. stibot says:

    Numonic, i believe it is all only a hyperbola with printing presses.

    Bank notes are circulating, i can withdraw all the amount from my ATM, i can go indebt, but those notes are being delivered back to a bank finally. No need to print new ones.

    Also i expect those FTDs of treasuries were not pure physical failures. I suppose it is like FTD on stock exchange: you know Eric's topic about shorting stocks. There are no paper stocks anyway nowadays.

    Then, check Treasury bills for example too: Do you still issue bills in paper form?
    No. All Treasury bills are now issued and held electronically. Paper bills were issued in the past, but all of them have matured.

    When there was great failure to deliver dollars as you mentioned, central banks printed huge amount of money, which was not possible by conventional press, it was just using the keyboard.

  17. Anonymous says:


    Thanks for the explanation. This is the first time I could finally "grook" your arguments in full.

    As far as I got it we have to watch for the final deleveraing trigger that won't or can't be bailed out.

    In case "everything" is bailed out by the world governments, we have to watch the bond markets that will crucify some countries and start the deleveraging that way.

    As far as I read at zerohedge the 2yrs treasury notes in the last auction where purchased to 70% by other governments central banks. I think this shows a high stress level within the markets.

    Do you have or can you point to some additional reading regarding the deleveraging scenario?

  18. Anonymous says:

    Anyone remember the photo of the Governator, Buffett, and ROTHSCHILD together at one of the Rothschild estates? They didn't look too pleased at being photographed, either.
    As Rahm Emmanuel (?) says, "Why waste a good crisis?"
    Wonder what's on the Rothschild (/Buffett/Goldman??) shopping list? Heh.

  19. Numonic says:

    Stibot, borrowing didn't or doesn't require taking physical delivery of the Fed Notes, it can be done by just adding the money digitally to your account. This is how the debt to physical note ratio exploded too high and stretched the dollar too thin.

    So when you say "i can go indebt, but those notes are being delivered back to a bank finally." This is false because most of the time those notes never existed to begin with. Most borrowing happend/happens on the digital level not physical. An entire transaction of borrowing and spending can happen on a digital level and that's how the majority of borrowing and spending has been happening. In the mean time to facilitate this digital form of borrowing and spending banks were opperating with little to no reserve requirements. The printing that was done could not keep up with the expansion of credit as I've said many times that digital money moves faster than physical money. Since physical money could not keep up, the small amounts of transactions that did require physical delivery of notes were effected. These small transactions were the feather falling from the sky to land on a boulder on top of a mountain that caused the boulder to roll off the mountain.

    You know, what i am saying is different from Eric's Failure to deliver Treasuries blog. In fact I'm saying something most people aren't. I'm talking about a failure to deliver Fed Notes. I don't know anyone talking about that, but that is the major problem.

    Stibot you said:

    "Also i expect those FTDs of treasuries were not pure physical failures. I suppose it is like FTD on stock exchange: you know Eric's topic about shorting stocks. There are no paper stocks anyway nowadays.

    Then, check Treasury bills for example too: Do you still issue bills in paper form?
    No. All Treasury bills are now issued and held electronically. Paper bills were issued in the past, but all of them have matured.

    I never said the Treasury bills were physical. I think you misunderstood Eric's blog. The blog was not about a shortage of Treasuries, it was a bout a shortage of cash to pay out those treasuries, hence "Treasury IOU's" and is the reason they were sold to the central bank for physical cash. The blog mentions many time "cash shortfall".

    People don't pay for things with Treasury Bills that's why it doesn't need to be physical. But there are people, even though in a minority, who still pay for things with physical cash and this is what caused the problem.

    That information you quoted about Treasury Bills and Stocks is not the issue. I never said they were physical, infact my point is the opposite. Because they are not physical, they can grow faster than that which needs to be physical(cash in the form of Fed Notes).

    Stibot you said:

    "When there was great failure to deliver dollars as you mentioned, central banks printed huge amount of money, which was not possible by conventional press, it was just using the keyboard."

    No where in that blog does it say that the central banks printed the money in an unconvential fashion with a keyboard. The Central Banks printed up physical notes and gave them to the institutions selling these "Treasury IOU's". The Treasury IOU's were/are digital but the cash needed and given by the central banks were/are physical. So yes the govt.'s did print up a couple trillion in physical notes and gave them to these institutions while the institutions digitally wired the Treasuries and stocks to the central banks. It was a swap of digital things(treasury and stocks) for physical things(cash: Fed Notes/other paper currencies).

  20. Numonic says:

    As i reread that article I caught a line in it that fully supports my stance that defaults devalue the dollar and the prevention of defaults increases the value of the dollar.

    In the dollar index chart it says above: "Dollar index - Notice how the dollar rallies as the treasury "failures to deliver" decrease."

    This is a spit in the face to all deflationists or anyone who believes that if we stop printing and allow defaults that the dollar will increase in value. It's the opposite. The value of our dollar is based on the value of our bonds and the value of our bonds is based on the value of other bonds which is why the govt. is trying to bailout as much bonds as possible because our bonds are not just Treasury bonds, our bonds are any bonds that promise to deliver our currency: Fed Notes.

  21. Numonic says:

    Actually Eric' Treasury IOU blog is about what I've been talking a bout: a shortage of cash(physical currency)

  22. stibot says:

    OK, thank you for explanation and sharing your thoughts.

    I probably misunderstood topic about Securities Lending. Seems it is a bit hard to distinguish exact meaning of the term cash, since I imagine bank accounts first within the context.

  23. Numonic says:

    Cool, One more thing. I know i said that the withdrawal of physical cash hasn't grown, let me make a correction. The withdrawal of physical cash has grown but not in percentage terms. It's like if you have 10 people and 1% of those people withdraw cash physically and then you have 100 people and 1% of those 100 withdraw physical cash, well the percentage has stayed the same but the amount of cash being withdrawn has grown. We all use physical cash for soemthing even though it is dwarfed by the use of credit. But even this minute percentage of withdrawing physical cash caused a problem. That's what triggered the problem, even though the percentage of people that withdraw physical cash stayed the same, the amount of people that withdraw physical cash increased. This was due to the massive expansion of credit/debt and this stretched the dollar thin as the printing of Fed Notes could not keep up with the creation/expansion of credit/debt. Reserve Requirements were lowered to 0 to help keep enough cash circulating in the system but even those methods didn't help, there was simply too much credit/debt in the system compared to the amount of physical notes in the system. The expansion of credit was forced to slowdown and stop as institutions had to recapitalize(get more physical notes) to make it possible for that 1% to be able to withdraw cash but it's failing to do so because due to the Credit Default Swaps, defaults expand the debt. It's a race between the printing press and the CDS. The CDS is electronic while the printing press is physical. Electronic is faster and will win the race. That means that that 1% that was having trouble withdrawing physical cash will have even more trouble now that the debt to cash ratio is expanding causing it to go from my hypothetical 1% of 10 to 1% of 100 and on and on to the point massive banks default on depositors with no help from FDIC or the govt. and not because they are not trying to help(they will be trying hard) but because they will not be able to without printing larger denominated bills.

    Now you might say, so the problem is CDS and that if we had a banking system without CDS then the problem would be fixed, it wouldn't be such a task to recapitalize these institutions. That may be true but CDS just like Easy credit was bait and bait increases the value of debt. I said it before, the more solvent a bond/bank looks the more valuable it is, so if a bond is giving away tons and tons of money or promising to give away tons and tons of money(CDS') then those bonds increase in value and the currency is tied to the value of the bond so the govt. pushed for easy credit and these methods such as CDS' which promised to pay so much money as to make it seem as if there was no chance of default. This increases the value of the bond and thus the currency, maybe not in real terms but in other terms. The prices of houses may have been going up but as it was it was becoming easier and easier to afford one because of easy credit and the ponzi scheme of rolling over debt by borrowing from another to pay old debt.

    I'm sorry I have to mention him but Mike "Mish" Shedlock keeps asking us hyperinflationists about explaining the drop in the price of housing if we are in hyperinflation and I just did it. Getting a house has not become easier, it has become harder so the real cost of owning a house has risen not fallen, when credit was easy, the real cost of owning a house was low, now that credit is hard to come by the real cost of owning a house has risen. The price that Mish is looking for to rise will rise but after the govt. prints larger bills to stop the delveraging(but by that time it won't matter because dollars will be worthless by that time) but as I said, the real cost of owning a house is rising. It's not getting easier to own a home, it's getting harder. This can be said for other things that require credit. Infact the nominal value of things are rising(i.e gas, oil, food etc). So I don't know what these deflationists are talking about.

  24. Tyrone says:

    Numonic, you're the man!
    Do you have your own blog?

    But perhaps you're Hank Paulson in hiding, using blogs to cleanse your soul. :)

  25. Jct: There’s nothing wrong with small denomination California State IOUs if I or anyone else 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 and which everyone accepted as useful currency. Best of all, 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 my banking systems engineering analysis at
    Too bad California State IOUs won’t be accepted in payment for state taxes and services like state bonds were in Argentina. Too bad California State 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.

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