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The theater of the absurd where US monetary policy is played out reached the height of the ridiculous when, on July 2, 2009, the Federal Reserve issued a press release advising the public to check with their banks to see the terms and conditions under which a bank may accept for deposit the “registered warrants” (IOUs) of the now insolvent State of California.
Emperor Norton, typical California nut-case
Of course, California has experience with phony money, San Francisco having been the home of the Joshua Abraham Norton, the self-declared ‘Emperor of the United States’ who was tolerated in paying his bills with his own money in the mid-19th century.
Note: The Federal Reserve did not prohibit banks from receiving California IOUs as “legal tender” for deposit, nor insist that banks, if they wished to help clients, simply buy the bills as securities, at a discount reflecting the time value of money and risk. Nor did the Federal Reserve clarify whether California IOUs on “deposit” would be subject to FDIC guarantees.
According to the Los Angeles Times, Bank of America, Wells Fargo, Chase, City National, Union Bank, and other big banks were accepting IOUs issued by the State of California for deposit.
Of course, the Federal Reserve allows banks to receive Federal IOUs (Federal Reserve Certificates, aka “money”) for deposit, so why not State of California IOUs?
Speaker Nancy Pelosi, Representative Henry Waxman, and Senator Barbara Boxer (of “don’t-call-me-ma’am” fame), representing the State of California, were silent on the matter.
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Jct: There’s nothing wrong with small denomination 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.
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.
See http://youtube.com/kingofthepaupers