IOU Part Two: California To Issue IOUs For Second Year In A Row

Tyler Durden's picture

The insolvent state of California which, just like the country of the USA, is operating without a budget (and who needs a budget when the Fed-PD complex will buy the bulk of anything and everything needed to fund ongoing daily operations), has once again ended up on the verge of bankruptcy. As a result, it has just passed a measure which for the second time in as many years (going all the way back to the Great Depression), will allow it to use IOUs in lieu of payment on everything from supplies to contracted services and health-care
costs, so it can actually preserve cash to make payments to its generous debtors. On the road to banker serfdom, California has once again reached its goal.

From Bloomberg:

California lawmakers passed a bill to let recipients use state IOUs to pay fees and taxes owed to the government in Sacramento, if the warrants are issued.

The bill, from Assemblyman Joel Anderson, a San Diego Republican, passed the Senate unanimously. It requires all state agencies to accept registered warrants issued to pay for goods and services. The Assembly unanimously approved the measure in September. The Senate vote puts the legislation before Governor Arnold Schwarzenegger, whose budget aides oppose it.

California may start handing out warrants to pay some bills within two weeks to conserve cash, Controller John Chiang, a Democrat, has said. The need for the IOUs arose because a legislative logjam over how to erase a $19 billion deficit has prevented passage of a budget. The state will use the chits for everything from supplies to contracted services and health-care costs so it can make payments on priority items such as bonds.

The legislation is aimed at offsetting the hardship IOUs can impose on those who receive them, Anderson said, citing the experiences some recipients had with last year’s warrants.

And who wouldn't love to accept warrants from a state that is not only once again bankrupt, but can't even balance its budget, as it is required by law. And the supreme irony is that not even this latest financial gimmick will postpone the inevitable:

Schwarzenegger’s budget office opposes the bill because it
may reduce the state’s cash position to less than projected,
said H.D. Palmer, a spokesman. Draining the state’s coffers
would defeat the purpose of the IOUs, Palmer said.

Less than projected? Based on what non-existant budget?

The tragedy of America's bankruptcy (oh wait, it can never go bankrupt, we keep forgetting) will be a long and painful one.

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flacon's picture

"I OWE YOU NOTHING!"

flacon's picture

See how easily they can change currencies?! Maybe one day they will bring back Constitutional GOLD AND SILVER as mandated by the Constitution!

TwoShortPlanks's picture

To bring back Gold and Silver would be nothing short of a controlled burn-off; saying bye-bye to the middle class, forever!

You'd be mad to expect market rate...the dollar would have been driven off the cliff long before that will ever happen.

It's hyperinflation via the market...that way the financial criminals can play innocent.

Currencies and markets will be suicided.

Crook County's picture

"Hey Moose, Rocco... help the Judge find his wallet."

Young's picture

Haha - Caddy Shack!

Ty: "Do you do drugs Danny?"

Danny: "Everyday sir"

Ty: "Good boy"

Danny: "Aah, I'm gonna end up working in a lumber yard"

Ty: "What's wrong with working in a lumber yard, I own several lumber yards"

Danny: "I notice you don't spend much time there..."

Ty: "Hmm, I'm not sure where they are"

Red Neck Repugnicant's picture

Caddyshack is easily the best movie of all time. 

 

It's easy to grin

when your ship comes in,

and you've got the stock market beat;

But a man worthwhile, 

is a man that can smile, 

when his shorts are too tight in the seat.  

http://www.youtube.com/watch?v=VGpQej3o9eo

Robslob's picture

And "I" owe you nothing...take that!

Turd Ferguson's picture

This almost reads like some kind of spoof or parody.

Very sad. Why anyone voluntarily lives in that state is beyond my comprehension.

Burnbright's picture

Turd, I love ya but you have obviously never lived in California before. I love the weather here. 

PenGun's picture

 Purple Kush is an abomination. You understand the purple is ruderellis a Russian weed. Losely related to real marijuana it grows huge. That's why the greed hounds use it.

 

 A real OC Kush or perhaps a nice Bubba Kush, both fine indicas, will hopefully enlighten you as to the truth.

 

 I'm a BC boy ... I know.

Turd Ferguson's picture

Burn: I spend about two weeks a year in SoCal. You're right, the weather is usually great but I need a little variety. My Kansas bunker affords me the beauty of all four seasons and I don't have to deal with all the traffic, the greasy liberal pols, the high taxes and fees, the overrun emergency rooms, earthquakes, wildfires, ants, tourists...must I continue?

knukles's picture

Oh, come on Turd, put on a happy face.  Just remember that most national trends start here, in the Winter Home of the Great Satan, California. 

As Richard M. Nixon (of CA) once reputedly said to Hunter Thompson (also of CA) at the loos in a men's room (in CA) whilst sharing a piss;

Doomed I say.  Doomed.  We're all fucking Doomed.

A little Left Coast Progressive Optimism.
(sigh, visions of butterflies, blue skies, fluffy clouds, beautiful scenery, baby unicorns shitting tiny rainbow Skittles, everybody smiling, Gavin Newsome, Jerry Brown, Nancy Pelosi, Henry Waxman...  There's no place like home.)

Thomas's picture

"most national trends start here"

That appears to be holding up now also.

NoVolumeMeltup's picture

Nixon stole that from The Mighty Mogambo (TMM).

Okay, I'm going to duck and/or accept my banning now.

Blano's picture

Gotta agree with you, Turd.  I'll never live in Kallyfornia, and I'm outside Detroit, lol.  The traffic itself would drive me insane.

I am a Man I am Forty's picture

Flew through detroit from DEN yesterday, nice airport.  Sort of surprised.  Big hub, I guess.

bronzie's picture

We get two full seasons in SoCal - short-day season and long-day season - the other seasons are over-rated

 

Secunda's picture

Gad the ants! The most insidious, invasive little fuckers I've ever had to face!

goldfish1's picture

Go to China town. Ask a shopkeep for the ant stick. It's a white chalklike  stick half a pencil size. Draw a line across where the ants are coming in. Might need one more treatment. You'll not have any ants thereafter.

I don't know what's in it.

Ms. Erable's picture

Regular chalk works pretty well, too. No need for Chinese chalk sticks...

optimator's picture

If that were the case, California would accept their own IOU's for taxes -- they don't.

Californians are so phoney that if they don't have air conditioning they ride around with their windows closed so no one knows they don't have it.

Rick64's picture

I was being sarcastic thus the Dumb and Dumber clip.

truont's picture

Cali IOUs:  The new normal.

docj's picture

Dead state walking.

Dont Taze Me Bro's picture

Have you heard about the new $578 Million high school in LA?

http://abcnews.go.com/WN/public-school-los-angeles-named-robert-kennedy-...

I wonder how tax payers in other states would feel about having to bail out California couple years from now.

Geoff-UK's picture

Won't matter--Obama's going to have everyone bail everybody else out!  It'll be the best daisy chain orgy ever!

Spalding_Smailes's picture

TRUTH IN ACCOUNTING ISSUES ILLINOIS’
“FINANCIAL STATE OF THE STATE”

Study Confirms State’s Financial Situation is ‘Obscene”


Chicago – Today, the Institute for Truth in Accounting released Illinois’ “Financial State of the State”, which answers the question “Is the state bankrupt?”  The Institute’s reports the state has only $20 billion of assets to cover $140.6 billion in bills ---- a $120.6 billion shortfall.  Each Illinois taxpayer’s share is $29,200.

This precarious financial position falls under one definition of bankruptcy ---- A debtor that does not have the financial means to pay their bills as they come due. The Institute’s detailed study of Illinois’ June 30, 2009 audited financial report and retirement systems’ actuarial reports found the state does not have the $120.6 billion needed to pay for its liabilities as they come due.“  The state has incurred billions of dollars of liabilities and does not have the means to meet these liabilities,” said Sheila Weinberg, founder & CEO of the Institute.

On July 2 Comptroller Dan Hynes admitted that the state did not have $5 billion to pay bills that were due.  In a New York Times interview Hynes stated, “This is not some esoteric budget issue; we are not paying bills for absolutely essential services”.  He underscored, “That is obscene.”

“Our study of the Illinois budget processes and financial reports found our governor and legislators continue to damage the state by not following the state budget law,” stressed Weinberg.  “Their total disregard of Illinois’ balanced budget requirement has resulted in a financial hole that may be insurmountable.”

The Institute’s study revealed that each year when calculating a balanced budget the governor and legislators routinely overlook billions of dollars of payroll costs, including earned retirement benefits.  Bill Gates recently called this practice “accounting fraud”.  The Institute’s chair Roger Nelson commented, “We must stop this practice, which our elected officials have used to pretend they have balanced the budget, while not providing the necessary funding for $100 billion retirement benefits promised our state employees and teachers.”

http://www.truthinaccounting.org/blog/blog.asp?ArticleSource=1119

 

Crook County's picture

"Get your foot off the boat."  :P

JLee2027's picture

Did they forget to count Blago's hair in the assets?

snowball777's picture

I'd be glad to remove it from him for you.

goldfish1's picture

“Their total disregard of Illinois’ balanced budget requirement has resulted in a financial hole that may be insurmountable.”

Yeah, that's about right.

"not providing the necessary funding for $100 billion retirement benefits promised our state employees and teachers"

Don't care about the government leeches.

Xibalba's picture

Can I pay my mortgage with those? 

Fidel Sarcastro's picture

HEY!  You scratched my anchor!! 

bugs_'s picture

California hear our call, you have always led the trend for the rest of the USA.

Just default.  Lets roll.

 

LoneStarHog's picture

Yeah and how many of these vendors are PUBLIC companies who will carry the WORTHLESS IOUs as valid RECEIVABLES, once again bastardizing balance sheets.

Monkey Craig's picture

I heard that because the IOUs were to be paid in a year, the trade creditors were even listing this shit as current assets. I spoke with an auditor of Emcor (EME) who confirmed this last summer.

snowball777's picture

From what I understand, the last time, markets were created for trading these via B of A and Wells so I doubt many corps held onto theirs.

Monkey Craig's picture

where is Cheeky Bastard to mention MEFO Bills? I'm not condoning Hjalmar Schacht and the role he played in Hitler's rise, but his genius saved the credit of Germany in 1934 and 1935.

 

http://en.wikipedia.org/wiki/Mefo_bills

where's Cheeky? did they get him?

 

NoVolumeMeltup's picture

Cheeky?

Never send to know for whom the bell trolls.

Atomizer's picture

Have the sniffles. Can I borrow your IOU to blow my nose? Promise to give it back.

Top 10 CDS Positions

http://www.isdacdsmarketplace.com/exposures_and_activity/top_10_cds_positions