Friday, July 3, 2009

California prints IOUs!

One of the more riveting anecdotes about the depth of the recession - for only the second time after the Great Depression, the state of California decides to makes payments due to taxpayers, vendors and local governments by printing IOUs! The interest bearing IOUs (at 3.75%) are to mature by October 2009 and can be encashed if banks accept them. So far 28,742 IOU warrants totaling $53.3 million have been issued.

A combination of outsized budget gaps (around $27 bn), unusual budget rules and a morass of financial obligations approved at the polls, coupled with the financial market crash and deep recession have been responsible for driving California to this state.

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