Now that the first phase of the great California currency experiment is under way, the natural first question is how much Governator IOUs are actually worth. BAC, JPM, and WFC have given the individuals lucky enough to receive approximately $53 million in 2008 tax refunds in state funny money until Friday to deposit the IOUs and get face value for them. While major banks may be forced into giving the state government full credit for its promises, everyone else- from hedge funds to individuals on Craigslist- is not so convinced.
Brandon Schlichter, a 23-year-old self-employed online marketer and blogger from Columbus, Ohio, is among those advertising on Craigslist. He is hoping to buy the IOUs for about half face value and has set up a website to connect buyers and sellers for 5-10 per cent commission. "As long as California keeps issuing these, buying and selling could become commonplace," Mr Schlichter said
If the state budget problem isn't solved by the end of July, another $3 billion+ of new Cali dollars will have been printed and available for arbitrage. This leaves the lucky holders of the IOUs with the choice of hitting the bid from a 23-year old Ohio blogger or betting there won't be tears when re-reading WFC's policy on what happens if Arnold's wallet remains empty:
We can charge the amount of any IOU the State does not pay back against your deposit account(s) under terms of your account agreement and you agree to pay us that amount. If you don't have enough money in your account to cover the unpaid IOU, we can overdraw your account(s) and you agree to pay back this debt and related expenses under terms of your account agreement.
It's a proud day when account holders wind up paying the fees and expenses associated with the inability of one of the world's 10 largest economies to honor its debts.
Posted by guest , Jul 06, 2009 11:46AM
El ano Greg del burro es escritor terrible. Él hace que quiere vomitar mi burrito del desayuno.
Posted by Perkins Maxwell , Jul 06, 2009 11:53AM
actually, i enjoyed this post. up until the last paragraph. skip the editorializing--your point is clear without it. And the first graf should be about 20 words shorter--don't waste time with verbiage, get us to the clever craigslister faster. you're improving though. Bess can take 150 words to get to the point in her posts b/c everyone one of them makes the reader laugh; since your beat is more serious, keep it quick and to the point.
There's my $.02
Posted by american bandersnatch , Jul 06, 2009 11:54AM
New Jersey will be next.
Posted by guest , Jul 06, 2009 11:57AM
@2
why don't you go give evening courses in creative writing from you mother's basement?
Fuck, your 2 cents aren't worth a rupee.
Posted by Seaman Bodine II , Jul 06, 2009 11:59AM
don't worry, this guy knows what he's doing
http://www.metacafe.com/watch/273003/arnold_smoking_weed/
Posted by guest , Jul 06, 2009 12:00PM
@2
When I throw a dog a bone I don't expect to be told if it tasted good or not.
Greg.
Posted by guest , Jul 06, 2009 12:06PM
Creating a market for CA IOU's from Ohio is the new hedge fund in Connecticut.
Posted by EvilBuzzard , Jul 06, 2009 12:06PM
I'm guessing someone could seriously make market at a rate of 1.33 Terminator-Bucks per $1 USD. Maybe a few extra sheckles for the moneychanger's fee...
Posted by guest , Jul 06, 2009 12:07PM
If the Schwarzenbucks have made their way into the banking system, the chance that they will be repaid by the Federal government just jumped to somewhere near 100%.
Posted by Debter , Jul 06, 2009 12:07PM
a 23-year-old self-employed online marketer and blogger from Columbus, Ohio is the new equities in Dallas.
Posted by guest , Jul 06, 2009 12:14PM
"Its a proud day..." You can save the harumph re the CA situation and its impact on an individual's bank fees, since same would apply if for example Aunt Sadie gave you a check for $18 as a bar mitzvah gift and it bounced.
Posted by wcburrs87 , Jul 06, 2009 12:30PM
What's a MCS cost in Cali dollars?
Posted by Porker Stankleberry , Jul 06, 2009 12:35PM
Is this kid the bastard son of Art Schlichter, by chance?
Or am I the only one who remembers that washed up loser?
Posted by guest , Jul 06, 2009 12:37PM
@ Porker - No you are not. I was thinking that as well, as i noticed that this Schlichter is from Columbus, OH.
Posted by guest , Jul 06, 2009 1:24PM
If Art's son is gonna pay 50 cents on the dollar, methinks he's not going to buy too many Schwarzenbucks...
Posted by guest , Jul 06, 2009 2:38PM
Art Jr. is not buying direct. He's acting as a market maker, he wants a commission for hooking up buyers and sellers.
And while the Aunt Sadie thing was funny, I suspect most people are not taking seriously the possibility that the bank could reverse the transaction and sock the accountholder. I think it's unlikely myself but there's a quantum difference between a personal check and a state IOU in the minds of most people, even though the bank is going to treat them the same if they bounce.
If they bounce and people start getting overdrafts and fees because of it, I'd bet even money that Arnie won't live long enough to be recalled.
Posted by guest , Jul 06, 2009 2:48PM
I tries to laugh repeatedly to no avail.
Posted by guest , Jul 06, 2009 4:06PM
@Debter- well played
Posted by guest , Jul 06, 2009 7:25PM
Credit Unions are the M.O. of most of California State Workers -- many of those CU's are taking, and have done so in prior situations, I.O.Us at face value and will simply collect the interest when the State pays cash. The last time the CU's took the I.O.U's it was 3 months before the State paid off.
Posted by guest , Jul 07, 2009 12:15AM
Are these IOUs defacto currency (you can go to a nationally chartered bank and exchange them for equal amount of USD)? Or are they debt -- and if so, does Cali have a constitutional limit to what debt they can issue? if currency, isn't that illegal? Hey, I'm just asking.. what a nightmare... Icelandic Crowns not looking so bad after all...
Posted by guest , Jul 07, 2009 5:52PM
Um, I'm sure I can use them to pay my taxes, right?