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Californian Iou = Money?

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On one side, IOU recipients are beginning to trade them like currency, forcing the California state treasurer’s office to issue guidelines if they are sold through eBay (EBAY), Craigslist or other means.


Would-be buyers of the scrip, officially called registered warrants, have expressed their interest on Web marketplaces including Craigslist and EBay.


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.


The State of California would have no financial constraint in the IOU vouchers. It would simply spend them (pay its workers) and collect the taxes later as people handed them back to satisfy their legal obligations. Imposing the tax obligation (in vouchers) creates a demand for them and allows them to circulate as a “currencyâ€.

Soon enough, the banking system would develop IOU Voucher Accounts and related products. In this way, the State of California could more easily maintain its level of services without imposing huge costs on the disadvantaged which they are forcing to accept the IOUs. The State could also expand public employment to attenuate the labour market impacts of the recession.

There might be some reluctance to hold the vouchers. In general terms whether Californians would desire to demand the IOUs would depend on how enforceable the tax obligations are. The State of California could probably enforce the tax obligations and allow them to be extinguished using vouchers. This would be sufficient to generate a viable demand for the IOUs as an operating currency. I am not considering any constitutional issues here. Just the logical point.


It seems that California is already ceasing to issue IOUs. Shame the California money experiment will not take place.

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On the one hand this is hilarious, but I can see Labour trying the exact same thing when TSHTF. Calis example could have all sorts of implications.

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