"A Crisis is a Terrible Thing to Waste"
By Chelsea Cody
OurLA.org
As I was meandering through the blogosphere this morning catching up on the latest dirt about the state's financial downward spiral (a little light holiday weekend reading) I came across a short item on LAist about people looking to buy California issued IOU's on Craigslist.
I wanted to know more so I went in search of the marketplace in California IOUs. Craigslist had plenty of them, dozens in fact.
While I didn't see any ads selling IOUs (yet) there were a wide variety of people looking to purchase them. Some buyers were looking to collect IOUs for posterity and as souvenirs, others were advertising IOU auctions and the ability to speedily match and connect sellers and buyers.
Most ads offered to buy IOUs at discounted prices, counting on some people's fears that the state will default on its obligation to repay.
Here's a sample: Private investor will pay you CASH now for any State of California IOU's issued to you instead of you waiting for payment due to you. If you need CASH now and can't wait for the state to solve the Budget I will buy your California IOU's and pay you cash. I am in the Los Angeles/Downtown area and only interested in working with LA based individuals. Please reply with your contact info and I will call you. Thank you.
Seeing as California has not issued IOUs since 1992 and that the interest rate on the 29,000 IOUs ($53 million) currently given out is 3.75 percent there is the potential for industrious (or conniving) people to make money if they could get their hands on enough IOUs.
The risk is lessened for buyers because the state, unlike city government, is obligated to guarantee payment. It then becomes a matter of when and how much?
One Craigslist advertiser, Brandon Schlichter, has created a website called BuyMyIOU.com. He believes Californians unable to wait to collect on their IOUs may have to settle for an amount 50-60 percent of the value of their IOUs for payment.
Another buyer, Glen Jones, hopes to connect to a lot of people holding the IOUs and to become a broker between buyers and sellers if he can get enough volume going.
"How'd I come up with this idea? I was just reading about the interest rate the state was offering to have people hold these warrants/IOUs and thought about what type of incentives it would take for people to /make a trading market/ in these instruments," he said.
"II then thought it would be pretty cool to hold on to one of these docs. I'm a professional economist and simply want one of these as a primary historical document. Not really expecting to get anything out of this other than a piece of paper." This is one of the truly remarkable things about America; there is
a market for everything, even -- or perhaps, particularly -- during times
of crisis.
As California faces a growing $24.3 billion deficit and as lawmakers continue to argue with the Governor over how to best shore up the state's finances (be that through cutting state programs or raising taxes on oil and tobacco products) this "fiscal emergency" means that State offices will be closed three days a month and that the state will continue to issue IOUs.
Many of which will be sold off for a fraction of what they are worth, as many banks will no longer be accepting IOUs come July 10.
Although the state will begin to cash IOUs Oct. 2 the online IOU market may very well be booming by then.
After all, people can't pay their bills, salaries or buy groceries with IOUs.
By Chelsea Cody
OurLA.org
As I was meandering through the blogosphere this morning catching up on the latest dirt about the state's financial downward spiral (a little light holiday weekend reading) I came across a short item on LAist about people looking to buy California issued IOU's on Craigslist.
I wanted to know more so I went in search of the marketplace in California IOUs. Craigslist had plenty of them, dozens in fact.
While I didn't see any ads selling IOUs (yet) there were a wide variety of people looking to purchase them. Some buyers were looking to collect IOUs for posterity and as souvenirs, others were advertising IOU auctions and the ability to speedily match and connect sellers and buyers.
Most ads offered to buy IOUs at discounted prices, counting on some people's fears that the state will default on its obligation to repay.
Here's a sample: Private investor will pay you CASH now for any State of California IOU's issued to you instead of you waiting for payment due to you. If you need CASH now and can't wait for the state to solve the Budget I will buy your California IOU's and pay you cash. I am in the Los Angeles/Downtown area and only interested in working with LA based individuals. Please reply with your contact info and I will call you. Thank you.
Seeing as California has not issued IOUs since 1992 and that the interest rate on the 29,000 IOUs ($53 million) currently given out is 3.75 percent there is the potential for industrious (or conniving) people to make money if they could get their hands on enough IOUs.
The risk is lessened for buyers because the state, unlike city government, is obligated to guarantee payment. It then becomes a matter of when and how much?
One Craigslist advertiser, Brandon Schlichter, has created a website called BuyMyIOU.com. He believes Californians unable to wait to collect on their IOUs may have to settle for an amount 50-60 percent of the value of their IOUs for payment.
Another buyer, Glen Jones, hopes to connect to a lot of people holding the IOUs and to become a broker between buyers and sellers if he can get enough volume going.
"How'd I come up with this idea? I was just reading about the interest rate the state was offering to have people hold these warrants/IOUs and thought about what type of incentives it would take for people to /make a trading market/ in these instruments," he said.
"II then thought it would be pretty cool to hold on to one of these docs. I'm a professional economist and simply want one of these as a primary historical document. Not really expecting to get anything out of this other than a piece of paper."
As California faces a growing $24.3 billion deficit and as lawmakers continue to argue with the Governor over how to best shore up the state's finances (be that through cutting state programs or raising taxes on oil and tobacco products) this "fiscal emergency" means that State offices will be closed three days a month and that the state will continue to issue IOUs.
Many of which will be sold off for a fraction of what they are worth, as many banks will no longer be accepting IOUs come July 10.
Although the state will begin to cash IOUs Oct. 2 the online IOU market may very well be booming by then.
After all, people can't pay their bills, salaries or buy groceries with IOUs.
Ron Kaye is the former editor of the Los Angeles Daily News where he spent 23 years helping to make the newspaper the voice of the San Fernando Valley and fighting for a city government that serves the people and not special interests.
Twice in recent years, Los Angeles Magazine listed Kaye among the city’s most influential people, specifically in the area of politics. Kaye has been variously described in the media as the “accidental anarchist,” “the Patrick Henry of the San Fernando Valley” and a “passionate populist.” He is now committed to
carrying on his crusade for a greater Los Angeles as an ordinary citizen. Previously, Ron worked at the Los Angeles Herald Examiner,
Associated Press, Cleveland Plain Dealer and The Australian as well as papers
in Fairbanks, Alaska and Yakima, Wash. He also wrote for Newsweek magazine, The Guardian in London and the National Enquirer.
If the state's IOU's trade at 50-60% on the dollar, then the state's credit rating is truly "junk." So much for Bill Lockyear's comments that the state is credit worthy.
There is a new website for individuals and businesses to buy and sell government-issued IOUs. It is called IOUmarket and It can be accessed at http://ioumarket.com.
Arnold is an idiot who has degraded California. This imbecile needs to resign!!
We can't take another year and a half of his incompetence!!!
I found this post in google, right on the first page - just what I was looking for, thanks!