I have heard reports that if California was a country it would be the world's ninth biggest economy. So it doesn't take much imagination to see that what is happening in California is symptomatic of the USA as a whole with the main difference being that the USA Government issues Treasury bonds.
The USA Government then sells these Treasury bonds to the privately owned Federal Reserve Bank, which buys the bonds by creating money from thin with a computer bookkeeping entry.
This money created from thin air then goes to the USA Government and the privately owned Federal Reserve Bank holds the bonds. Then the USA Government, on the bonds that the USA Government itself issued, pays interest to the privately owned Federal Reserve Bank!
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Out of Cash, California Turns to IOUs New America Media, News Report, Aaron Glantz,
Editor’s Note: Today, California enters a new fiscal year without a budget, and an estimated deficit of $24 billion. Gov. Arnold Schwarzenegger refuses to sign a budget that raises taxes while Democrats in the state legislature are unwilling to eliminate social services. As the economy worsens and the budget gap becomes larger and even more difficult to close, the state controller is issuing IOUs.
SAN FRANCISCO -– If you’re waiting for a check from the state of California, keep waiting. You won’t be getting it anytime soon.
Whether you’re a student waiting for your financial aid to come through, a taxpayer waiting for a refund, a defense lawyer representing a prisoner on death row, a businessman with a contract, a mental health care provider, or a state-funded community clinic, you won’t be getting any of the money California has promised you.
Instead, starting Wednesday, you can expect an IOU.
Full article at http://news.newamericamedia.org/news/view_article.html?article_id=1ca5d9685cd9edad8c4f51701c452523&from=rss
