Thursday, July 9, 2009
California's experiment with IOU's...unanticipated effects?
I have seen that California is having some success getting people to use their new IOU's as a currency. I know that's not what the stated reason is for producing them, but that's the effect. If other states down the road end up in a similar state of ruin as California is in now (which I think is likely for most of them), then the U.S. could see a host of competing 'currencies' emerge, state by state, which will continue to undermine the authority and necessity of the U.S. Federal Reserve note. This also has implications for federal taxation. Would you have to pay Federal income tax on wages paid in state based IOU currency? Wouldn't the cash strapped states want that tax revenue for their own?