Banks hate California IOUs, but you should learn to love them until California establishes a State bank. Heck, they even pay interest!
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According to the Wall Street Journal,
The Big Banks Don't Want California's IOUs.
That is soooooo strange, because the big banks loooooove IOUs. Ninety
nine percent of all US currency is nothing but markers for Federal Government IOUs
and markers for personal and business IOUs. That is what 99% of US
dollars are, markers representing IOUs. The substitution of Federal
Reserve Notes (the markers) for IOUs was nothing but a switcheroo, to
make it appear the Federal Reserve Note (FRN) is the same as the old United
States Note, a paper dollar that was issued by the Federal Government
from 1862 to 1971.
The main difference between the old United
States Note (USN) and the FRN is that the USN was issued debt-free
directly by the U.S. Government, and the Government now issues IOUs as
collateral when it wants to "borrow" its own currency in the form of
FRNs or bank deposits from private banks. Can you believe that? For
109 years, longer than any other form of U.S. paper money has existed
including the FRN, the United States issued its own debt-free currency
as it was Constitutionally mandated to do. Then, it abandoned the
Constitution and gave the authority to "coin money" and "regulate its
value" to a cartel of private banks instead. Plus, it agreed to pay
interest for the privilege of "borrowing" those private banknotes that
the banks create for the cost of paper and printing. What a racket!
The
Federal Government is now running a TRILLION dollar deficit, not a
measly 26 billion dollar deficit like California, and has been doling
out hundreds of billions of dollars to the financial industry like so
much confetti. So, what do the Government IOUs look like? You know
what they are. They are Treasury Notes, i.e., T-bonds and T-bills.
Fancy names for IOUs. And, what do personal and business IOUs look
like? They are also known as "loan documents". That's right. T-bonds
and T-bills are nothing but Federal IOUs. And, personal and business
loan documents are nothing but personal and business IOUs. In exchange
for all these IOUs, the banks issue FRNs, or create bank "deposits".
Every time you write a check or deposit a check you are shuffling about
dollars, and those dollars are nothing but bank markers you get the
privilege of using in exchange for somebody paying interest on some
kind of IOU.
As a matter of definition, any instrument that
represents dollars and circulates as a form of money is called
"currency". So, why do the banks take Federal IOUs, personal IOUs, and
business IOUs and issue currency and say they will refuse California
IOUs? That is the question you should be asking. The answer is simple
but it is not obvious. They are afraid of competition from the
individual States of the United States. It's one thing to control
Congress via the Federal Reserve Act, the Federal Reserve System of
banks, the national debt, and political contributions. It is another
to control every State Government in the Union. The oligarchs and
their political clout have successfully prevented the Federal
Government from issuing its own currency, but they do not wish to fight
every State.
For the State of California to issue IOUs and use
them to pay bills in place of FRNs, that would be equivalent to the
Federal Government issuing IOUs - T-bills and T-bonds - and using them
in whatever denomination they wish to pay bills directly in place of
FRNs. The big banks greatest fear is the threat to their monopoly on
the creation of currency. Not only are California IOUs direct
competition to FRNs and bank credit, the California IOUs are superior
because unlike FRNs and bank deposits, they pay significant interest to
the holder. The big banks are trying to make it appear as if the
California IOUs are no good by not accepting them, but except for the
refusal of the big banks to accept them, I would much rather be paid in
an interest bearing currency than FRNs or bank deposits.
The
more I think about it, the angrier it makes me. Bank of America,
Citigroup, Wells Fargo, J.P. Morgan Chase, and the other major banks
who say they will refuse the California IOUs are all major shareholders
of the Federal Reserve System. The same banks are refusing to loan a
paltry $26 billion or so to California, despite having received
trillions in bailouts and loans from Government and the Federal Reserve
System itself. The financial crisis is the main reason why California
had to issue IOUs in the first place, and the same banks and same
system that caused the financial crisis to begin with are now refusing
to lend to California and refusing it's IOUs. If the major banks and
the Fed will not help California deal with the problem the major banks
and the Fed created, if the banks will not take California's interest
bearing money (its IOUs), then I suggest that we do not take their
money (checks written against Fed bank accounts), and we start to learn
how to get by without them. Here are my suggestions:
1) Write to Governor Schwarzenegger, and tell him you want California
to start its own State bank, like North Dakota did, and put all State
tax receipts in it.
2) If you have a checking or savings account
with: Bank of America Corp., Citigroup Inc., Wells Fargo & Co. J.P.
Morgan Chase & Co., or other Fed member bank, move that account to
a local credit union, and when California charters a State bank, move
it to the State bank. At least with the local credit union, you might
get better service and better interest rates, the profits stay local,
and you are partially withdrawing your support from the Federal Reserve
System.
3) If you have a mortgage owned by: Bank of America Corp.,
Citigroup Inc., Wells Fargo & Co. J.P. Morgan Chase & Co., or
other Fed member bank, refinance it with your local credit union, so
you will not be making mortgage payments to a Fed bank.
4) Refuse to
accept any check written against a: Bank of America Corp., Citigroup
Inc., Wells Fargo & Co. J.P. Morgan Chase & Co., or other Fed
member bank account, except as required by law.
It might be a
while before California charters that State bank, but you can move your
money or most of your money to a credit union, refinance your mortgage
with a credit union, and start refusing checks from the major banks
immediately if you wish to poke your finger in the eye of the Fed and
the major banks right now. In most cases, people are not required to
accept bank checks as payment for anything. You can list the banks you
will not take checks from, or you can just say, "No bank checks". But,
keep accepting checks from credit unions though as long as they are the
next best alternative to a State bank.
Two large
special cases in which you might be forced to accept payment in the
form of checks from Fed banks are: wages and rent, although in many cases
you can demand payment of wages in cash. California Labor Code section
212(a)(1) prohibits payment of wages by check unless the check is
"negotiable and payable in cash, on demand, without discount, at some
established place of business in the state, the name and address of
which must appear on the instrument." In other words, if the check
cannot be immediately cashed (and the larger the check, the less likely
a bank will cash it on demand), then you may insist on being paid your
wages in cash. If the check can be cashed immediately without
discount, and the name and address of the place where you can cash it
are written on the check, then you are obligated to accept it.
Regarding rent, a landlord in California normally cannot refuse a bank check
and require payment in cash. However, a landlord can require payment
in cash for three months if he receives a check from his tenant that is
dishonored by his bank. That can happen if the tenant overdraws his
account or stops payment on a check.
There might be other reasons than the ones I've given concerning why
California IOUs cannot become a viable long-term alternative currency,
but that does not imply we should not accept them in the short term and
keep trying to devise a better monetary mousetrap in the meantime. California did
over-commit itself financially, but it did not create the financial
crisis. A State of the Union certainly deserves more support from the
Federal Government than a private banking cartel.
Authors Bio:
Merchant marine experience on ocean research and oil exploration vessels in my youth. Ex-mechanical engineer, oil exploration equipment industry, commercial and military aerospace industries, SCUBA diving and respiratory protective breathing apparatus industries. Sport skin diver, spear fisher, scuba diver, fisherman, boat owner, football player, tennis player, husband, father, math teacher. Ex-Republican, not a fan of the Democratic Party either. Not very impressed with the reasoning ability of Progressives either, who seem gullible and incapable of envisioning the negative consequences of trying to create Utopia by law, but have a soft spot for them anyway because their heart is often in the right place. Long time interests include: political philosophy, ethics, economics, banking and monetary systems, criminology, the Second Amendment and gun control.