FICRY

Worthless Emergency Currency: Issued Nordhausen, DE, 75 note , 1921

In this financial climate, woeful tales of businesses going bust have come to grace the front pages of our newspapers and the homepages of our blogs almost every day (at least when Michael Jackson isn’t dying). But here’s one that seems positively surreal, almost as if it came to us straight out of a Depression-era blues song, or at least the backlog of outtakes from the film “Oh Brother Where Art Thou.” Hard up and with no one to turn to, the State of California has started issuing IOU’s to its residents. Tha’s right, like the messages you wrote to your poker buddies in college when you lost a game and couldn’t pay up. But as strange as it may sound, the Golden State, whose economy would be the eighth-largest in the world if it were its own sovereign nation, is flat out broke. Bloomberg News reports, “California was forced to issue the notes last week for the first time since 1992 for everything from tax refunds to services and goods, as Governor Arnold Schwarzenegger and lawmakers remain deadlocked over how to fix a $26 billion budget deficit.”

Not surprisingly, an occurrence as rare as this one leads to a good many people wanting to get in on the action, by buying up the IOU’s as souvenirs, or as an investment. If you’ve ever seen a note for ten billion Deutschmarks from back during the Weimar Republic in Germany in the 1930’s (or, sadly, any of Zimbabwe’s currency these days), you’ll know what a titillating shock it is to see a piece of currency worth less than the paper it’s printed on. Glen Jones, one of the collectors in pursuit of this FICRY commodity, explained, “I thought I would buy one as a souvenir of fiscal irresponsibility.”

Strangest of all, however, is not that the slips are being bought, sold, auctioned off, and collected online, but rather that the state government fully expects this to happen and condones the activity. Although those who hold onto the IOU’s will get all of the money they are owed from the state plus interest, not everyone has the luxury of doing so. Indeed if California is so hard up that they have to issue these in the first place, it is probably right to assume that most of the people receiving them are desperate for the money. That is why a bizarre transaction of this sort suddenly makes sense. If a middle man were to buy an IOU for slightly more than it is worth right now, and hold onto it until payback time, both parties benefit: the person who was originally issued it gets cash on hand immediately, while the person who bought it makes a profit later on.

While there’s no word yet on how well the system is working, we see two possible futures for this bold financial venture. Either all will go as planned, and California residents will turn in their IOU’s on time to receive the full amount of legal US tender they are owed, or California will be unable to close their budget gap and sink further and further into debt, residents unable to turn in their IOU’s for money will begin using their IOU’s as money, causing the California economy to slip from its place as eighth-largest in the world to somewhere below the rank of Botswana. Finally, the golden state will be forced to secede from the union on the grounds that it can no longer do business with the other 49 states. Only time will tell.

Got something to say? Leave your comments below and follow us on Twitter, Facebook and Reddit by clicking the icons.