It's All Worthless Paper

Thanks to Junior Mogambo Ranger (JMR) Marc H., who sent the clip from with the perfect illustration of both the worth of the IOUs that the state of California created and used to pay its bills, and the general worth of fiat money (like the US dollar) in general.

The particulars are that California did not have enough dollars to pay its bills after running the state into the ground with their laughable Leftist lunacies, and so they decided to print up IOUs with which to pay its bills!

In effect, California then had two fiat currencies, and there is probably some Gresham’s Law lesson in there somewhere when some banks refused to accept the IOUs.

Oddly enough, neither will the state of California, which issued them! Stranger than fiction! Court House News puts it as “Small businesses that received $682 million in IOUs from the state say California expects them to pay taxes on the worthless scraps of paper, but refuses to accept its own IOUs to pay debts or taxes.” Hahaha!

Let’s stop laughing long enough to review: California paid its vendors with its own newly-created money, but it won’t accept the same money back as payment for taxes or debts! Hahaha!

The problem is that there are limits on how much you can borrow, and if you continue to spend more than you make, accomplished by the simple expedient of borrowing money and then spending it having a wonderful time, then one day you are going to hit that debt limit, whereupon all hell breaks loose, like when you are at the restaurant and the snotty little waiter unexpectedly comes over and, with an irritating tone to his voice, embarrasses the hell out of you by tossing your credit card rudely in your surprised face and loudly declaring “Your credit card has been denied, sir, because apparently you recently spent the last of your available credit at what appears to be a wild, drunken bacchanal at a bar and, around midnight, on a case of frozen microwave burritos, a cup of coffee, and a rather large purchase of adult videos and associated novelties at what appears to be a truck stop.”

So you can see how reaching a debt limit is a bummer! If you are the federal government, however, the problem is as simple as having the CIA or NSA kill the snotty waiter and giving yourself some more “wiggle room” by raising your own debt limit! Hahaha! It’s easy when you know how!

Sure enough, The 5-Minute Forecast reports that Tim Geithner, ridiculous Secretary of the Treasury, wrote to the members of Congress and begged that “It is critically important that Congress act before the [debt] limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations.”

The 5 says facetiously that this could be interpreted as meaning that “our Treasury Secretary is finally putting his foot down, insisting that Congress pull back its lavish spending programs and start addressing our incredible $11.6 trillion national debt” by deliberately letting the people suffer the pain of spending less money and paying back debt, which (if you know anything about the American system of federal, state and local government, or the way Americans now clamor for a free lunch for everybody) is enough to make you laugh and laugh and laugh so hard that pieces of microwave burrito that you ate last night, fly out of your mouth! Hahahaha! Now THAT’S laughing! Hahahaha!

Suddenly, The 5 says, “Wait… what’s that?” which I thought was going to be some stinging criticism referring to the sudden appearance of half-digested pieces of burrito flying through the air, but was thankfully not.

Instead, it was what you thought it was… “Geithner’s actually asking for Congress to raise the debt ceiling” which he does (as one gathers from the text of Mr. Geithner’s actual remarks) because “If Congress authorizes our government to dig deeper than $12.1 trillion in debt (our current glass ceiling), our partners here and abroad will somehow ‘remain confident.’”

To this apparent contradiction, The 5 asks, “How perverse is that?”

Well, by this time I was pretty despondent about the economic future of this country and the world, although I had a kind of pleasant buzz and was having fun kind of swaying back and forth on the barstool while looking at myself swaying in the mirror behind the bar.

I was marveling at the devastating changes that have happened to my face and my life since that special, special moment a long, long time ago when a naïve young moron happily said “I do” because he was too stupid to even vaguely comprehend that married life was not like it appears on TV, where dad comes home from some job where he makes enough money to support a whole family consisting of (at least) a few kids and a wife wearing a pearl necklace and high heels all day, instead of the gruesome reality of having to break your aching back at some dead-end job making almost nothing, even with exhausting overtime, and then having to listen to your wife whining that she doesn’t have any money because you are lazy and stupid, which is true but – damn it! – she didn’t know that before we were married?

And on TV, the wife calls her husband “dear” instead of “you disgusting pig”, and who gives him an affectionate kiss on the cheek when he gets home, instead of shrieking “Don’t lay a finger on me, you disgusting pig!” which is the same “disgusting pig” crack we were talking about earlier, proving my point, whatever it was, but you can see the kind of crap I have been putting up with (or “up with which I am putting”) seemingly All My Freaking Life (AMFL).

On the other hand, if it happened on TV, you would say, “Don’t be stupid! That can’t possibly happen in real life!” but the fact is that California has issued a new fiat money that is so foul that not even the issuing government will accept it in payment for anything! Hahaha!

This brings us to gold, which in 4,500 years, has always found someone to accept it in payment for everything! Hahaha! So which one do you want? Paper California IOUs, paper dollars or gold?

Whee! This investing stuff is easy!

The Daily Reckoning