California

Monday, Jul 6, 2009 08:45 PDT

How The World Works

Wanted on Craigslist: California insolvency

The Golden State's budget crisis can't be that terrible if people are interested in buying its IOUs. Right?

By Andrew Leonard

It sure makes for a compelling headline, "Wall Street Gears Up to Trade California IOUs: Payment Promise Offer Posted on Craigslist." How low can you go? The state of California can't pay its bills, is offering IOUs instead, and the pseudo-currency is getting traded on Craigslist, along with Death Ride tickets and futons.

However, you're a lot more likely to be able to grab a Death Ride ticket than you are an IOU. I went to Craigslist and found only two parties interested in purchasing California IOUs and no one willing to sell. I also found a message from a Bloomberg News reporter who wanted to take a picture of someone who had received an IOU.

Could it be that the decision by Wells Fargo and Bank of America to accept California IOUs for deposit has sapped the willingness of debtholders to sell at a discount? Or maybe the news that state Democrats have caved and are no longer pushing for a tax hike to help bridge the budget gap means that a deal with Republicans to slash spending is imminent and the IOUs will soon be yesterday's story?

Or maybe Californians remember that back in 1992, we went through the whole IOU drama and it was no big thing.

I dunno. But if you're looking for a hot market in California's brand-new currency, Craigslist is not exactly hopping. Which I find slightly reassuring, I guess.