LEX You owe me, I owe you, but no IOUs please. After taking the extraordinary step of paying certain debts in registered warrants, California’s legislature is considering a bill that would allow tax debts to be paid in this temporary scrip. The measure almost certainly will not pass as it would create a vicious circle for the cash-strapped state, forcing issuance of even more IOUs.
When California began issuing the warrants last week, observers thought they were witnessing the creation of a parallel currency. Now large banks say they will stop accepting payments in IOUs and state officials have quashed a budding secondary market by requiring notarised transfers from the original recipient. Any resemblance to “legal tender for all debts, public and private”, the phrase printed on actual dollars, is fading.
