"The Last fig leaf" ripped off: California July 2 began "white finance"

July 2, California, which is struggling on the brink of bankruptcy, will have to start relying on white stripes. June 24, California Auditor General Chiang John Chiang to practice his 2 days ago to the reporter revealed the financial rescue plan.　　He announced that if Governor Schwarzenegger and the state legislature could not shake up the budget revisions, he would start issuing government IOUs (registered warrants) on July 2 to pay for the California government's spending in the real sense of "white stripes".　　Compared with the obscure term "registered warrants", American people prefer its synonyms iou―― this is the abbreviation of "I owe you" three words, translated into Chinese is "I owe you". "I owe you" as a typical product of the Great Depression of the 30, is the last tool for the government to make up the deficit.　　So, Chiang this time, he also took off the last fig leaf of California's finances, declaring it to be in the Great Depression era. Of course, "I owe you" is far from a simple white-stripe, it has its own set of rules of the game.　　July 2, Chiang will be with California's other two "head of finance"-California finance director (Treasurer) Bill? says Lockyer and Finance Minister Mike? Guinester met, the 3-person group for the first batch of this year will expire October 1, "I owe you" set the rate for "white finance" set the rules of the game. "White Finance": Helpless "I owe you" after the Great Depression of the late 30, the Government of California issued only IOU ("I Owe You") in 1992 and implemented "White-money finance".　　When the governor of California, Peter Wilson, paid 100,000 civil servants with IOU, he was immediately sued by the latter. Chiang said IOU was the last resort. California will enter fiscal year 2010 on July 1, but the government will face a $2.8 billion trillion funding shortfall by July, and the gap will widen to $6.5 billion by September. He has not been able to solve the problem by "deferred payments", as it did in February this year, as the current funding gap has swelled 5 times-fold.　　The contingency plan to get short-term, high interest loans from Wall Street has been rejected by Governor Schwarzenegger. June 24 The day, after Chiang announced the IOU plan, the Democrats proposed deficit reduction program was vetoed by the California legislature, step by the Governor Schwarzenegger 16 billion U.S. dollars "fiscal downsizing" in the footsteps of the plan.　　June 26, Fitch, the rating agency, has downgraded California's general obligation bond credit rating by one level to "a-". In the coming July, construction contractors and suppliers sent their bills to the government of California, only to get a bunch of white stripes instead of the green dollar.　　California's corporate and personal income tax rebates will also be paid with white stripes. Of course, white stripes are not omnipotent. Chiang to this reporter said, "The government IOU's payment effect is very limited." "According to the plusState law stipulates that Governments cannot IOU educational institutions or use white stripes to send investors with government bonds, which must be paid in cash. White-stripe Economics: interest rates, circulation and taxes there is no doubt that California's creditors will be furious about the white stripes.　　If there is not enough compensation, no one will accept a pile of IOUs.　　To quell the grievances of creditors and make way for "white finance", the Government of California will provide compensation for IOU by 3 ways. The first is to set interest rates. The expiration date for the first instalment of IOU was October 1, meaning that creditors could receive cash from the government 3 months later, the equivalent of a mandatory March-year savings for creditors. Therefore, IOU's first compensation method is reflected in the interest rate, this batch of white-stripes interest rate, must be higher than the market in the March period bank deposit rate. In 1992, IOU's interest rate was set at 5%, while the corresponding interest rate for the big banks in Los Angeles was 3.4%, and San Francisco was 3.3%.　　Although the current Federal Reserve has a substantial 0 interest rate policy, Commercial bank deposit interest rate is also low, but how to determine a suitable spread to persuade creditors to accept white stripes, and do not pay too much interest, but also Chiang must be resolved on July 2 a problem. The second means of compensation is reflected in the circulation of white stripes. In 1992, the California government and the California Bankers ' Association reached an agreement that creditors could cash out their white stripes through the Bank of California. Lenders can also opt to deposit their ious in banks, but according to the bank's market interest rates, they must shift the White stripes to at least 2-year regular savings if they are to get the 5% interest rate.　　So in the days to come, Chiang and other Californian finance bosses may have to negotiate with the California Bankers ' Association. Finally, the tax issue. The Government of California may also consider a 1992-year model for capital gains tax on the interest earned by creditors by holding "white Stripes".