Since 1789, States have not been allowed to print their own money - unlike the Federal government which simply buys more green-tinted paper then runs the presses 24/7 until it has enough to stimulate every real and potential Obama voter in the land.
Article I, section 8 of the Constitution states the Congress has the power: To coin money, regulate the value thereof … and to provide for the punishment of counterfeiting the securities and current coin of the United States.
But think about this. If I were a store keeper in California and a state employee, or vendor, or whomever walked in with an official state IOU to buy something … what would stop me from taking that piece of paper in lieu of cash?
I mean, the only thing which makes a $10 bill worth $10 is if you and I agree it is worth $10.
So, if Californians decide that IOUs have the value of whatever it says on that paper, then the IOU becomes … currency.
What if, say, Ford Motor Company decides to accept California IOUs in payment for cars? And if Ford's vendors say they will, in turn, accept Ford IOUs (based on the California IOUs) in payment for brake pads and carburetors, then Ford IOUs become, for all intents and purposes, money.
This IOU thing is really important, especially in the face of Cap-and-Trade. Think about General Electric, or U.S. Steel, or 3-M issuing IOUs for their carbon production instead trying to buy carbon credits for cash.
Corporate and State IOUs could replace Dollars, Euros, Dinars, and Yuans.
If you think Ford is good for its IOUs you'll take them as payment. If you don't think GM's IOUs are worth a crap, you won't.
The free market will, in spite of Barack Obama, prevail. Get me John Galt on the phone.
What's the address of those Nobel Prize for Economics guys?