I also mentioned in that previous post that during The Great Depression, state and local government entities including school districts across the nation issued registered warrants (check shaped IOU's) to pay vendors and employees. Hallye Jordan, spokewoman for State Controller John Chiang, is quoted today in the Sacramento Bee as saying "we may have to go straight to registered warrants. That's something that we are looking at daily."
This is within the context of the Governor and the Legislature being unable to "rebalance" the budget for the coming fiscal year which was adopted in February. The article reports:
The problem with the Bee writer's perspective is that during The Great Depression it became that dire and that simple. During The Great Depression, banks wouldn't honor the warrants as doing so was essentially issuing a loan to the governments involved with no assurance as to when or how the loan would be repaid. Grocery, drug, and other stores and vendors quit accepting them after it became apparent that after a few months they still couldn't redeem them for money.
"This week I sat down with the controller and also with the treasurer," Gov. Arnold Schwarzenegger told a Southern California audience on Friday, "and we all agreed that after June 15, every day of inaction jeopardizes our state's solvency, and our ability to pay schools and teachers, and to keep hospitals and ERs open."
The actual fiscal jeopardy is neither that dire nor that simple, but it's still serious.
Many teachers and nurses continued to work as long as they could. In The Great Depression that kept things going for awhile because most people didn't have the debt they have today and most folks could walk to work. Now in The Great Recession that 23 miles to the job will be an impossible situation when the local Chevron quits taking registered warrants.
The Bee writer and most governmental officials including Legislators believe that couldn't happen today. Yes it can.
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