Unconstitutional IOU’s

I don’t know why this hasn’t been brought up in any of the California budget news that I’ve seen.  The state of California is issuing IOU’s instead of paying people and companies.  I’m no lawyer, but that practice obviously (it’s obvious to me anyway) violates the US Constitution.  Article I, Section 10, titled “Powers prohibited of States”, states:

No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

Let me summarize it this way – No State is allowed to use anything except US Dollars as payment for anything.  They cannot print their own money, they cannot “emit bills of credit” which are IOU’s.  Here’s the definition of “bills of credit“: a paper issued by a State, on the mere faith and credit of the State, and designed to circulate as money.

That’s why California can’t require banks and others to accept them – IOU’s aren’t money and the state is specifically prohibited from using IOU’s as money.  I’m guessing that the only reason they’re allowed to do it is that no one has filed a suit to challenge it.  Californians want their bread and circuses.  Who cares if they are being paid with worthless pieces of paper?




One Response

  1. Interestingly enough, one would think that the “pass any (…) Law impairing the Obligation of Contracts” would nullify the entire GM bankrupcy, but I guess one easily forgets that governments rarely follow their own laws, nor do their loyal servant courts that are run by political pull….

    How are things in the US? Anyone picking up on the hyperinflation debate, as we know this is the “cure” that will solve all government financial problems in the end…

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