February 10th, 2009

That's not an IOU. This is an IOU.

From http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/02/09/MN7715QD8H.DTL:
California forced to issue IOUs to counties

California's budget woes will sweep over California's 58 counties this week when they get IOUs instead of checks for $89 million in anticipated payments for welfare, food stamps and other services.

Many counties are planning to go to court as soon as that first payment is missed. San Francisco will join a suit set to be filed by San Diego and Sacramento counties, arguing that state Controller John Chiang must release funds that already have been appropriated by the Legislature in the state budget.

The state requires counties to provide foster care programs, adult protective services, welfare payments and a laundry list of other social services and normally provides much of the money to run them. But while the legal requirements remain, the money has disappeared.
The SF Chronicle doesn't mean that literally. What they're actually saying is that the state is deferring payment until it figures out what to do.
The state's cash crunch means that the counties also won't get an $83 million payment scheduled for Feb. 25 and that no future payments will be made until the state reaches a budget agreement that eases its cash-flow problem.

The state's long-term budget problems already have stretched county resources. Since 2001, the state has not approved a cost-of-living increase for most social service programs, forcing counties to make up the difference.
If California were really issuing IOUs, they might look more like this (click on images for larger versions with legible text):


From http://en.wikipedia.org/wiki/Patac%C3%B3n_(bond)
The Patacón (officially called Letra de Tesorería para Cancelación de Obligaciones de la Provincia de Buenos Aires) was a bond issued by the government of the province of Buenos Aires, Argentina, during 2001. The patacones were used to pay government bills, including state employees' salaries during a period when the economic crisis caused regular currency (Argentine pesos) to be scarce. Patacones then circulated in the economy in much the same way as pesos.
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Cute furry summer animal picture of the day.

It's hard to find an upbeat photo from the bushfires in Victoria, but I did find this one.

From a photo gallery on the Herald Sun's (Melbourne) website:



Yarra Glen CFA firefighter Darren Thompson with a baby sugar glider rescued from the bushfires.

From http://www.americanaustralian.org/en/art/?345:
The [American Australian] Association is accepting donations for the Victorian Bushfire Relief Fund that will allow for tax-deductible donations from the United States to be redirected to the Australian Red Cross who are leading the relief effort through the 2009 Victorian Bushfire Appeal.

The Association will issue tax deductible receipts for donations over $US200.

To make a donation please use this form.

The Association is a section 501 (c)(3) public charity, contributions to the Associations programs and contributions are tax-deductible to the extent provided under section 170 of the U.S. Internal Revenue Code.
(Image and donations page via Naked Capitalism).

I was going to post something on the Geithner speech today...

...but it got all TL;DR.

Suffice to say I'm as impressed as the markets were today.

The kindest thing I've seen said about it so far is from Paul Krugman:
An old joke from my younger days: What do you get when you cross a Godfather with a deconstructionist? Someone who makes you an offer you can’t understand.

I found myself remembering that joke when trying to make sense of the Geithner financial rescue plan. It’s really not clear what the plan means; there’s an interpretation that makes it not too bad, but it’s not clear if that’s the right interpretation.

The plan deserves praise for what isn’t in it, at least as far as I can tell. There doesn’t seem to be provision for mass purchases of toxic waste at premium prices; there also doesn’t seem to be a massive “ring-fencing” guarantee against private losses on bad assets. In that sense the plan is better than what the last few weeks of leaks led us to expect.

So what is the plan? I really don’t know, at least based on what we’ve seen today. But maybe, maybe, it’s a Trojan horse that smuggles the right policy into place.