The Debts of the Spenders: IRS Declares California IOUs to be Securities and Not Legal Tender

Banks have good reason to be wary of accepting California IOUs as valid legal tender because only the Federal government has the authority to issue money. This is a basic principle enshrined in the Constitution. Article 1, Section 8 clearly states:

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

To borrow money on the credit of the United States;

To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;

So, it comes w/little surprise that the IRS has declared California IOUs to be securities or negotiable instruments similar to checks. After all, they cannot contravene something that is taught in high school civics classes.

Source: http://capital-flow-analysis.com/capital-flow-watch/
sec-declares-california-ious-to-be-municipal-securities.html

Interestingly enough, this has opened up a whole new Financial "Wild West" where speculators are working on arbitrage opportunities to trade, lever, and exchange the IOUs on secondary markets.