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Warning: Taking a page from the book of Paul, this is a long rambling post that doesn’t have any real point aside from me writing down some thoughts in my head at the moment. You’ve been warned.

So California can’t afford to pay tax refunds. It is instead looking into delaying tax refund checks or issuing IOUs. 2 ways this seems entirely fucked to me:

1. A tax refund is money you overpaid in taxes. The govt shouldn’t spend money that doesn’t rightfully belong to them. To be fair, the govt shouldn’t even be getting anymore money than the proper amount of tax. Why do we have income tax again? Oh right, to pay for wars. I wonder what wars any of the states that collect income tax will be fighting.
2. If California issues IOUs (or checks since they’re both pieces of paper guaranteeing money) why would any bank honor these pieces of paper? They know that California has a $42 billion dollar deficit. Imagine you write a check to someone and the bank knows you have a -$4,200 balance. You think they’d cash the check? Hell no.

Expanding on thought #2, I highly doubt that banks aren’t going to cash the checks/IOUs as chaos would quickly ensue (more on this thought later). So banks will knowingly accept a less than worthless (worthnegative?) piece of paper thereby extending an unwritten, unguaranteed loan to the state of California.

We know California is broke right? What happens if they don’t pay the banks back for these IOUs? Last year Cali paid out $10.7 billion in tax refunds. After the bank bailout and ensuing bankruptcies, I don’t think any bank can afford to be stiffed on a billion dollar loan (we’ll assume most of the refunds will end up in ~10 banks because we can).

See the cycle here? The loans and the debts go round and round because nobody wants to let stuff hit ground. Returning to that bit about banks not cashing the IOUs, I would welcome the resultant chaos if it would ultimately lead to true market correction.

People are talking a lot about the economy “bouncing back” to which I say bullshit. There is nothing to “bounce back” too. That joyride we were having for the last few years was just Monopoly money. Once you take all the pretend money out of the equation, we’re right where we’re supposed to be. Unfortunately all sorts of businesses made big bets on debt and lending and are now feeling the pain.

BUT WAIT!

Government to the rescue, ready to print more real money backed by nothing thereby devaluing the real money you already have. Why? So these businesses that made bad bets don’t crash.

The free market can’t really work if the government is going to rescue businesses that don’t do well.

Pop quiz:

You have a car that you use to get around and also cart around your little sister for your parents. You total your car while driving recklessly. You still seem committed to driving recklessly even after you’ve crashed. Your parents:

A) Give you another car.
B) Tell you to save up and buy another on your own.

Makes less sense when put that way right?

Oh but what about the jobs of the people? Won’t you think of the people? The fact is, business is just a big bet. When you go to work for a company, you’re saying that you trust the company won’t fail. You’re making a bet on the business just like the owners are. While we like to think jobs are guaranteed, they are not.

This all goes back to the lack of responsibility and consequences. For some reason, our nation has been moving toward a mindset that consequences don’t exist, that someone will be there to pick you up will you fall.

Sorry, that was a tangent. Money?

So this whole cycle of debt business? It has to stop. Let the value of homes fall (sorry homeowners) since their pricing and value was based on fake money. This will make it so people don’t have to go into significant debt to buy a home.

College tuition should not be what it is. Kids should not have to start their adult lives by piling on debt. I mean, what IS that? “Well kids, you’re 18 now, and since most people need a college degree to have a career you should go to college. Here’s $40,000 in debt to start you off.”

More debt.

I disagree with the notion that anything worth having requires you be in significant debt but that is the notion that has been fueling our society and bubble based economy for the last decade or so. Maybe more? Probably.

Personally, I want this whole house of cards to fall so the value of things can be adjusted to their value based on real money and not debt based money. Do I think that will happen? No. Chaos, remember? People would go nuts because while the market was correcting itself, we’d look like we were in a recession (depression?) and all the fake money would go away and then the govt would step in and…

…oh wait.

Well until that whole govt-stepping-in-to-catch-the-economy-when-it-falls stuff stops, we’re fucked. The cycle will perpetuate because the market will never be able to correct itself.

I’m done rambling about this now.

Disclaimers: I fix computers not money for a living, these are just my based on common sense thoughts. The place where I fix computers has no idea I have these crazy thoughts about money so these words are mine, not theirs.