Big banks are rejecting California’s IOUs.

Even in January, it was reported that California might have to issue IOUs. Last week the state started issuing IOUs and major banks have made a promise not to cash them after today. There is a $26 billion budget deficit. The only other alternative is to go to a credit union. There are about 60 in the state that will accept them for deposit.

Most major banks reiterated that customers could not deposit the IOUs after today. Others, such as City National Corp., said they would continue accepting the registered warrants but could stop taking them at any time.

The last time the state sent out IOUs, during a 1992 impasse between then-Gov. Pete Wilson and legislators, banks also eventually rejected the registered warrants.

The 3.75% interest isn’t enough of an incentive for the banks to accept the IOUs but the credit unions are hedging their bets to gain a greater foothold in the market since there are larger financial institutions that are not accepting the cash vouchers. Some people have tried to sell them on the internet at a discount because they have no other place to turn.

Additionally…
Another way California is looking to garner income is by taxing marijuana.

Ponzi schemes. When things sound too good to be true, they usually are. Even if someone is a friend, check out what they are telling you.

Bernie Madoff received the maximum sentence for his crime. Yet, his incarceration won’t bring back the life savings to those that he bilked out of millions of dollars.

He apologized.

“I live in a tormented state for all the pain and suffering I created,” Madoff said. “I left a legacy of shame. It is something I will live with for the rest of my life. Saying I’m sorry is not enough. I turn to face you. I know it will not help. I’m sorry.”

The Securities Investor Protection Corporation already has over $61 million in claims made by nearly 9,000 Madoff investors. The SIPC will also pay up to $500,000 for eligible claimants who lost money to Madoff.  The SIPC works with a trustee in the even that a brokerage firm fails and owes money to investors.  Hardship cases are also being given priority and their claims are being expedited.

The worst part about this is that with so many people out of work, it is possible that there are more similar illegal schemes like multi-level management and Ponzi schemes just looking for more gullible folks to participate. The unemployed need to be wary of “great opportunities” offered by a company seeking salespeople for their products and require that you bring in more people to sell or asking you to refer friends to a great opportunity.

When something is great or horrible you want to tell your friends. It is when things are mediocre that you say nothing. When you have a great experience anywhere you tell others – a great return of your income or a great chance to make more money. Good or bad, check it out.

Investigate on your own, if something doesn’t seem right even if it legitimate, then don’t go any further with a “job opportunity” or investment.  Investments are not mandatory, they are optional. When you want to work and have been out of work for a while, some work opportunities seem great – this does not mean that they are legitimate. With investments, the best option is not to put all of your money into one type of account. Nothing is certain and sincere is are many way that people have spent their money. For a job opportunity ask how much you have to spend in order to get a position. If you are required to recruit a certain number of people or do something that you are uncomfortable with, leave the opportunity.

What is the overall impact of increased savings? Since more people are saving because of uncertainty, even those who are not having financial problems. What does that do to our economy?

Saving is imperative and for decades, Americans did not save enough. Now that the tide has turned and people are saving more there is a battle between the people who save and those who are financially fit but more tightfisted with their cash. Americans are spending less. This of course also includes those who are out of work and not contributing to the economy in tangible ways – other than for food or gas. People who are not nervous about their jobs or incomes are still cautious about their spending.

This is what makes me worry. Saving when you do not necessarily need to or saving more than you need to can make someone into a miser. Then someone who suddenly sees that they aren’t saving for a goal or for a good reason, could snap and then spend recklessly.

“It will likely be a difficult quarter for consumer spending because consumers are still very nervous about their jobs,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “They’re going to be very cautious in their spending until there’s concrete evidence the recovery has really taken hold.”

The recession is taking hold in other countries as well. Canada’s GDP has fallen by over 5%, retail sales in Hong Kong are down 4%, European governments are rethinking their employment schema in order to have more workers.

There is no easy solution to this problem, but no extreme will make our financial problem improve. Reckless spending created this problem, stockpiling and not spending will not end this problem. A happy medium of spending within reason needs to be reached. Reasonable spending differs for each person, yet spending nothing when you have money to spend is also foolish and deprives yourself of what you may truly need (or want).

Venezuela’s Oil Minister Rafael Ramirez said in Vienna that his country could not afford to invest in major new oil exploration unless prices rise further. “We need a level of at least $70 [a barrel] to recuperate investment,” he said on Thursday. Muhammad-Ali Zainy, senior energy analyst at the Center for Global Energy Studies in London, says oil demand could increase quickly once the recession ends, especially as China has begun to build up its strategic oil reserves. “We think the price is going to go up gradually,” says Zainy. 

Oil prices are all about money. Gas prices have increased even though demand is down. The summer blends that are required in parts of the United States have always been a bit higher. Plus, summer has traditionally been driving season. So even though fewer people are really going out and take vacations, thy might take a road trip which requires gas. Also other countries need gasoline as well.

Consider if you are basing your projected expenses and budget on a certain amount of income you can survive. None of the oil producing countries were complaining when oi was selling for more than $145 a barrel. Now that the price is less than half of that, they can’t manage. Just like municipalities that were accustomed to using tax revenues for the budget and now have shortfalls because of unemployed people contributing less to the tax coffers, something has to happen. In the case of oil, production has slowed.

When demand increases for oil, OPEC countries are encouraged that the global recession is lessening.

Credit card reform has passed in the Senate and will return to the House for a vote.

One interesting area that the separate bills provide for are credit cards for minors. The House bill states that (unemancipated) minors can’t have more than one card, and limits college students to one card. The Senate bill eliminates credit cards for anyone younger than 21 without proof of income or adult co-signer.

Universal default is also eliminated so if you make a late payment your rate isn’t automatically increased on you other credit cards.

Though the other parts of either the House’s or Senate’s bill would be beneficial to cardholders, the provision for minors and college age students is important. Having one card will still allow a student to do some damage but not so much as having several cards and accruing thousands of dollars in non-tuition debt before graduating from college.

Debt is a big issue for many people. Starting your life with excessive credit card debt doesn’t help a college student make his/her way in the world. This legislation if passed by the House will make a difference when students arrive on campus and have to walk through a gauntlet of credit card companies’ tables offering free gifts and generous credit limits for those who have no employment. Proof of income or a co-signer would make it more difficult to completely ruin your credit. [A provision for a reasonable credit limit, depending on the student’s income would have been a great addition as well.]