Evan Newmark at The Deal Journal has a very clever column up on the California IOUs. Here’s a bit of it:

Who says the American genius for financial innovation is dead?

Nine months after Wall Street nearly destroyed itself, and we already have a burgeoning new securities market: California IOUs. Apparently, the SEC wants these IOUs to be treated as a form of municipal securities.

All it took was a budget impasse and the near bankruptcy of our largest state to create a brand new $3.3 billion market for securities. That’s what happens when a state is no longer able to issue municipal bonds. So what if the IOUs trade at a discount — and state workers and contractors only get 96 cents or 97 cents on the dollar. And so what if the recipients of IOUs have no choice but to take them. Just think of all those broker commissions!

He takes this to its logical conclusion as all of the other bankrupt states see the genius in the California solution and start flooding the country with their own paper.

It’s a good way to laugh at a pretty pathetic situation and laughter is quickly becoming about all we have left. The problem is that we can’t afford to pay our bills on any level so we just keep on creating debt to plug the holes.