California is issuing IOUs ("scrip") instead of money because it spends more money than it has. It is legal for anyone to make their own local money as long as it does not look like a Federal Reserve note (counterfeit) and it is not a scheme for avoiding taxes on income.
Worthwhile Canadian Initiative: The State(s) Theory of Money: California and Canadian Tire: "there is a distinct chance that California will allow taxes to be paid in the new scrip it issued when it ran out of funds. I have no idea whether this will happen, or whether the Federal government will stop it. Let me just assume that it does happen, and that the Federal government does not stop it. I'm (almost) hoping that it does happen, and that the Fed doesn't stop it, because it would be such a fascinating experiment in monetary theory.
Assuming this experiment does go ahead, what are the chances that California scrip will circulate as a medium of exchange?"
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