A broke state says it will issue IOUs until its legislature acts like adults and passes a budget (don’t hold your breath) but then can’t even get it together to send the IOUs out. Truly, such incompetence is breathtaking. Why, it’s beyond Palinesque, is what it is.
How much longer until the IOUs get tranched into bonds? Investors bottom-dwelling weasels could buy them for 80 cents on the dollar. Plus the state promises to pay interest until they are paid off. Thus, the IOUs could also be sliced and diced into interest-only and principal-only strips, My mathematical models clearly show such an approach simply can not fail.
Except of course, if California decides to repudiate the debt.