And now: an arbitrage market for California’s IOUs.

Who says capitalism is dead?

“If you are receiving a California IOU and need cash immediately, please contact me,” reads a posting on Craigslist. “I may be of assistance.”

The California legislature's been unable to agree on budget cuts and tax hikes needed to close a $24 billion budget gap, leaving the state short of cash. Last week, California issued registered warrants (a fancy term for IOUs) totaling $53 million, the Financial Times reports.

The IOUs are scheduled to be paid on or before October 2. Each pays an annual rate of 3.75% and is transferable, meaning anyone can buy or sell them.

Translation: If you need cash now, it'll cost you.

An entrepreneur in Ohio has set up a website designed to bring buyers and sellers together for a commission ranging from 5% to 10%. Not quite money for nothing, but it’s close.

Even at $0.99 on the dollar, a buyer would garner an annual yield of about 7%, Matt Fabian, managing director at Municipal Market Advisors, told the Financial Times.

You can bet that institutional investors will demand significant discounts to cover the risk.

California says the IOUs are “rock solid,” and both Wells Fargo (WFC) and Bank of America (BAC) say they’ll accept them as deposits. That should keep folks in cheese and crackers at Wal-Mart (WMT).

But don’t sneer: California’s problems may be a preview of the colossal crackup coming to Washington.

President Obama’s proposed health care plan will cost an estimated $1.6 trillion. This has about quadrupled the national debt, raising the pressing question: Where will the money to pay for yet another huge federal program -- one that’s bound to be more expensive than anticipated -- come from?

The answer may be federal IOUs.

Keep in mind that the federal deficit's now almost 70 times larger than California’s. President Bush appeared indifferent to the government’s growing red ink, but President Obama seems intent on setting a new world record for spending.

The ballooning deficit's bad news for the dollar, and it appears everyone knows it except Washington.

But cheer up: Would you rather have an IOU signed by the Governator -- or by the President?

Then again, either may be suitable for framing and hanging in your bathroom.