Friday, July 15, 2005

Man on a Soap Box, and a Note About Inflation

In California, we're not all nuts and fruits, even though it may seem that way. There are a few people - even a few in our legislature - who still have a grain or two of common sense and the courage to get up on their soap box and talk loud.

You may have heard how the State has gotten itself into some pretty murky financial waters over the last few years, due to the usual political overspending and lack of budgetary foresight. You've also heard about how loudmouth actor Arnold Schwarzenegger got us to boot out Gray Davis, our former Democrat governor, right on his ear.

Behind the catchy melody that got that entertainer elected were some very solid bass tones drumming out the refrain of economic restraint; and when Schwarzenegger took his place in Davis's chair, many Californians breathed a sigh of relief and allowed themselves once again to hope against hope that this upstart, this Austrian Oak, as he liked to refer to himself, might be able to use his fresh political naivete and brazen personality to cajole the legislature into getting serious about the California budget crisis.

A few years have passed, and Schwarzie has won a few, lost a few - all the while retaining his good sense of humor, it seems, if one is to judge from his regular public appearances on the Tonight Show. However, getting the Democrat majority to grow up and face budgetary reality proved to be just as gnarly a task as any the Terminator has faced to date.

Finally, after some pretty wise choices for council, a couple of dumb off-the-cuff remarks, and a few ear-catching, protracted tit-for-tat sessions with his would-be-nemesis, California Democrat Fabian Nunez, he has ended up coming to an agreement with the legislature, just in time to save face - or so we thought. Everyone was relieved. Finally. They've stopped the silliness. Yea! Maybe this State is going to be okay.

Or so I thought, until I read this balloon-pricker from one of the most outspoken bass-player Republicans of the State, Tom McClintock. It seems that the so-called "compromise" was worse than the budget proposals legislature already had rejected. Read his straight-shooting critique here.

Too bad the dang politicians can't put aside their petty feuding to think about their constituents and the State's future for a change, instead of feathering their own little special interest nests time after time after time. My heart has sunk - again.

Another Topic: A Note About Inflation

You probably are thinking, "Oh, 3% is really not so bad. The Feds have things under control. There won't be any real estate bubble bursting, stock market crashing, or business down-turning just yet. So what if no one - not even Greenspan - can figure out why long-term bond rates are so low while the Fed is moving its rate higher, contrary to everyone's expectations? No big deal."

Well, I just want you to do this little economics gymnastics. Let's imagine that you have managed to save $40,000 this year, and you put it in the bank at 3%. By the end of the year your money has earned $1,200. Sounds neat. You could pay one month's rent with that.

Well, if you earn a salary of $40,000 a year, by December inflation will have stolen one month's rent from you by taking $1,200 worth of purchasing power.

That's a lot of dough, don't you think? That's like asking you to pay a 13th month of rent every year, for nothing. Why is it that everyone is so content to have that much money disappear from their wallets? I don't get it. Maybe if we called it an "Inflation Tax" people might get the picture.

Read more about the subject in my earlier posts, most particularly here, and in my article here.


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