The Republican Outlook
Republicans in California this year fought in the toughest political environment for our party since 1974. In no cycle since then have our candidates had so many externalities to overcome on their way to Election Day, with the bottom dropping out of the world financial system in October, the summer energy crisis, an incumbent President with approval ratings in the 25% range, and other external factors beyond the control of either party.
Given this environment, how did our candidates perform?
Let’s start with Congress. Unlike states like Arizona, New Mexico, Florida, New York, Connecticut, and many others, California held each of our Republican Congressional seats, including open seats in Northern and Southern California. These results contrast with the predictions Democrats were making to anyone who would listen that Dana Rohrabacher, Brian Bilbray, Dan Lungren and Tom McClintock were all at risk of being defeated. None were.
During the final weeks of the campaign we were all subjected to endless Democrat predictions that they would reach a two-thirds majority in the legislature so they could raise taxes. Another grand plan defeated by Republicans.
Government’s New Cash Cow Could be a Cow Tax
Proposition 2 passed by a huge majority. The poultry industry now awaits its fate which could include the shuttering of many farms that have been producing eggs in California for over 100 years. But never mind as long as the chickens are “free to be you and me” as the song from the 1970s used to say.
At the time I warned that the animal activists’ mission was more far reaching than making chickens more comfortable while laying eggs. They don’t want you to eat eggs or meat period. They want us all to eat tofu in its many wonderful forms like tofu hot dogs and burgers and my personal favorite just in time for the holidays, tofurky. Just look at this yummy recipe from the Humane Society’s website and have your family and friends dive into this for Christmas dinner.
Fed Funds Rate Drops to Almost Zero
It really happened here. Tuesday, the Federal Reserve’s closely watched, overnight federal funds rate dropped from its already historic 1% to a level not seen since Japan’s “Los Decade” of the ‘90’s – a rate between zero and 0.25%! The reality is that we’ve already been there even with the 1% nominal rate, as foreshadowed by the recent sales of 4-week T-Bills at 0%, just so investors worldwide can feel that their money is in a safe place.
With the scandals of late, including the record-busting Madoff (still-unfolding) $50 Billion plus mess which has cleaned the clocks of many rich individuals, entities and even charities, a flight to safety is looking increasingly like a reasonable alternative, even if it pays nothing – the under-the-mattress rate, if you will, because that is what you get if you hide your cash there – now the same as the Fed!
So the real fear now is Deflation and there is no more speculation about it. Milton Friedman (1912- 2006) a Nobel Prize winning economist, is credited with creation (or, at least the modern revival) of the economic theory of Monetarism, which, greatly oversimplified, is the belief that excessive expansion of the money supply is inherently inflationary, and that monetary authorities must devote themselves to maintain price stability, almost at all cost.