By Wayne Lusvardi
In the old Soviet Union the only way to understand what was really happening was by the cultural spread of jokes because the news media was controlled by the state and there was no Internet or Twitter. Something like this seems to have been operating in California both before and after November 2nd when the electorate voted for Green Power and green politicians (and against Prop 23 to delay Green Power).
You can hear the post election jokes on the streets of California now: “Voters thought they were voting for Clean, Green Power when what they really were voting for was inflation.”
What else could explain voting for the political party of inflated pensions, inflated municipal salaries and benefits (Bell, CA), grade and test score inflation, inflated science about global warming, inflated numbers of Delta Smelt fish die offs, inflated credentials of a California Air Resources Board (CARB) scientist, inflated numbers of hospital emergency room patients, inflated numbers of Green jobs, homes prices inflated by “inclusionary housing” and “smart growth,” inflated water rates, and inflated reductions of pollution due to Green Power, and even inflated news?
True to the form of Soviet style disinformation news the Los Angeles Times followed up the election with a series of articles on Prop 23, an initiative to delay Green Power until the economy improved. On November 2nd the Times ran an article titled “Proposition 23: Backers were outspent, out organized” on how “Big Texas Oil Companies” that backed Prop 23 were defeated by the organized mass of little people and environmentalists-https://latimesblogs.latimes.com/greenspace/2010/11/proposition-23-defeat-global-warming-climate-change-initiative.html
The L.A. Times could not have gotten the story any more wrong. A hedge fund manager for CalPERS who was heavily invested in big oil and dirty coal stocks and Chinese solar panel manufacturing stock that would outsource jobs from California defeated prop 23 by donating $5 million to oppose it. The CalPERS’ pension fund stood to reap a windfall on profits from oil, gas, coal, nukes and green power if cheap coal and hydropower could be embargoed under California’s Green Power Law. A No Vote on Prop 23 (and for Green Power) was a vote for inflating the price of electricity with no logical benefit to the environment. Why would any responsible news media report this story so backwards? Are California’s majority voters green dupes? But of course this is Kalifornia where environmentalism has reached the status of a semi-official state religion.
Now that midterm national elections are over, President Obama is proceeding quickly with intentionally inflating the dollar under an obscure monetary policy hardly anyone understands called “Quantitative Easing 2,” abbreviated as QE2. The humorous street definition of QE2 is that it “eases the theft of large quantities of money” (i.e. inflation). A definition that rhymes with Quantitative Easing might be to call it “Queasy Inflation” (nauseating inflation).
Joke: “Remember how President Obama was going to solve the energy crisis? He once proposed keeping your tires inflated (only with Stimulus money not air).”
California’s split personality electorate voted for nearly an entire slate of Democratic Party pro-green politicians but when it came to raising taxes, fees, parcel taxes, or even for subsidizing state park entry fees the voters said “NO.” So the state is back to dysfunction and gridlock and the only likely way out seems to be (you guessed it) inflation. Politicians like inflation because it is a hidden tax. It is a convenient way to blame the financial markets or Enron for something created by government.
Look at the charts at the link provided for commodity prices for corn, soybeans, and crude oil in August (scroll down the page -https://www.minyanville.com/businessmarkets/articles/quantitative-easing-qe2-david-stockman-corn/11/8/2010/id/30995?camp=featuredslidealso&medium=home&from=minyanville ). These are commodities you end up eating or using unlike gold or silver. Inflation will decimate the poor and hit the middle class hard with high food and energy costs while providing effectively no other benefit to them. Central Valley farmers might do OK. But those living on pensions will have their benefits eroded. There will be runaway inflation in essential goods and continued deflation in luxury goods (flat screen TV’s). But you won’t have enough inflated dollars to buy many luxury goods. Have you noticed that two bags of groceries at your local market now costs around $100?
The financial markets anticipated this coming inflation knowing full well that Obama was going to roll out QE2 after the mid term election. The Federal Reserve and the U.S. Treasury had in 2008-09 rolled out QE1 on a test drive by buying up $2.35 trillion of toxic debts from banks. But QE1 had a provision in it called “sterilization” that means that the money paid to banks for their bad assets was not immediately potent for use in the private economy. Under “sterilization” policy the banks had to slowly “ease” or release this money into the economy so as not to create runaway inflation. Thus the term “quantitative easing.” Call it creeping inflation.
Because QE2 has no “sterilization” provision, experts suspect it is really a currency cold war with other nations. As the U.S. dollar is inflated U.S. domestic produced goods become cheaper and thus gain more export sales overseas and regain sales from formerly imported goods. The shelves of Walmart would be refilled with goods made in the U.S. instead of China. This is the new strategy being rolled out by the Obama administration for economy recovery. Cheapen the dollar so that U.S. industries can compete with foreign imports and pump up exports at the same time.
This might be called reverse globalization. And it may have devastating impacts on economic migrants and their families living in the U.S. many of whom may have voted for Obama or Democrats during the recent midterm election. The losers in this new strategy will be the elderly, savers, those on fixed incomes, small businesses, the middle class, and economic migrants.
Should California legislators try and eliminate Prop 13 property tax protections for either homes or commercial properties or both to balance the state budget in this inflationary environment it would be a repeat of 1975 when widows were selling their homes to pay tax liens. Only this time small business owners with SBA loans collateralized by home equity would also stand to lose both their homes and their businesses. A wave of commercial property tax sales and foreclosures would result.
Recently passed Prop 26 has already blocked increasing fees or taxes camouflaged as fees without a supermajority vote but this doesn’t extend to utility rates.
When California proceeds to turn on the switch on over-priced Green Power in 2012 under its newly ratified Green Power Law (AB 32), California will be caught in a pincers of national inflationary policy and local inflation of electricity and water rates as well as food and gasoline prices. The question is whose ox is going to get gored (pun intended on Al Gore)?
Those holding stocks in Green Power, Big Oil and Nukes would likely reap a windfall, especially without the competition from cheap coal and hydropower embargoed by California’s Green Power Law. The CalPERS and CalSTRS underfunded pension funds could get healthy quickly if they were holding stocks in “dirty oil” and other conventional energy companies; but at the expense of poor and the middle class Californians. Electricity inflation is a way to suck out money from your household without overtly passing a tax.
Governor-elect Jerry Brown can put the state budget to the public ballot as he promised or get a simple majority vote from the legislature, as now provided under newly passed Prop 25, but it won’t do any good without revenues. Where all the action will be is not with the state budget but with inflation of electricity, water, food, and gasoline prices. And the media may try and ignore the connection of inflation and government policies just as it failed to explain what Prop 23 was all about and who opposed it during the recent election. But the true advocates for the poor must realize that Green Power is no jobs savior, won’t reduce pollution, and is regressive.
Here is where unpoliticized churches and synagogues should get involved in being advocates for the poor, if there are any such organizations anymore. But this would likely conflict with their beliefs that all environmentalism is good. Social psychology has shown that when beliefs (everything green is good) conflict with reality (green power harms the poor) people will resolve the conflict by their beliefs becoming stronger. So it is unlikely that even conservative churches will advocate against green power for the interests of the poor.
A possible wild card in this evolving situation is the potential of lower energy prices not from Green Power but from new hydraulic fracturing and horizontal drilling methods for oil and natural gas as recently reported by Steve Forbes.https://video.forbes.com/fvn/fact-and-comment/the-energy-crisis-is-over. This technology is already being deployed and needs no costly additional infrastructure or subsidies, as does Green Power. Natural gas lines already exist from Texas to California.
Paradoxically, it isn’t “Big Oil” or “Texas Oil Companies” that California’s poor and middle class should fear but the Green Power cartel that is looking to bail out California pension holders, unions, and insolvent cities at the expense of everyone else. And they may be able to pull it off if the Soviet-like media is able to continue stigmatizing the conventional energy industry and open energy markets.
Strangely, the Obama Administration has asked the Federal Energy Regulatory Commission (FERC) to open up regional electrical grids by building new transmission lines for Green Power by socializing the costs. California is opposed to this proposal, however, in order to protect its over-market energy prices and cartel of municipal and public power producers, unions, cities, counties and the state.
Other states are quickly learning to reject Green Power projects as economically unsound, something we can’t expect in California however -https://www.nytimes.com/2010/11/08/science/earth/08fossil.html?_r=
Following the recent election, the Cal-PERS pension fund has just invested $500 million in green energy - -https://www.sacbee.com/2010/11/10/3174901/calpers-invests-500-million-in.html
Cash-strapped California cities and counties are looking to siphon increased revenues from higher electricity prices from Green Power into their municipal coffers via Utility User’s Taxes and betting on investments in energy stocks to plug their huge pension liabilities. If they are successful they will decimate California’s poor and middle class and likely lead to greater economic flight. Ironically, it may be public pensioners who flee to other states taking their lucrative pensions and escaping state taxes and high utility rates at the same time.
Remember if you want to know what is going on with California government and its economy, listen for street jokes, read independent Internet websites, start comparing your monthly food and electricity bills, and don’t rely on establishment media sources. It was Karl Marx who wrote: “The final phase of a historic political system is comedy.” Only in California’s case it would be a tragi-comedy.