Schwarzenegger finally shoots back at the public unions.

Gov. Schwarzenegger added Prop. 75 to his November slate of proposals. Good for him. The public unions are the single most significant reason for government waste and inefficiency. They are the embodiment of what it is that even Democrats hate: greed, corruption, self-interest. The unions have no competition, and are give a legislative license to racketeer.

This is their bit: the teacher's union REQUIRES that if you are a public school teacher, you MUST pay dues to them. You don't have to be a member, but you must give them money. That is racketeering. The funny part about it is that their justification is that the unaffiliated teachers are benefitting from their collective bargaining. Um, who was the last teacher you met who felt blessed by the union's brilliant negotiating prowess that got them such fantastic benefits and wages? Don't talk to me about the three months off... that was not the result of the genius teacher's union.

Sounds like protection money to me.

Prop 75 is another excellent proposal. Voting for each and every one of the November proposals will do our mediocre state a great deal of good.

Japan: on the right track.

Koizumi has won. The world economy gives a sigh of relief. This election will very likely result in the privitization of Japan Post, by some measures the largest bank in the world, with over $3 trillion in assets. Those assets are primarily the plentiful savings of the Japanese populace.

With a slowly recovering Japanese economy, which has suffered from the deflation of the past decade, we can expect growth rates to rocket upwards from the currently projected 0.8%. Japan Post has been used as a piggy bank for LDP politicians for decades and has ensured inefficient allocation of capital to the Japanese economy, partly responsible for the property boom and bust of the early 90's. With the privatization almost ensured, we'll likely begin to see capital investment boost in Japan, and hopefully end deflation once and for all. Look for higher interest rates in Japan over the coming 5 years or so.

The possibility of rising interest rates may lead some disenchanted asian investors to move cash out of US bonds and into Japanese bonds. This will raise the cost of capital in the US, and hopefully lead to some necessary fiscal discipline and possibly a deflation of the property bubble in selected US markets.

What can we do in the US? We can cheer. This may lead to world growth burden sharing by the Japanese and possibly a resurgent German economy (possible, but don't hold your breath... the incompetent compaigning by Angela Merkel may force a grand coilition with the welfare-statist SPD). Increased burden sharing may lead to increased flexibility for the Fed, and higher interest rates due to less fear of a world recession predicated upon too-quick tightening of rates. If the Japanese economy grows by more than 3% in the near future, look for a 50 basis-point rise by the Fed, hopefully designed to increase savings (at an all-time low of 0% in the US) and deflate the property bubble in many urban areas.

Look to Japanese stocks to continue their upward move (up almost 8% since Koizumi announced the snap election), more investment by the Chinese in their arch-rivals economy, especially in Japan bonds as per the revaluation basket of last month, and slower but more sustainable growth in the American economy. Look for weakness in the dollar compared to the Yen, but possibly firmer to the Euro.

For my part, I will wait for a bump in the Nikkei due to the election results, followed by a short profit-taking trough, and then a sustained upward move for a significant period of time.