Posted on 12/03/2010 7:40:30 PM PST by sickoflibs
Today's payroll report severely disappointed on the downside and left economists scratching their heads to explain the weakness. The explanation, however, is plain as day. As I have been saying for years, the US economy will not create jobs as long as the Fed keeps interest rates artificially low, and Congress keeps stimulating spending and consumer debt, punishing employers with mandates, regulations, and taxes, crowding out private investment with massive government borrowing, and preventing market forces from restructuring our out-of-balance economy.
As new data comes in that continues to bolster my hypothesis, the politicians in Washington continue to follow the wrong diagnosis, while ignoring evidence that their policy prescription has failed. Rather than reassessing the effectiveness of their remedy, they are merely prescribing more of the same.
No doubt the 9.8% unemployment rate (17% when counting the under-employed or discouraged workers) will spark another extension of unemployment benefits, which will provide yet additional incentives for the unemployed not to work. In addition, we will likely get another round of stimulus - paid for with higher budget deficits - that will further hinder the capital investment and business formation necessary to produce sustainable jobs. Then, the inflation created by the Fed to finance those deficits will send consumer prices higher, making life that much harder for all Americans, regardless of their employment status.
All the talk in Washington that demand must be stimulated to create jobs is farcical. The news reports of mobs of shoppers trampling over each other to fill their carts shows there is plenty of demand. What is truly lacking in our economy is supply. Those mobs are still filling their carts almost exclusively with imported products. If it were true that demand creates jobs, we would be at full employment right now, but the truth is that demand is meaningless without the productive means to supply the goods.
It's ironic that extending unemployment benefits, one of the reasons unemployment remains so high in the first place, is actually being touted as a jobs bill. Keynesian proponents argue that giving money to unemployed people will create jobs wherever they spend their government cheese. This is utter nonsense.
If printing money and dolling it out to the unemployed could create growth and jobs, why hasn't it already worked? After all, we have already extended benefits to 99 weeks. Where are all the jobs? Also, if every dollar of unemployment benefits generates two dollars of growth, as our legislators claim, why not double or triple the benefits? In fact, why limit them to the unemployed? Just give the benefits to everyone - then we will really get this economy going.
Politicians cannot create economic growth at will simply by doling out money. If it could, the Soviets would have won the Cold War. Handing out cash does not create additional production, it merely changes who benefits from existing production. Transferring purchasing power from producers to consumers undermines economic growth and destroys jobs.
For now, production is being supplied from abroad. But this dynamic merely worsens our trade imbalance, putting our nation deeper into debt. As the dollar losses purchasing power, foreign goods will become more expensive and American living standards will plummet.
What will it take for our leaders to realize that their solution is exacerbating the problem they are trying to solve? Unfortunately, I doubt they will learn until the situation becomes intolerable for the majority of voters. These jobs numbers bring us one step closer to that critical mass.
Unless politicians can be roused from their stupor, we will soon confront an imminent sovereign debt and currency crisis that will make the credit crisis of 2008 look like a happy interlude. Hopefully, when the first major shock strikes in the US, as is currently happening in Ireland and Portugal, it will finally provoke a 180-degree change of policy in Washington. Hopefully, it won't be too late to spare millions from a life of subsistence, or worse. These are my hopes, but my fear is that we are on the cusp on the largest economic downfall in modern history.
Not a bad idea - just put a sticky-note on it, asking them to share it with their comrads across the aisle.
Reagan said: Government is not the solution, government is the problem.
Schiff BTTT!!! For later reading. Thank you!!!! But,
*****NAME ALERT*****
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sickoflibs, there is actually another (much newer) FReeper who posts under the handle of "magna carta". I am your loyal Schiff fan.
Peter Schiff is great, I have enjoyed reading his columns and watching him on YouTube...but it is a shame that we need someone like Peter Schiff or Gerald Celente to point out what should be obvious. Losing the family farm system is one of the things that are wrecking this nation, those of us who grew up on the farm know well that SOMEONE must produce before ANYONE can consume. We also realize that consumption is not “equally as important” as production as some unfortunate soul tried to instruct me recently on FR.
When we sliced a country cured ham for breakfast when I was a small lad we all remembered the “Hog killing” that yielded the ham because all participated in some way in the butchering process, when I was too small to do anything else I carried sticks for the fire to heat water that was used to remove the hair from the carcass, as I got a little bigger and stronger I started cranking a hand powered meat grinder for sausage making. We all knew when we ate that pork that we were really eating some of the corn that had cost so much sweat and toil in the hot fields of summer. The eggs that accompanied the ham came from our own chickens that we tended and the grits were ground from some of the same corn that fed the pigs.
The point is that when we sat down to that wonderful breakfast there was no illusion that the eating was “equally as important” as all the work that went into producing the breakfast. The eating was simply what necessitated all the work but a toddler who could produce nothing could participate in the eating while only those old enough and strong enough to work could produce.
This may sound simplistic but we have people in this country who have yet to grasp the meaning of what I am saying.
Pelosi can only spread her garbage because people are ignorant of economics. I am no economist, I have never taken a course in economics but I DO understand what Ayn Rand meant when she said that what actually gives money value is that SOMEONE SOMEWHERE worked to earn it! When money is handed out to those who have not earned it it can only do one thing, it increases the amount of money relative to the amount of goods and services available because money is added to the system without a corresponding increase in supply of goods and services. This is natural law and is as unchanging as 2+2=4 regardless of how many Pelosis try to obscure it. Once someone grasps this incontrovertible fact they realize that even if one dollar of benefits DOES create two dollars in the economy that is a net negative NOT a positive.
Ron and Rand Paul?
...It's ironic that extending unemployment benefits, one of the reasons unemployment remains so high in the first place, is actually being touted as a jobs bill. Keynesian proponents argue that giving money to unemployed people will create jobs wherever they spend their government cheese. This is utter nonsense.
Y'know, I should have known better than to send him money for his Senate campaign. He simply makes too much economic sense to have been elected.
Thanks, sickoflibs, for bringing him back!
Well—maybe not them——LOL! But who knows, even they might like to read it.
That was another reason for me to stop posting him. For a while at the end I posted him but posted nothing about his campaign. How can he be Schiff while running for office? He is the bitter medicine guy, To win elections you have to lie about everything being easy and painless, even your supporters want you to do it to win.
It is refreshing reading his columns again, especially as most of his predictions have come true,
I, for one, am a happy camper to have him back.
Hey! Why didn't I think of that??? And while we are at it, let's raise the minimum wage to $100.00 an hour. That will fix everything.
And you can’t tax your way to prosperity.
Schiff bump.
Thanks for sharing.
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