The Fed and Job Creation
Unemployment continues to plague our economy. In spite of constant claims that we have just turned the corner into recovery, the jobs reports remain grim with no real signs of improvement. While Keynesian economists and big government apologists scratch their heads about persistent unemployment in spite of unprecedented government "investment" in the economy, free market economists understand the problem perfectly well. In short, they understand that we are looking to the Federal Reserve to solve an unemployment crisis that the Fed itself largely created.
For example, the Fed is supposed to maintain full employment as half of its "dual mandate". But the Fed simply has the wrong tools to do this. In fact, its credit expansion and manipulation of interest rates cause harm when they are applied to "help" the economy. As we saw with the housing boom and bust, Fed-created inflation cannot be sustained without harmful consequences. The Fed's artificial boom led to the unemployment we're suffering today. The Fed is not a small business or a manufacturer that creates value or increases productivity to sustain real job growth. It literally destroys value by printing more money, and distributing it through sweetheart deals to well connected banks and corporations (including foreign banks!). The only success the Fed has had in maintaining full employment has been on Wall Street where it props up crony banks and investment houses to prevent them from going bankrupt as they should. Instead, they survive to malinvest another day while their executives enjoy jackpot bonuses.
The Fed also pumped up employment in the housing industry with artificially low interest rates that created an unsustainable demand for housing. Millions jumped into this sector when the money was loose and the bubble inflating. Besides the many who bought houses they could not afford and now face foreclosure, there were also those who became employed in housing related fields. These people invested time and money in training and spent years establishing careers in real estate, mortgage lending, construction and contracting, careers that all vanished into thin air with the burst of the bubble. Now they face considerable disruption in their lives as they struggle with unemployment, underemployment and decisions about retraining for different careers. This amounts to a tremendous amount of unnecessary waste that would not have occurred had the housing industry been allowed to develop naturally according to market demands.
Jobs are properly created by entrepreneurs who are willing to work hard and take calculated risks. Jobs are also created through real increases in productivity, resulting from re-invested profits or conservative borrowing at market interest rates. But the Fed has made those risks impossible to calculate, and made borrowing money artificially cheap. As a result, economic growth has been chilled while unemployment skyrockets.
Until those in power understand the harm they do with central economic planning, we will continue to slide backwards and lose jobs. The Fed needs to stay out of the job creating business altogether and the federal government needs to focus on its constitutional duties. Just when we need government to back off, we hear about more government intervention in the economy in the form of more spending, only they call it "investment". It is more properly called "malinvestment", and the resources that are funneled into industries by government policies will only hurt employment more in the long run.
Posted by Leperwatchman on 02/02/11 08:03 PM
"A team of experts.... need to step forward now, to share their knowledge to .... move this country forward."
"There are many keen minds working on this, or sharing what they know... It would seem a convention to propose solutions is needed, Click to view linkpose new ways and solutions to the nation's financial problems"
"This is fundamental to preserving our freedom, resuscitating the economy, and rebuilding the nation for the future."
"Please step forward to assist Congressman Ron Paul."
Is there an address, a URL to collaborate for the reconstruction of an honest-measure exchange?
Posted by CharK on 02/02/11 09:15 AM
I can agree with R. Paul on this. My husband was self employed for 10 years as tile installer and other installations for construction sites for businesses or homes, even remodeling jobs were there and in abundance.
Just this past year, no jobs, none...where there was abundance. Now he has not been working for a year and I was laid off a year ago when the main office closed one of the branch office in the city I had lived, indefinitely due to the Health Care reform and they had to financially reconstruct everything to accommodate this new law.
We had to move to another state in order to find employment. Husband is now looking into coal mining job. We are in our 50s. Something is just not right here. We are now living in a travel trailer. I know there are others who are in worse shape than we are...something is just not right...what will it take to someone or somebodies to really do what is right.
Posted by Akhil Khanna on 02/02/11 02:00 AM
The size of governments around the world and their interferences in smooth functioning of businesses and markets have substantially increased in the last couple of years and is likely to go on increasing in the name of solving the crises they themselves created. They are increasing regulations on businesses, engaging in currency wars and protectionism policies, deciding which industries would get preference over others etc. Basically they are reacting to various crises as they unfold without any attempt to identify the underlying reasons that cause the crises and finding a long term solution to them.
Click to view link
Posted by Arlie Blood on 02/01/11 06:36 PM
Government should stay out of the business of trying to solve the US financial crisis. I can not think of one instance where a government run program that has been a fiscal success. The Obama Cabinet does not have any members that have owned or run a business. They are all from the academic field. They will destroy the US economy and do nothing to solve the job market.
Posted by Tiamet on 02/01/11 06:07 PM
Thank you Representative Ron Paul.
You are accurate, concise.
Your courage, and persistence over the last 25 years to challenge Congress to dismantle the Federal Reserve is indisputable evidence that not only Congress, but the mainstream media ignored what you said to be true, on behalf of the country, and to remain free.
That the PE has used the Federal Reserve as their personal piggy bank is indisputable, and treasonable.
That Americans are forced to pay taxes to service the debt, to pay interest on the debt created out of thin air to the owners of a privately owned Federal Reserve is treasonable.
For sixty years the mainstream press ignored anyone who challenged the Federal Reserve since its covert inception in 1913.
That our "finest" universities have not, did not teach the truth about the Federal Reserve for nearly 100 years makes those with doctorates in economics, and those who studied Keynesian Economics essential puppets for the usurpers of the nation, all of its resources, and all that has been produced in the nation since the 1,500's.
That David Rockefeller acknowledged in his 1991 memoir that he was very grateful the mainstream press had not reported upon the cabals' plans for a new world order, as reported on the internet, showing exact text verbatim is proof of seditious, treasonable acts against millions of taxpaying citizens, those whom he may deem "cattle."
The internet is offers truth seekers an ineffable platform of information, as well as disinformation.
A team of experts, people with real knowledge, facts, experience, and the capacity to create a new banking system, new currency, and or money system need to step forward now, to share their knowledge to make sure the new system(s) work and will move this country forward.
There are many keen minds working on this, or sharing what they know, many at the DB, and those who post, share links, and know others who are concerned, and knowledgeable. It would seem a convention to propose solutions is needed, to amalgamate the many fine minds to share and compose new ways and solutions to the nation's financial problems before it is too late.
This is fundamental to preserving our freedom, resuscitating the economy, and rebuilding the nation for the future.
The American Free Press reported that many states are taking a close look at the Bank of North Dakota, and Congress is investigating ways that states may reduce financial obligations, to deal with the default on municipal bonds.
A historic modification of the nation's banking system will require the best of minds from various schools of "economics" and the expertise of those who comprehend banking, money, currencies, operations, hard money, commodities, distribution of products, payments, credit and many other intertwining subjects, activities.
Please step forward to assist Congressman Ron Paul.
Perhaps, Vice President Joseph Biden will shed some light upon the corporation, the shareholders, the owners of the Federal Reserve registered in the State of Delaware, and it were in the 1970's.
Posted by Chris Coles on 02/01/11 06:00 PM
With the very greatest of respects Dr. Paul is once again missing the most essential element of unemployment; which we can all agree is a scourge.
Yes, he is correct to say: "Jobs are properly created by entrepreneurs who are willing to work hard and take calculated risks." But then he goes on to say: "Jobs are also created through real increases in productivity, resulting from re-invested profits or conservative borrowing at market interest rates" and in so stating, he misses out of his equation the one element that is missing from his debate, yet is essential to any capital based economy; Capital itself!
He is not alone. The general perception today is that unemployment will be stemmed by investment of borrowed money from a bank. But the simple fact is; banks have no recognised responsibility to anyone other than their shareholders. Their function is the provision of short term working capital as loans.
They have no remit, of any sort, to provide the equity capital, any business, (whether trading or industrial manufacturing, particularly the hard working, risk taking entrepreneur), needs, to underpin that working capital.
What went wrong is the failure to recognise that the banks have replaced the function of the savings institutions; whose purpose was to take the savings of the people and deliver the provision of the equity capital.
That failure has, in turn, created a classic conflict of interest for the wider national interest. Without realising it, the savings institutional functions were replaced by government attempts at job creation; by trying to replace the equity capital with government grants.
The savings institution disappeared from view; their function forgotten and consigned to history.
The result has been a disaster of monumental proportions; entailing the near complete collapse of the world's banking system.
Trying to provision the entire financial structure of a capital based economy designed for a free society, with mercantile loans; has instead generated a feudal mercantile economy that suits none but a tiny minority.
The first thing to recognise is the need to redirect the savings back into new savings institutions who must be given a remit to provide the missing equity capital. That new source of capital must, in turn, address the needs of a fully free society, not those of a feudal mercantile economic structure that has signally failed to deliver.
The greatest challenge we all face today is to accept the responsibility to ensure the prosperity of the ordinary citizen of the nation; indeed, any nation. We can only reduce unemployment through the re-creation of a capital based free enterprise economy.
Posted by Myron Martin on 02/01/11 03:39 PM
What a breath of fresh air when a clear thinker like Ron Paul is so articulate in defining a problem.
The underlying problem is simply the greed in human nature! Bankers and politicians have simply figured out a way to "live comfortably" at the expense of others without having to take real market risks, or work hard at any productive job, the best descriptions I can think of is "PARASITES" who fight tooth and nail not to be dislodged from their unwilling hosts who they have turned into unwitting debt slaves.
Posted by Sith4s on 02/01/11 01:57 PM
Do away with the fed I'd say and go back to the gold standard.
Posted by Mark Y on 02/01/11 12:52 PM
This is the clearest no jargon " plain language statement " of why central banking is destructive to society that I can remember reading:
1. Central banking does nothing contructive for society "The Fed is not a small business or a manufacturer that creates value or increases productivity to sustain real job growth." and ...
2. Central banking does much which is destructive to society "It literally destroys value by printing more money, and distributing it through sweetheart deals to well connected banks and corporations (including foreign banks!). The only success the Fed has had in maintaining full employment has been on Wall Street where it props up crony banks and investment houses to prevent them from going bankrupt as they should. Instead, they survive to malinvest another day while their executives enjoy jackpot bonuses."
Its really that simple. In a way, all the complex economic theories get in the way of these two obvious (once pointed out) truths!
Posted by Sovereignthink on 02/01/11 12:26 PM
Working for the State and Federal Prisoner System or for the Police State system accounts for Main Employment Focus of the Administrations.
Do you like wearing "Brown Shirts"?
Engineering a Generation of Domestic CyberSecurity and State Policey Enforcement
Click to view link
Posted by John Danforth on 02/01/11 08:56 AM
Ron Paul 2012!
No more squishy Republicans.
Posted by Cmj44 on 02/01/11 07:49 AM
As usual, Ron Paul is spot on.
Posted by EDD on 02/01/11 07:21 AM
"The only success the Fed has had in maintaining full employment has been on Wall Street where it props up crony banks and investment houses to prevent them from going bankrupt as they should. Instead, they survive to malinvest another day while their executives enjoy jackpot bonuses."
Executives enjoying jackpot bonuses? Yes, even when they commit fraud when doing so. The link provided makes Madoff look like a saint.
Click to view link