The unemployment rate has surpassed 10 percent for the first time since 1983 — and is likely to go higher. Nearly 16 million people can't find jobs even though the worst recession since the Great Depression has apparently ended. The Labor Department said Friday that the economy shed a net total of 190,000 jobs in October, less than the downwardly revised 219,000 lost in September. August job losses were also revised lower, to 154,000 from 201,000. But the loss of jobs last month exceeded economists' estimates. It's the 22nd straight month the U.S. economy has shed jobs, the longest on records dating back 70 years. Buzz up! Counting those who have settled for part-time jobs or stopped looking for work, the unemployment rate would be 17.5 percent, the highest on records dating from 1994. The jobless rate rose from 9.8 percent in September. Friday's report is the first since the government said last week that the economy grew at a 3.5 percent annual rate in the July-September quarter, the strongest signal yet that the economy is rebounding. But that isn't fast enough to spur rapid hiring, raising the specter of a jobless recovery. – Yahoo/AP
Dominant Social Theme: Let the good times roll?
Free-Market Analysis: For longer than we like to remember, and along with other free-market publications, we have been writing that massive money stimulation, additional regulation and "bail outs" were not going to bring back jobs, or not the real, long-lasting kind, and not anytime soon. It begins to look as if this perspective was correct.
Why? Along with our intellectual brethren and betters, we have written that all the money that has been poured into the system has only had the effect of freezing the economic shake out and preventing a full recovery. Bad companies and enterprises are sucking up a great deal of investment and tax money. Western governments, in charge of sorting out industrial priorities, have decided to pitch billions towards green energy programs that didn't work in the 1970s and won't work today. More waste.
Arrayed against our modest voice (and those similarly inclined) has been the combined might of central banking, the mainstream media and the best-bought economic minds in the world. This conglomerate of economic super-sophistication has made it clear in no uncertain terms that the way to avoid a Depression was to pour money into the system and stabilize it so that it could begin to create jobs and remove companies from the brink of bankruptcy.
What we have here, dear reader, is a classic Keynes-versus-Hayek shoot out. Free-market economist FA Hayek lost in the court of public opinion back in the 1930s (so they say) but later won a Nobel prize. Keynes went on to see his incomprehensible theories adopted worldwide (well, we're not sure exactly what was adopted, but supposedly it's Keynesian) and has enjoyed what the mainstream media terms a "renaissance" in the 2000s, because of the economic crisis.
While Keynes is almost entirely indecipherable if you try to read his theoretical work, we have it on good authority that Keyens' basic tenet came to down to an analysis that was fairly simple. Economic crises occur, he opined, because people stop buying things, and the easiest way to get economies moving again is for government, through the use of central-bank money printing, to put people back to work through public works programs and general public spending.
Hayek's free-market point of view was considerably different. He and his mentor Ludwig von Mises claimed that it was government interference through central bank money printing that generated the initial crisis to begin with and that these crises happened with regularity because central banks always over-printed paper money. Over time, the amount of excess money in the economy built up and caused a boom that tricked individuals and businesses into buying more than they could afford. Eventually, the mal-investments became evident, markets sold off, investors lost money and economic crises presented themselves.
According to this latter point of view, an economic crisis is merely the aftermath of too much money being invested in too many bad places. The only way to deal with such a crisis is to let the bad investments go away – so they don't suck yet more money from good businesses and good investments. Only after the bad investments have gone away can an economy start rebounding with any force because investors can finally begin to figure out what is rational and what is not.
According to the free-market perspective then, government ought NOT to throw money at failing businesses because this is a waste of resources and turns a one or two-year economic crisis into a kind of Japanese "lost decade." Keynesians obviously disagree. While Keynes never apparently postulated a reason for economic slumps he was firm in his conviction that the remedy was increased government spending to prop up failing businesses and to create new businesses – any kind of business including, importantly, public works – that would put people back to work.
Being free-market oriented, we have firmly hewed to the Hayekian perspective in our analysis of what's going on. And of course our analysis is not Keynesian. We see no reason to depart from our convictions currently (not that we would, anyway, absent some sort of extraordinary event like, hm-mm … rendition?). And, we think the mainstream media, Western governments, central bankers, academics, myriad Nobel prize winners and others who continue to beat the drum for government stimulation and public works projects have got it wrong.
We don't mean to sound arrogant when making such a statement. We do not collectively or individually have very big brains. Certainly, they are probably not as large and certainly do not work as well as, say, Ben Bernanke's, or (heaven forbid) Alan Greenspan's. But we can read. And having read, we have selected material that makes sense to us and that we can understand. Perhaps if we could understand Keynes, we would be Keynesian. But we defy anyone to understand Keynes' fundamental writings.
The media, collectively, in our opinion, doesn't read much. Its writers tend to listen to the "experts" and then report their views. Thus, the well-paid, ink-stained wretches that are still employed at these publications pen articles that have about them an air of perennial surprise. How is it, they seem to wonder (if you read between the lines) that the massive spending programs of Western governments don't seem to be doing the job. How can it be?
Now there is a new term coming to the fore – "jobless recovery." As we've written in the past, we think the recovery part of this terminology is way off the mark. No, the "recovery" that is being trumpeted is merely a massaging of statistics combined with considerable over-stimulation of securities markets. The jobless part however is correct. There will be no jobs for the foreseeable future because government and its enablers have refused to let bad businesses die, thus further wasting resources and ensuring that companies that COULD create jobs have no cash to do so.
It is possible, of course, (and this, too happens regularly), that enough monetary stimulation can revive even the worst businesses, and cause them to look as if they were profitable again. This doesn't do much for jobs of course – the West had been losing certain kinds of jobs and industries for decades – but it does create a reasonable effect of prosperity. It also simply puts off the real day of reckoning as inevitably there will be another bust, even worse than the one that was re-inflated. This is why fiat money economies eventually die lingering deaths. First jobs and prosperity are stripped away and then, at some point, the re-inflation simply ceases to work. The horse won't rise. Flog it all you want. It is dead. The Chinese know all about it (though they seem to have forgotten) and so do the Indians in India. (They just bought 200 tonnes of gold.)
So … unlike the mainstream media, which seems confused, we are not surprised by this so-called jobless recovery. It is not a recovery, in fact, and it will continue to be a jobless one (the recovery that is not a recovery) until Western governments overprint enough paper to kick the weary horse to its feet one last time – or get out of the way and let the private markets power a real economic resurgence.
One way to do this, the best way, in fact, would be to declare a moratorium on central banking. If this were done (a simple enough proposition) then the larger private market would develop a privately-based gold and silver standard of the type that worked well for millennia. Government could not stimulate the bejezus out of the economy and people would cease to be confused about money, what it stood for and how it works. A real economy could take shape then. People could see, for the first time in decades, the proper liniments of their environment.
We await the mainstream's approbation. We think we have a good idea! (We are generally partial to our ideas anyhow.) It makes sense, dear reader, does it not? Absent central banking and the government largesse it makes possible, real jobs would return. (You betcha! as Sarah Palin might say.) Anyway … publishing mogul Rupert Murdoch is welcome to contact us directly if he wishes to present our idea about a central banking moratorium in any of his myriad publications. Alternatively we will be glad to supply him with a well-developed set of marketing materials that he may promote as he wishes. Perhaps such a concept will generate additional readership. We shall be glad to supervise for a modest fee.