Dear Friends,
It seems to me that the economy should be humming along creating jobs…
The dollar is very low as compared to other currencies. The Canadian Dollar is almost at par and is predicted to be at par by the end of the year at 60%. With the US Dollar so low wages in the US are lowered as compared to other nations. Notably the European Union. Making American labor comparatively cheap.
With so many talented and skilled workers being laid off Entrepreneurialship should be rampant. When there are no jobs available many people start a business. There is always a demand for something. Doing so fills a vacuum and pulls other people into job creation as well.
Government is spending gobs of money. Trillions of US Dollars are being spent on TARP and Stimulus. Roads are being repaved and bridges are being painted. With an unprecedented amount of government spending, the economy, (according to John Menard Keynes) should be ripping. (Isn’t painting a bridge more productive than burying money at the bottom of an old mine shaft)?
Government has bought General Motors. The government has appointed the board of directors and the president. Ensuring many high paid jobs will stay. Theoretically keeping the economies in the areas that have auto manufacturing plants viable.
The “problem” of sticky wages seems to have been solved. Workers across the US are taking pay cuts. Many are being forced to take unpaid days off. Union contracts are being broken in bankruptsy court. Wages are more reactive to the market conditions.
The stock market is booming. Up 50% this year. Capital is flowing into the stock market driving up the share prices. As the DOW goes up billions are made. All this money at the hands of people.
The Fed is keeping the interest rate near zero. That is like having the accelerator all the way to the floor. But no matter the access to air an engine needs fuel in the right mixture. Thus the pushing on a string analogy. You can pull a string, (slow the economy), but you can only let up on the string. If there is no pulling back the string will only go limp.
So why isn’t the economy creating jobs?
The government has declared profit a bad thing. Part of the societal myth of the United States is that profit is good. Now it is being redefined. So if profit is bad and those that make profit, (everyone except government and nonprofit) is bad. We the people are bad. This pernicious attack on the foundation of our society is corrosive of job creation. Without profit there can be no jobs. It follows necessarily.
Government is roiling the waters as it comes to regulation. Government is threatening, but everyone tacitly knows, the elite friends of government will have their oxen protected. Just as Bastiat said, “Government is seen as a means to plunder the goods of others and protect your goods from being plundered.” Threatening greater regulation puts a hold on some business. Especially that business that is being threatened by regulation. This is the very definition of friction to the economy.
Government is destroying the perceived value of the US Dollar. Remember caveat currency only has the value we give it. But, like it is public opinion that makes a king a king, as soon as the people see the king with no clothes he is no longer king. The currency of a nation is it’s life blood. Poison it at the peril of the nation.
Government is spending the money very unwisely. By trying to decide exactly where each dollar should go the government is handy capping the US economy. If the money were given back as a temporary tax cut the money would naturally flow to where it was needed. If the banks needed the money it would have flowed there. Manufacturing would have gotten a piece of the pie. Landscapers to Architects would have reaped the benefit. But the way government has decided to spend trillions of dollars, basically on reelection campaigns, it has guaranteed our children will have a lower standard of living than we have had.
Besides, most of the stimulus spending will be kicking in in 2010. An election year. I would think that spending timed to coincide with an election season next year won’t help the economy in crisis this year. Generally emergency spending to fend off a depression is spent quickly. Not earmarked for a year later.
It is a Faustian bargain at best to sell the futures of our children and grandchildren… to get reelected.
