'The Recovery That Isn’t'

Debt,Free Markets,Inflation,Labor

As you go over the alarming new unemployment numbers, remember what was said in this space with respect to that “unbeatable bit of political fraud; that fig leaf of a ‘jobless recovery’: “A jobless economic recovery is the equivalent of a housewarming for the homeless.”

It was revealed today that “employers shed 263,000 jobs in September. The losses propelled the headline unemployment rate to a 26-year high of 9.8%. U6, the Bureau of Labor Statistics’ most complete measure of unemployment, has risen to a dismal 17%. This figure includes those people who want to work full time, but have simply given up looking, or who have accepted part-time work in the interim. As it is similar to the methodology used during the Great Depression, U6 offers better historical perspective on the severity of our current crisis.”

More from Peter Schiff: “Those who do cling to the absurd belief that, absent exponential productivity gains, the economy can expand while workers are being laid off will undergo a massive test of their convictions now that it’s clear the employment picture is bleak. Today’s weaker-than-expected report on non-farm payrolls revealed that employers shed 263,000 jobs in September. The losses propelled the headline unemployment rate to a 26-year high of 9.8%. U6, the Bureau of Labor Statistics’ most complete measure of unemployment, has risen to a dismal 17%. This figure includes those people who want to work full time, but have simply given up looking, or who have accepted part-time work in the interim. As it is similar to the methodology used during the Great Depression, U6 offers better historical perspective on the severity of our current crisis.”

“Taken together with yesterday’s larger-than-expected pickup in unemployment claims (first time claims rose by 17,000 to 551,000), today’s report makes it certain that the job market is still contracting, even while some indicators like GDP and consumer confidence are moving in the opposite direction.”

“There is no question that the sense of panic has temporarily subsided. In recent interviews, Treasury Secretary Geithner has been almost giddy in his descriptions of the recovery – all the while crediting his own policies for averting disaster. Americans are once again taking the government’s bait by spending money they don’t have to buy things they can’t afford. Evidence of this trend was contained in data released earlier this week which showed that even while income growth was largely stagnant, U.S. consumers showed the biggest month-over-month increase in personal spending in ten years! With the same report showing a 25% drop in the savings rate, the source of the spending money is clear. But depleting savings and increasing borrowing does not a recovery make.”

“To really recuperate, the government must allow market forces to restructure our economy. The government and individuals must rein in their spending; we must replenish our stock of savings, allow interest rates to rise, asset prices to adjust to economic reality, insolvent businesses to fail, and wages to reflect productivity. To accomplish these goals, subsidies that distort market forces must be removed and regulations that undermine our competitiveness must be repealed.”

9 thoughts on “'The Recovery That Isn’t'

  1. M. B. Moon

    “To really recuperate, the government must allow market forces to restructure our economy. … To accomplish these goals, subsidies that distort market forces must be removed and regulations that undermine our competitiveness must be repealed.”

    Of course. But how about also adding a some hope to an economy suffering a severe hangover? The solution, as is almost always the case, is more liberty not less.

    The government backed banking cartel (the Federal Reserve System) has hosed us yet again. How about allowing alternatives to that system? How can we say we have a free market when we are forced to use the dollar for even private (business) transactions?

    The solution is the allowance of free banking and money creation. That way, business can escape the deadly boom/bust cycle that has plagued mankind since 1694.

    Fractional reserve banking is obsolete, IMO. But even if it isn’t, leverage is greatly limited without a government backed central bank.

    This nonsense must stop. Can we survive another world war caused by an unstable banking and money system?

  2. George Pal

    “U.S. consumers showed the biggest month-over-month increase in personal spending in ten years”

    Why not! If the ship’s sinking what’s the point of trimming the sails?

  3. M. B. Moon

    Interview with Ron Paul in NYT:

    Q. You mention in the book that your ultimate goal is to “repel legal tender laws and letting everyone get into the business of the production of money.” Can you explain what you mean by that? It sounds kind of chaotic.

    A. This is kind of a theoretical argument, because I follow what [Austrian economist Friedrich] Hayek said in that you should have competing currencies in one economy. The market would decide if you use gold or silver or some other things – anything to restrain the printing press. from http://dealbook.blogs.nytimes.com/2009/10/02/the-fed-fighter-dealbooks-ron-paul-interview/

  4. Steve Hogan

    Sound advice, which is why it will be ignored. Given a choice between allowing the market to heal itself and saving their Wall Street buddies, the Fed will take the latter every time. It’s the world’s largest bank heist, but it’s the bankers doing the stealing.

  5. Robert Taylor

    I have NEVER understood why most people find “interest rates” mysterious or so threatening that they must be controlled by the government and/or the Fed. Interest rates, qua interest, are merely another commodity..like a lamp, a tractor, a vacation package, etc. Supply and demand alone in the market should be allowed to allow consumers and producers to coorlate prices..not a czar, bureacrat or GSE. Signals from the market such as current price levels, including competing interest rate level, are needed for an efficient economy to occur.

  6. M. B. Moon

    “I have NEVER understood why most people find “interest rates” mysterious or so threatening that they must be controlled by the government and/or the Fed. Robert Taylor

    The short answer is that due to interest rate suppression via fractional reserve lending and the central bank (the Fed), our economy has become addicted to low interest rates. Allowing market rates would be sound and just but would be painful to some. So, the looting of purchasing power continues.

  7. John Danforth

    A ‘jobless recovery’ makes perfect sense (to anyone who thinks printed money is real wealth.)

    Guess who thinks that?

    All the elite economists, bankers, regulators, and politicians, that’s who.

    We’re supposed to think they’re just mistaken, and not consciously evil. It wold be impolite of us to blame them for purposely stealing the value out of the economy, destroying people’s jobs and having them put out of their homes. No, it’s an economic theory taught at all the most elite universities (never mind that history is repeating itself yet again).

    They’re “just doing their jobs”. Trying to save us from the evils of unrestrained capitalism (never mind that we haven’t tried capitalism since a century ago).

  8. Roger Chaillet

    The Fed can only control the supply of money, and not interest rates. Demand for money, and thus interest rates, is set on the world market. It’s no different than any other commodity. I didn’t learn this in grad school; I learned it as a stockbroker.

    As for why the Fed still exists, it’s simple. Blaming the Fed is the easy way out for elected officials. Monetary policy is easier to game than changing fiscal policies, i.e., spending beyond our abilities.

    But there is hope. A catharsis is coming soon. Things might not necessarily get better – think Japan – but it will destroy the old order. We should at least be thankful for that.

  9. M. B. Moon

    “The Fed can only control the supply of money, and not interest rates.” Roger

    As the counterfeiter in chief it can lower interest rates by open market purchases with newly created money. It might raise them by sales of Fed assets.

    Still, it does target interest rates.

    Yes, we need the Fed like we need cancer. This time it doesn’t skate. They heated the water too rapidly. Will history thank Bush and Greenspan?

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