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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.
Ron Paul
www.house.gov/paul
Copyright Dr. Ron
Paul
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