The Fed and Job Creation

http://paul.house.gov/index.php?option=com_content&view=article&id=1823:the-
fed-and-job-creation&catid=62:texas-straight-talk&Itemid=1&Itemid=69

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. 

-- 
dadl-ot mailing list
http://mail.thehood.us/mailman/listinfo/dadl-ot_thehood.us
http://news.gmane.org/gmane.music.dadl.ot