The issue is that we are playing by the rules of the establishment economists. They produce all of the data. In essence, what they have done is set their employment numbers to show changes in unemployment. If employment numbers begin to stabilize, then their data will show that employment is actually recovering. Why is this a problem? Because what if we have stabilized in a horrible situation? And if we have, is there any way to prove it?
Fortunately for Austrians, there is. The graph of civilian-employment population ratio is not subject to the same fudging as unemployment numbers. There is a word of caution with using this data as social trends can also change the data (think housewives who started entering the workforce in the 1960s and '70s. Recently, there have not been any major changes like this, so this data should be pretty reliable. How does it look?
Is this really how we want our economy to stabilize? Does this look good to anyone? Can anyone defend this?
Not much different than the stunning success of his energy policy that he is spinning right now.
ReplyDeleteMore drilling would help, but even there the main source of the problem remains the same: the Federal Reserve creating inflation.
DeleteGod to see you blogging again, Tony. That graph should make a great Republican campaign ad this summer.
ReplyDeleteThe Austrian economist also take heat because they predict that stimulus will lead to inflation. Paul Krugman loves to point out that there is no inflation. Putting aside that the inflation numbers are also cooked, there is a lot of money that has never made into circulation. We are told that corporations are sitting on a trillion dollars and that banks are sitting on two trillion in excess reserves. We are told that that worries over the true cost of Obamacare and uncertainty over the impact of Dodds-Frank are the reasons. Does that make sense to you?
The banks and corporations have a sweet deal right now. They are abusing the difference in interest rates. The go to the discount window at the Fed, and take out a loan at that sweet interest rate, and then go and buy T-bills and get about 2% for a 10-year. They make money for doing nothing! This is why the banks are saving more money than they ever have.
Deletehttp://research.stlouisfed.org/fred2/series/EXCRESNS
Why should they loan to private companies when they get a guaranteed return for doing nothing? Obamacare and Dodd-Frank could be reasons for uncertainty, but until interest rates rise, we are not going to see real growth and a stable monetary base. A huge wave of inflation will come once those excess reserves get unleashed.