Globalization
News Journal: Number 28, October 16, 2010: The Obama Depression Deepens–Federal Reserve Executes–QE II Plan–“Operation Pawnshop”–$2,500 Billion In Quantitative Easing–Money Printing–Will It Be Enough?
Non-conventional vs. Traditional Federal Reserve System Building
“Credit expansion is the governments foremost tool in their struggle against the market economy. In their hands it is the magic wand designed to conjure away the scarcity of capital goods, to lower the rate of interest or to abolish it altogether, to finance lavish government spending, to expropriate the capitalists, to contrive everlasting booms, and to make everybody prosperous.”
“The final outcome of the credit expansion is general impoverishment.”
~Ludwig von Mises
Peter Schiff – It’s Scary How Clueless Bernanke Is
The Gold Dollar | Llewellyn H. Rockwell, Jr.
Fed’s Next Move: What Will Boost the Economy?
Helicopter Ben Bernanke 10/15/10 Part 1
Helicopter Ben Bernanke 10/15/10 Part 2
Swonk Says Bernanke Laid Out Rationale for Fed QE: Video
Currencies, Phillips curve, inflation target, Ramsey, SchiffRadio.com
Bernanke Says Fed Stimulus Move Coming, Amount Unknown
Tyson Says Quantitative Easing ‘Only Policy Option Left’
Jim Grant on Bloomberg 10/8/10: Quantitative Easing Is Just Money Printing
Mandelbrot (Chaos Theory) Taleb (Black Swan) on markets
End the Fed | Ron Paul
The primary goal of the Federal Reserve System is price stability or the avoidance of inflation for the U.S. economy.
However, unlike other central banks, the Federal Reserve also was given several other goals by Congress:
“The goals of monetary policy are spelled out in the Federal Reserve Act, which specifies that the Board of Governors and the Federal Open Market Committee should seek “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” …”
Since the Fed already has a zero interest rate policy or ZIRP with the Federal Funds rate target range of between 0.0% – .25% and a low inflation rate for the time being under 2%, the Federal Reserve now turns it monetary policy tools on the persistent high unemployment rates, now at 9.6% and headed once again to 10% or more.
Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Annual |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2000 | 4.0 | 4.1 | 4.0 | 3.8 | 4.0 | 4.0 | 4.0 | 4.1 | 3.9 | 3.9 | 3.9 | 3.9 | |
2001 | 4.2 | 4.2 | 4.3 | 4.4 | 4.3 | 4.5 | 4.6 | 4.9 | 5.0 | 5.3 | 5.5 | 5.7 | |
2002 | 5.7 | 5.7 | 5.7 | 5.9 | 5.8 | 5.8 | 5.8 | 5.7 | 5.7 | 5.7 | 5.9 | 6.0 | |
2003 | 5.8 | 5.9 | 5.9 | 6.0 | 6.1 | 6.3 | 6.2 | 6.1 | 6.1 | 6.0 | 5.8 | 5.7 | |
2004 | 5.7 | 5.6 | 5.8 | 5.6 | 5.6 | 5.6 | 5.5 | 5.4 | 5.4 | 5.5 | 5.4 | 5.4 | |
2005 | 5.3 | 5.4 | 5.2 | 5.2 | 5.1 | 5.0 | 5.0 | 4.9 | 5.0 | 5.0 | 5.0 | 4.9 | |
2006 | 4.7 | 4.8 | 4.7 | 4.7 | 4.6 | 4.6 | 4.7 | 4.7 | 4.5 | 4.4 | 4.5 | 4.4 | |
2007 | 4.6 | 4.5 | 4.4 | 4.5 | 4.4 | 4.6 | 4.6 | 4.6 | 4.7 | 4.7 | 4.7 | 5.0 | |
2008 | 5.0 | 4.8 | 5.1 | 5.0 | 5.4 | 5.5 | 5.8 | 6.1 | 6.2 | 6.6 | 6.9 | 7.4 | |
2009 | 7.7 | 8.2 | 8.6 | 8.9 | 9.4 | 9.5 | 9.4 | 9.7 | 9.8 | 10.1 | 10.0 | 10.0 | |
2010 | 9.7 | 9.7 | 9.7 | 9.9 | 9.7 | 9.5 | 9.5 | 9.6 | 9.6 |
http://data.bls.gov/PDQ/servlet/SurveyOutputServlet
The Chairman of the Federal Reserve, Ben Bernanke, communicated in an October 15, 2010 speech in Boston what the Federal Open Market Committee (FOMC) unconventional monetary policy was targeting– maximum employment–by printing more money and purchasing Treasuries and other bonds:
“…In short, there are clearly many challenges in communicating and conducting monetary policy in a low-inflation environment, including the uncertainties associated with the use of nonconventional policy tools. Despite these challenges, the Federal Reserve remains committed to pursuing policies that promote our dual objectives of maximum employment and price stability. In particular, the FOMC is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation over time to levels consistent with our mandate. …”
Translation, the Fed will be printing more money starting in November to expand the money and credit supply by purchasing Treasury securities including bills, notes and bonds in the market as well other assets such as bonds with the objective of lowering the unemployment rate.
http://nowandfutures.com/key_stats.html
The Fed will be attempting to “inflate” the economy out of the current “jobless recovery” into another economic boom.
Call it quantitative easing, credit easing or “nonconventional” monetary policy, I call it overdosing on interventionism.
Quantitative Easing–Videos
What is the size, scope and duration of the “quantitative easing” or overdosing on interventionism ?
How big will the Fed’s weekly habit be?
My guess it will start “small” with $2 to $5 billion per week and gradually increase to about $15 billion per week?
How long will the Fed persist in this habit before going cold turkey?
At least twelve to forty-eight months or until the unemployment rate is below 6% and core inflation is over 2%.
This will require another massive expansion of the Federal Reserve’s balance sheet.
How much will it take?
My guess is a 1% reduction in the U-3 official unemployment rate would take a minimum of $600 billion per year ($200,000 money or credit expansion times 3,000,000 new jobs in one year)
A 4% reduction in the unemployment rate from 10% to 5% or the creation of about 12,000,000 new jobs would require a minimum of $2,500 billion dollars over four years.
The U.S. official unemployment rate as measured by U-3 is again headed towards 10% with over 15,000,000 Americans unemployed.
The private sector needs to create between 250,000 and 300,000 jobs per month to reduce the official unemployment rate by just .1%.
Currently the private sector is creating less than 100,000 jobs per month.
The United States needs between 100,000 to 150,000 jobs to absorb new entrants into the labor market due to the population growth. There are currently over 1.1 million unemployed new entrants that have not found their first job.
Another 150,000 to 200,000 jobs is are needed to reduce the unemployment by .1%.
Unfortunately, the persistent unemployment problem is even worse.
The U-6 total unemployment rate increased from 16.7% in August to 17.1% in October 2010.
With a total civilian labor force of about 155 million, a 17.1% unemployment rate means that over 26,500,000 Americans are looking for full-time jobs.
This represents over twice the number of unemployed Americans, about 13 million, during the worse month of the Great Depression, March 1933.
Assume it takes a minimum of $200,000 increase in the money and credit supply to create one new job.
Assume it takes 250,000 new jobs per month to reduce the unemployment rate by .1% or 3,000,000 jobs per year to reduce the unemployment rate by 1.2%.
Then the Federal Reserve would need to expand the money and credit supply by about $600 billion per year.
If the objective is to reduce the unemployment rate official unemployment rate U-3 from about 10% to 5% then the Federal Reserve would need to expand the money and credit supply by about $2,500 billion over a forty-eight month period.
I fully expect both the U-3 and U-6 unemployment rates to rise by at least .1 to .2% per month for next three to six months.
This would bring the official unemployment rate or U-3 over 10% during the first quarter of 2011 and the total unemployment rate or U-6 over 18% by the start of the second quarter of 2011.
This would represent over 15 million Americans unemployed and over 28 million seeking full-time unemployment.
This in turn will mean the U.S. economy is entering a “new” recession or a “double dip recession” with declining and most likely negative growth rates in the second and third quarter of 2011 and an increased probability of deflation or a declining general price level for goods and services.
Therefore the case for an expansionary monetary policy is still strong and increasing.
With the Federal Funds rate essentially zero, the Federal Reserve will be purchasing assets such as Treasury securities and agency mortgage-backed securities starting in November and continuing for a least six months until the U.S. unemployment rates are down by at least 1% to 2% or more and growth in production or the gross national product is at least above 3% to 4%.
Assuming the Federal Reserve purchases $12 billion in assets or securities each week, the total amount of the quantitative easing will be about $2,500 billion over the next forty-eight months to bring the official unemployment rate U-3 to about 5%.
The Federal Reserve cannot count upon the central bank of Communist China, the People’s Bank of China, to appreciate the Yuan by more than 5% to 10% per year relative to the U.S. dollar to encourage U.S. exports and reduce Chinese imports to the United States.
The real problem is Federal government spending that should be drastically cut until a balanced or even surplus budget is the result.
The Bush tax rate cuts in 2001 and 2003 need to be made permanent as well.
Until such fiscal economic policies are actually implemented, the only monetary policy “bullets” that the Federal Reserve has left is quantitative easing or money printing to purchase assets by expanding their balance sheet.
The Federal Government has for the last two years run deficits exceeding 1,000 billion each year and totaling over $2,500 billion not counting interest and this is likely to continue for at least one or two years until the U.S. economy fully recovers and the unemployment rates are well below 7%.
These budgetary deficits need to be financed by the Treasury Department issuing Treasury bills, notes and bonds.
The Federal Reserve will monetize some of these Treasury debts as part of its quantitative easing operations to the extent other buyers of Treasuries cannot be found.
What is the size or quantity of the quantitative easing?
I do not expect this to be announced, but at least $2,500 billion may be needed in the next forty-eight months to avoid another recession, significantly reduce unemployment to under 6%, and increase the growth of the economy above 4%.
Will such a “nonconventional” monetary policy work?
Only if the Congress and the President drastically cut the Federal Budget so it balances, do not increase taxes, and repeal Obama care.
In other words,this “nonconventional” monetary policy strategy of asset purchases or quantitative easing is not very likely to work any time soon.
The problem with government intervention into the economy is it always requires even more government intervention to correct past mistakes.
Both fiscal and monetary policy are generating massive uncertainty and a lack of confidence by consumers and businesses results in the deferral of consumption and investment expenditures and the hiring of new employees.
Bernanke understands this for he wrote in his Ph.D. dissertation at M.I.T.:
“…increase uncertainty provides an incentive to defer investments in order to wait for new information.”
Massive increases in the size and scope of the Federal government has resulted in huge budgetary deficits and proposed tax increase during a “jobless recovery”.
These deficits must be financed and the Federal Reserve will make sure that Treasury debt in the form of bills, notes and bonds will be purchased by printing more money as needed.
The Federal Reserve “nonconventional” monetary policy of printing more money is essentially government intervention into the economy to accommodate the U.S. Government’s Department of the Treasury need in financing massive government deficits
The Federal Open Market Committee will purchase Treasuries, mostly short-term Treasury bills but some notes and bonds in exchange for Federal Reserve Notes or money.
While the Fed’s cover story may be that this is needed to reduce unemployment, the real objective is financing massive Federal government spending and deficits. This is similar to what was done from 1942 to 1951 where Treasury long-term government bond yields were fixed at very low levels to finance World War II.
In fact, the Federal Reserve will be debasing the U.S. dollar by reducing the purchasing power of the dollar.
End the Fed | Ron Paul
This is a hidden tax paid by all the American people.
The cost of exports will rise as the U.S. dollar depreciates relative to other foreign currencies.
The price of petroleum will significantly rise and Americans will be paying over $3 a gallon in 2011 and over $4 a gallon in 2012.
The increases in petroleum and gasoline prices will in turn impact food prices.
The Federal Reserve uses a core personal consumption expenditure (PCE) price index approach in measuring and setting inflation targets, which excludes food and energy. The core personal consumption is a less volatile inflation or price measure than a change in total personal consumption expenditures which includes energy and food.
However, the American people need to eat and use gasoline to power their cars and heating oil to warm their homes.
The American people do not tolerate fools, even educated fools of the ruling class, for very long when they are losing their jobs, homes, health care and retirement plans and their children and grandchildren cannot find jobs or complete their college education.
The Second American Revolution has started.
On Tuesday November 2, 2010, election day, a shot will be heard around the world that even the world’s central bankers will be able to hear, if not fully comprehend.
During which the Federal Open Market Committee or FOMC will meet to decide when and how much quantitative easing or credit easing is needed to create jobs, avoid another recession and finance the U.S. government massive deficits.
The U.S. economy is in a liquidity trap where conventional monetary policy is ineffective and “nonconventional” monetary policy cannot work effectively until the appropriate fiscal policies are a reality and working.
The U.S. economy is slowly drowning in a flood of government intervention that has simply failed in generating jobs and high rates of economic growth and wealth creation.
The American people are paying the price for our ruling class’s continuing failures.
After quantitative easing or “operation pawn shop” fails and the value of the U.S. dollars is further debased, a period of inflation will follow and the Obama Depression will become an inflationary depression–a black swan.
“To be told that the Fed did what it could isn’t much comfort to a family who loses its house to foreclosure, a businessman forced into bankruptcy, a sixty-five-year-old whose retirement fund is devastated, a would-be borrower turned away by a beleaguered bank, a new college grad who can’t find a job, any job. For those victims and all the others, a final verdict on the Fed’s response to the Great Panic must await the health of the U.S. economy in 2010 and 2011 and beyond.”
~David Wessle, In Fed We Trust, Ben Bernanke’s War On the Great Panic, page 266.
“It is indeed one of the principal drawbacks of every kind of interventionism that it is so difficult to reverse the process.”
“Economics does not say that isolated government interference with the prices of only one commodity or a few commodities is unfair, bad, or unfeasible. It says that such interference produces results contrary to its purpose, that it makes conditions worse, not better, from the point of view of the government and those backing its interference.”
~Ludwig von Mises
Roubini: U.S. Running Out of Options to Stimulate Economy
Roubini On Double Dip
Nassim Nicholas Taleb – What is a “Black Swan?”
Background Articles and Videos
Peter Schiff “We Should Save ‘Person Of The Year’ For People Who Do Good!
Ron Paul: Allow The Free Market, Not The Fed, To Set Interest Rates
Maynard Keynes Inventor of Quantitative Easing
The Financial Crisis and the Death of Macroeconomics | Joseph T. Salerno
Government’s Response to the Crisis: A Fantastic Success, for Government | Robert Higgs
Why You’ve Never Heard of the Great Depression of 1920 | Thomas E. Woods, Jr.
Keynesian Predictions vs. American History | Thomas E. Woods, Jr.
Our Wise Overlords Are Just Here to Serve Us | Thomas E. Woods. Jr.
Nassim Nicholas Taleb Angry
16. The Evolution and Perfection of Monetary Policy
Crisis and Capitalism
Understanding the Financial Crisis
The Psychology of the Financial Crisis
Money, Banking and the Federal Reserve
How to Abolish the Federal Reserve
Speech
Chairman Ben S. Bernanke
At the Revisiting Monetary Policy in a Low-Inflation Environment Conference, Federal Reserve Bank of Boston, Boston, Massachusetts
October 15, 2010
Monetary Policy Objectives and Tools in a Low-Inflation Environment”…
“…However, possible costs must be weighed against the potential benefits of nonconventional policies. One disadvantage of asset purchases relative to conventional monetary policy is that we have much less experience in judging the economic effects of this policy instrument, which makes it challenging to determine the appropriate quantity and pace of purchases and to communicate this policy response to the public. These factors have dictated that the FOMC proceed with some caution in deciding whether to engage in further purchases of longer-term securities.
Another concern associated with additional securities purchases is that substantial further expansion of the balance sheet could reduce public confidence in the Fed’s ability to execute a smooth exit from its accommodative policies at the appropriate time. Even if unjustified, such a reduction in confidence might lead to an undesired increase in inflation expectations, to a level above the Committee’s inflation objective. To address such concerns and to ensure that it can withdraw monetary accommodation smoothly at the appropriate time, the Federal Reserve has developed an array of new tools.7 With these tools in hand, I am confident that the FOMC will be able to tighten monetary conditions when warranted, even if the balance sheet remains considerably larger than normal at that time.
Central bank communication provides additional means of increasing the degree of policy accommodation when short-term nominal interest rates are near zero. For example, FOMC postmeeting statements have included forward policy guidance since December 2008, and the most recent statements have reflected the FOMC’s anticipation that exceptionally low levels of the federal funds rate are likely to be warranted “for an extended period,” contingent on economic conditions. A step the Committee could consider, if conditions called for it, would be to modify the language of the statement in some way that indicates that the Committee expects to keep the target for the federal funds rate low for longer than markets expect. Such a change would presumably lower longer-term rates by an amount related to the revision in policy expectations. A potential drawback of using the FOMC’s statement in this way is that, at least without a more comprehensive framework in place, it may be difficult to convey the Committee’s policy intentions with sufficient precision and conditionality. The Committee will continue to actively review its communications strategy with the goal of providing as much clarity as possible about its outlook, policy objectives, and policy strategies.
Conclusion
In short, there are clearly many challenges in communicating and conducting monetary policy in a low-inflation environment, including the uncertainties associated with the use of nonconventional policy tools. Despite these challenges, the Federal Reserve remains committed to pursuing policies that promote our dual objectives of maximum employment and price stability. In particular, the FOMC is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation over time to levels consistent with our mandate. Of course, in considering possible further actions, the FOMC will take account of the potential costs and risks of nonconventional policies, and, as always, the Committee’s actions are contingent on incoming information about the economic outlook and financial conditions. ..”
Bernanke sees case for more Federal Reserve easing
“… Federal Reserve Chairman Ben Bernanke on Friday offered his most explicit signal yet that the U.S. central bank was set to ease monetary policy further, but provided no details on how aggressively it might act.
Bernanke warned a prolonged period of high unemployment could choke off the U.S. recovery and that the low level of inflation presented an uncomfortable risk of deflation, a dangerous downward slide in prices.
“There would appear — all else being equal — to be a case for further action,” Bernanke said at a conference sponsored by the Boston Federal Reserve Bank.
With overnight interest rates already close to zero, many economists expect the Fed to launch a fresh round of bond purchases, perhaps on the order of $500 billion, to push borrowing costs lower at its next policy meeting on November 2-3.
Prices for longer-dated U.S. government debt fell after Bernanke’s remarks as investors bet the Fed would be successful in generating more inflation. Stocks were mixed while the dollar briefly hit an eight-month low against the euro.
Bernanke said the central bank could bolster its economy and inflation-lifting efforts by indicating a willingness to hold interest rates low for longer than currently expected.
The Fed pushed overnight rates to zero in December 2008 and then bought $1.7 trillion in U.S. government and mortgage-linked bonds to offer more support for the economy.
Officials have said further asset buying, or quantitative easing, would be the course they would most likely pursue to spur a stronger recovery.
Bernanke indicated Fed policymakers were still weighing how aggressive they should be, leaving markets to guess as to the details of any operation. …”
http://finance.yahoo.com/news/Bernanke-says-sees-case-for-rb-4235164349.html?x=0&.v=3
Personal consumption expenditures price index
“…he PCE price index (PCEPI) (or PCE deflator, PCE price deflator, Implicit Price Deflator for Personal Consumption Expenditures (IPD for PCE) (by the BEA), Chain-type Price Index for Personal Consumption Expenditures (CTPIPCE) (by the FOMC )) is a United States-wide indicator of the average increase in prices for all domestic personal consumption. It is indexed to a base of 100 in 2005. Using a variety of data including U.S. Consumer Price Index and Producer Price Index prices, it is derived from the largest component of the Gross Domestic Product in the BEA’s National Income and Product Accounts, personal consumption expenditures.
The less volatile measure of the PCE price index is the core PCE price index which excludes the more volatile and seasonal food and energy prices.
In comparison to the headline United States Consumer Price Index, which uses one set of expenditure weights for several years, this index uses a Fisher Price Index, which uses expenditure data from both the current period and the preceding period. Also, the PCEPI uses a chained index which compares one quarter’s price to the last quarter’s instead of choosing a fixed base. This price index method assumes that the consumer has made allowances for changes in relative prices. That is to say, they have substituted from goods whose prices are rising to goods whose prices are stable or falling.
The PCE rises about one-third percent less than the CPI, a trend that dates back to 1992. This may be due to the failure of CPI to take into account substitution. Alternatively, an unpublished report on this difference by the BLS suggests that most of it is from different ways of calculating hospital expenses and airfares.[1] …”
http://en.wikipedia.org/wiki/Personal_consumption_expenditures_price_index
Black Swan Theory
“…The Black Swan Theory or “Theory of Black Swan Events” was developed by Nassim Nicholas Taleb to explain: 1) the disproportionate role of high-impact, hard to predict, and rare events that are beyond the realm of normal expectations in history, science, finance and technology, 2) the non-computability of the probability of the consequential rare events using scientific methods (owing to their very nature of small probabilities) and 3) the psychological biases that make people individually and collectively blind to uncertainty and unaware of the massive role of the rare event in historical affairs. Unlike the earlier philosophical “black swan problem”, the “Black Swan Theory” (capitalized) refers only to unexpected events of large magnitude and consequence and their dominant role in history. Such events, considered extreme outliers, collectively play vastly larger roles than regular occurrences.
Black Swan Events were characterized by Nassim Nicholas Taleb in his 2007 book (revised and completed in 2010), The Black Swan. Taleb regards almost all major scientific discoveries, historical events, and artistic accomplishments as “black swans” — undirected and unpredicted. He gives the rise of the Internet, the personal computer, World War I, and the September 11 attacks as examples of Black Swan Events.
The term black swan was a Latin expression — its oldest known reference comes from the poet Juvenal’s characterization of something being “rara avis in terris nigroque simillima cygno” (6.165).[1] In English, this Latin phrase means “a rare bird in the lands, and very like a black swan.” When the phrase was coined, the black swan was presumed not to exist. The importance of the simile lies in its analogy to the fragility of any system of thought. A set of conclusions is potentially undone once any of its fundamental postulates is disproven. In this case, the observation of a single black swan would be the undoing of the phrase’s underlying logic, as well as any reasoning that followed from that underlying logic.
Juvenal’s phrase was a common expression in 16th century London as a statement of impossibility. The London expression derives from the Old World presumption that all swans must be white because all historical records of swans reported that they had white feathers.[2] In that context, a black swan was impossible or at least nonexistent. After a Dutch expedition led by explorer Willem de Vlamingh on the Swan River in 1697, discovered black swans in Western Australia[3], the term metamorphosed to connote that a perceived impossibility might later be disproven. Taleb notes that in the 19th century John Stuart Mill used the black swan logical fallacy as a new term to identify falsification.
Specifically, Taleb asserts[4] in the New York Times:
What we call here a Black Swan (and capitalize it) is an event with the following three attributes.
First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.
I stop and summarize the triplet: rarity, extreme impact, and retrospective (though not prospective) predictability. A small number of Black Swans explains almost everything in our world, from the success of ideas and religions, to the dynamics of historical events, to elements of our own personal lives.
Coping with black swan events
The main idea in Taleb’s book is not to attempt to predict Black Swan Events, but to build robustness against negative ones that occur and being able to exploit positive ones. Taleb contends that banks and trading firms are very vulnerable to hazardous Black Swan Events and are exposed to losses beyond that predicted by their defective models.
Taleb states that a Black Swan Event depends on the observer—using a simple example, what may be a Black Swan surprise for a turkey is not a Black Swan surprise for its butcher—hence the objective should be to “avoid being the turkey” by identifying areas of vulnerability in order to “turn the Black Swans white”.
Identifying a black swan event
Based on the author’s criteria:
- The event is a surprise (to the observer).
- The event has a major impact.
- After the fact, the event is rationalized by hindsight, as if it had been expected.
Taleb’s ten principles for a black swan robust world
Taleb enumerates ten principles for building systems that are robust to Black Swan Events:[10]
- What is fragile should break early while it is still small. Nothing should ever become Too Big to Fail.
- No socialisation of losses and privatisation of gains.
- People who were driving a school bus blindfolded (and crashed it) should never be given a new bus.
- Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks.
- Counter-balance complexity with simplicity.
- Do not give children sticks of dynamite, even if they come with a warning.
- Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”.
- Do not give an addict more drugs if he has withdrawal pains.
- Citizens should not depend on financial assets or fallible “expert” advice for their retirement.
- Make an omelette with the broken eggs.
In addition to these ten principles, Taleb also recommends employing both physical and functional redundancy in the design of systems. These two steps can be found in the principles of resilience architecting. (Reference: Jackson, S. Architecting Resilient Systems: John Wiley & Sons. Hoboken, NJ: 2010.)
http://en.wikipedia.org/wiki/Black_swan_theory
Federal Reserve System: Purposes and Functions
http://www.federalreserve.gov/pf/pdf/pf_complete.pdf
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Read Full Post | Make a Comment ( None so far )News Journal: Number 27, October 16, 2010: Cracking Communist Chinese Currency–Float The Yuan/RBN or Devalue Your Currency Via U.S. Dollar 10% Per Year For Next Five Years Or Face U.S. Import Ban–No Pressure–Your Choice–Videos
“The valuation of the monetary unit depends not upon the wealth of the country, but upon the ratio between the quantity of money and the demand for it, so that even the richest country may have a bad currency and the poorest country a good one.”
~Ludwig von Mises, The Theory of Money and Credit, page 278.
“The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem of how to allocate “given” resources—if “given” is taken to mean given to a single mind which deliberately solves the problem set by these “data.” It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.”
~Friedrich A. Hayek, The Use of Knowledge in Society
September, 1945, American Economic Review. XXXV, No. 4. pp. 519-30. American Economic Association
http://www.econlib.org/library/Essays/hykKnw1.html
Capitalism in China: Should We Trade With Them? – Ayn Rand Center for Individual Rights
Dr. Milton Friedman speaking about Free Trade
The looming China-U.S. showdown
Battling over the Yuan – F24 101001
China’s Wen Jiabao: ‘Dont pressure us to raise RMB rates’
Lee Says China Will Appreciate Yuan to Prevent Trade War: Video
Eurozone troika urges ‘broad-based’ currency appreciation in China
Inside Look: China Currency Controversy
China Currency and Trade Wars
Peter Schiff – June 21 2010 – Appreciation Of The Chinese Currency Means The Implosion Of The Dollar
Mar 24 10 Hearing on China’s Exchange Rate Policy, Niall Ferguson Opening Statement
Mar 24 10 Hearing on China’s Exchange Rate Policy, C. Fred Bergsten Opening Statement
Mar 24 10 Hearing on China’s Exchange Rate Policy, Clyde Prestowitz Opening Statement
Mar 24 10 Hearing on China’s Exchange Rate Policy, Philip Levy Opening Statement
The U.S. and China (Ted Galen Carpenter)
Government intervention into markets always requires even more government intervention to correct past mistakes.
The central bank of the People’s Republic of China (PRC) would be well advised to just let their currency freely float against the currencies of the world.
This would mean the PRC’s official currency the renminbi or RMB and its unit of currency the yuan would rise in value against both the U.S. dollar and the Euro.
Yes, this would mean the PRC’s export goods would be more expensive for both Americans and Europeans and conversely American and European goods and services would be cheaper to purchase for the PRC.
The result would be a decline in the growth of exports to the United States and Europe.
The Chinese people need to be able to increase their level of consumption and reduce their savings rate to absorb the production that currently goes almost entirely abroad as exports.
Should the PRC implement such a strategy, it would be advised to stop purchasing United States Treasury debt and as the U.S Treasury obligations mature use the dollar payments to purchase natural resource assets in the United States.
In other words diversify your portfolio out foreign government obligations into natural resources that your economy needs to manufacture goods.
As a second best solution, gradually appreciate the renminbi against the U.S. dollar at 10% per year for five years and then freely float the yuan.
Since the U.S unemployment rate is expected to exceed 8% for at least the next three years, the appreciation of the renminbi at 10% a year for five years would lead to a decline in U.S. unemployment due to increase in U.S. exports and and a rise in the demand for Chinese exports as the U.S economy recovers from the recession.
Absence an improvement in the U.S. employment situation, demand for Chinese exports would be flat or even decline.
Therefore, it is in the interest of both countries governments to have an appreciation of the renminbi.
The U.S. Federal Reserve should also abandon its practice of intervening in the U.S money market by attempting to set target Federal fund rates to expand the money supply and in turn credit.
Will any of the above actually happen?
Not likely.
The ruling classes of United States and the People’s Republic of China actually believe they are have the intelligence and knowledge exceeding that of free markets.
Both ruling classes are only fooling themselves.
Both are wrong.
Let the currency wars begin.
Let the ruling class of both parties demonstrate they care less for the welfare of their people.
Let the American and Chinese people determine the fates of their ruling class.
Increasing unemployment in both countries will lead to a revolution and the overthrow of both ruling classes.
The free market will over time prevail and the ruling class control freaks with their failed government interventionist economic policies will be replaced.
Power of the Market – How to Cure Inflation 1
Power of the Market – How to Cure Inflation 2
Power of the Market – How to Cure Inflation 3
“We shall not grow wiser before we learn that much that we have done was very foolish. “
~Friedrich A. Hayek
“Perpetual vigilance on the part of the citizens can achieve what a thousand laws and dozens of alphabetical bureaus with hordes of employees never have and never will achieve: the preservation of a sound currency.”
~Ludwig von Mises, The Theory of Money and Credit, page 495
Background Articles and Videos
China’s Economy in the Post-Crisis World
Obama Pressed On New Global Currency At Presidential News Conference
Related Posts On Pronk Palisades
Chinese Communist State Company–China National Offshore Oil Corp.(CNOOC)–Invests In Texas Oil–Videos
Printing More Money (Quantitative Easing) and The Coming Currency War and Decline In The Purchasing Power of The U.S. Dollar–Robbing The American People–Videos
The Monetarization of The Debt and Quantitative Easing: The Federal Reserve is printing $1,000,000,000,000!–Run-Away Inflation Coming Soon!
Read Full Post | Make a Comment ( None so far )
News Journal: Number 25, October 9, 2010: Obama Depression: 20 Months Of Unemployment Over 8% For Official U-3 Rate and Over 15% For Total U-6 Rate–Over 26 Million Americans Looking For A Full Time Job and 41.8 Million On Food Stamps!–Followed By 36 More Months Of Over 8% Official Unemployment U-3 Rate and 15% Total Unemployment U-6 Rate!
“Government spending cannot create additional jobs. If the government provides the funds required by taxing the citizens or by borrowing from the public, it abolishes on the one hand as many jobs as it creates on the other.”
“True, governments can reduce the rate of interest in the short run. They can issue additional paper money. They can open the way to credit expansion by the banks. They can thus create an artificial boom and the appearance of prosperity. But such a boom is bound to collapse soon or late and to bring about a depression.”
~Ludwig von Mises
Economy Sheds 95,000 Jobs; 14.8 Million out of Work
RECORD 41.8 MILLION PEOPLE ON FOOD STAMPS 9-15-2010
Sept 2010 Employment Report
U.S. Recovering Jobs But Pace Has Slowed, Analyst Says
Goolsbee Sees Need to Get ‘Job Engine’ Growing Faster: Video
“Traders will look at the U6 unemployment rate…on Friday”
President Obama on September, 2010 Jobs Numbers
Ron Paul: Obama Stimulus Package Will Turn Recession Into Depression
The U.S. jobless ” recovery” continues and is getting worse.
While the official unemployment rate of 9.6% as measured by U-3 did not go up in September, the real total unemployment rate went from 16.7% in August to 17.1% in September 2010.
The official unemployment level is currently at 14,767,000 unemployed Americans and exceeds the 13 million unemployed during the worse year of the Great Depression, 1933.
The total unemployment level calculated as 17.1% of the civilian labor force of about 154,158,000 is over 26 million, twice the number of unemployed during the worse year of the Great Depression, 1933.
The Obama Depression is not over or improving but is in fact getting worse.
The Keynesian economics recipe for economic disaster of more and more stimulus spending, larger and larger budgetary deficits, financed by layer upon layer of government debt has been a big failure.
A failure made even worse by the Federal Reserves’ quantitative easing monetary policy of monetization of the debt by “printing” more and more money in exchange for the Federal Government’s debt.
Neither the fiscal policy of stimulus spending nor the monetary policy of quantitative easing will create more jobs.
Obama”s economic policies only increase the belief among consumers and business owners that the Federal Government is completely out-of-control.
Only when President Obama’s economic policies are reversed and the current regime in Congress and the President are elected out of office will you finally see job creation and low full employment rates of 2%% to 3% This will take not months but at least five years.
Dixion Says Fed Quantitative Easing Won’t Create New Jobs
http://www.youtube.com/watch?v=85Olz2h6ehM
The immediate result is the devaluing of the dollar
The Federal Reserves’ policy is a massive tax increase on all Americans as the purchasing power of their money declines daily.
This will only result in higher prices for all imports including gasoline and the costs of all goods and services to the extent they require imported goods and services such as petroleum.
Ron Paul vs. Ben Bernanke
Peter Schiff–Dollar Collaspse–Gold As A Hedge Against The Fed’s Committment To Raise Inflation
Who reappointed The Federal Reserve Chairman, Ben Bernanke,–President Barack Obama.
Ron Paul : We Can’t Say Cut Spending For Food Stamps But NOT For The Military Industrial Complex!
http://www.youtube.com/watch?v=whfopF8Xj8I
All Labor and Unemployment Statistics Are From
The Department of Labor, Bureau of Labor Statistics
http://data.bls.gov/cgi-bin/surveymost?ln
As Of October 2010
The Numbers In Red Are For The Obama Administration
U-3
Series Id: LNS14000000
Seasonally Adjusted
Series title: (Seas) Unemployment Rate
Labor force status: Unemployment rate
Type of data: Percent or rate
Age: 16 years and over
Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Annual |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2000 | 4.0 | 4.1 | 4.0 | 3.8 | 4.0 | 4.0 | 4.0 | 4.1 | 3.9 | 3.9 | 3.9 | 3.9 | |
2001 | 4.2 | 4.2 | 4.3 | 4.4 | 4.3 | 4.5 | 4.6 | 4.9 | 5.0 | 5.3 | 5.5 | 5.7 | |
2002 | 5.7 | 5.7 | 5.7 | 5.9 | 5.8 | 5.8 | 5.8 | 5.7 | 5.7 | 5.7 | 5.9 | 6.0 | |
2003 | 5.8 | 5.9 | 5.9 | 6.0 | 6.1 | 6.3 | 6.2 | 6.1 | 6.1 | 6.0 | 5.8 | 5.7 | |
2004 | 5.7 | 5.6 | 5.8 | 5.6 | 5.6 | 5.6 | 5.5 | 5.4 | 5.4 | 5.5 | 5.4 | 5.4 | |
2005 | 5.3 | 5.4 | 5.2 | 5.2 | 5.1 | 5.0 | 5.0 | 4.9 | 5.0 | 5.0 | 5.0 | 4.9 | |
2006 | 4.7 | 4.8 | 4.7 | 4.7 | 4.6 | 4.6 | 4.7 | 4.7 | 4.5 | 4.4 | 4.5 | 4.4 | |
2007 | 4.6 | 4.5 | 4.4 | 4.5 | 4.4 | 4.6 | 4.6 | 4.6 | 4.7 | 4.7 | 4.7 | 5.0 | |
2008 | 5.0 | 4.8 | 5.1 | 5.0 | 5.4 | 5.5 | 5.8 | 6.1 | 6.2 | 6.6 | 6.9 | 7.4 | |
2009 | 7.7 | 8.2 | 8.6 | 8.9 | 9.4 | 9.5 | 9.4 | 9.7 | 9.8 | 10.1 | 10.0 | 10.0 | |
2010 | 9.7 | 9.7 | 9.7 | 9.9 | 9.7 | 9.5 | 9.5 | 9.6 | 9.6 |
U-6
Series Id: LNS13327709
Seasonally Adjusted
Series title: (seas) Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons, as a percent of all civilian labor force plus all marginally attached workers
Labor force status: Aggregated totals unemployed
Type of data: Percent or rate
Age: 16 years and over
Percent/rates: Unemployed and mrg attached and pt for econ reas as percent of labor force plus marg attached
Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Annual |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2000 | 7.1 | 7.2 | 7.1 | 6.9 | 7.1 | 7.0 | 7.0 | 7.1 | 7.0 | 6.8 | 7.1 | 6.9 | |
2001 | 7.3 | 7.4 | 7.3 | 7.4 | 7.5 | 7.9 | 7.8 | 8.1 | 8.7 | 9.3 | 9.4 | 9.6 | |
2002 | 9.5 | 9.5 | 9.4 | 9.7 | 9.5 | 9.5 | 9.6 | 9.6 | 9.6 | 9.6 | 9.7 | 9.8 | |
2003 | 10.0 | 10.2 | 10.0 | 10.2 | 10.1 | 10.3 | 10.3 | 10.1 | 10.4 | 10.2 | 10.0 | 9.8 | |
2004 | 9.9 | 9.7 | 10.0 | 9.6 | 9.6 | 9.5 | 9.5 | 9.4 | 9.4 | 9.7 | 9.4 | 9.2 | |
2005 | 9.3 | 9.3 | 9.1 | 8.9 | 8.9 | 9.0 | 8.8 | 8.9 | 9.0 | 8.7 | 8.7 | 8.6 | |
2006 | 8.4 | 8.4 | 8.2 | 8.1 | 8.2 | 8.4 | 8.5 | 8.4 | 8.0 | 8.2 | 8.1 | 8.0 | |
2007 | 8.3 | 8.1 | 8.0 | 8.2 | 8.2 | 8.2 | 8.3 | 8.5 | 8.4 | 8.4 | 8.5 | 8.8 | |
2008 | 9.1 | 8.9 | 9.0 | 9.2 | 9.7 | 10.0 | 10.5 | 10.9 | 11.2 | 11.9 | 12.8 | 13.7 | |
2009 | 14.0 | 15.0 | 15.6 | 15.8 | 16.4 | 16.5 | 16.4 | 16.8 | 17.0 | 17.4 | 17.2 | 17.3 | |
2010 | 16.5 | 16.8 | 16.9 | 17.1 | 16.6 | 16.5 | 16.5 | 16.7 | 17.1 |
Series Id: LNS13000000
Seasonally Adjusted
Series title: (Seas) Unemployment Level
Labor force status: Unemployed
Type of data: Number in thousands
Age: 16 years and over
Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Annual |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2000 | 5708 | 5858 | 5733 | 5481 | 5758 | 5651 | 5747 | 5853 | 5625 | 5534 | 5639 | 5634 | |
2001 | 6023 | 6089 | 6141 | 6271 | 6226 | 6484 | 6583 | 7042 | 7142 | 7694 | 8003 | 8258 | |
2002 | 8182 | 8215 | 8304 | 8599 | 8399 | 8393 | 8390 | 8304 | 8251 | 8307 | 8520 | 8640 | |
2003 | 8520 | 8618 | 8588 | 8842 | 8957 | 9266 | 9011 | 8896 | 8921 | 8732 | 8576 | 8317 | |
2004 | 8370 | 8167 | 8491 | 8170 | 8212 | 8286 | 8136 | 7990 | 7927 | 8061 | 7932 | 7934 | |
2005 | 7784 | 7980 | 7737 | 7672 | 7651 | 7524 | 7406 | 7345 | 7553 | 7453 | 7566 | 7279 | |
2006 | 7059 | 7185 | 7075 | 7122 | 6977 | 6998 | 7154 | 7097 | 6853 | 6728 | 6883 | 6784 | |
2007 | 7085 | 6898 | 6725 | 6845 | 6765 | 6966 | 7113 | 7096 | 7200 | 7273 | 7284 | 7696 | |
2008 | 7628 | 7435 | 7793 | 7631 | 8397 | 8560 | 8895 | 9509 | 9569 | 10172 | 10617 | 11400 | |
2009 | 11919 | 12714 | 13310 | 13816 | 14518 | 14721 | 14534 | 14993 | 15159 | 15612 | 15340 | 15267 | |
2010 | 14837 | 14871 | 15005 | 15260 | 14973 | 14623 | 14599 | 14860 | 14767 |
In order to reduce the U.S. official unemployment rate by .1% in a single month requires the creation of between 250,000 and 300,000 jobs per month depending upon the number of new entrants into the labor market due to population growth and the labor participation rate or those seeking employment.
The labor participation rate goes down as an economy goes into a recession and goes up as the economy grows and prospers. The labor participation rate is currently 64.7%, well below the more normal range of 66% to 67.5% .
A higher labor participation rate means more individuals are actively seeking full-time employment and more jobs need to be created each month to absorb both new entrants and re-entrants into the labor market.
This is the reason why between 250,000 and 300,000 jobs need to be created each month to reduce the unemployment rate just .1%.
Series Id: LNS11300000
Seasonally Adjusted
Series title: (Seas) Labor Force Participation Rate
Labor force status: Civilian labor force participation rate
Type of data: Percent or rate
Age: 16 years and over
Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Annual |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2000 | 67.3 | 67.3 | 67.3 | 67.3 | 67.1 | 67.1 | 66.9 | 66.9 | 66.9 | 66.8 | 66.9 | 67.0 | |
2001 | 67.2 | 67.1 | 67.2 | 66.9 | 66.7 | 66.7 | 66.8 | 66.5 | 66.8 | 66.7 | 66.7 | 66.7 | |
2002 | 66.5 | 66.8 | 66.6 | 66.7 | 66.7 | 66.6 | 66.5 | 66.6 | 66.7 | 66.6 | 66.4 | 66.3 | |
2003 | 66.4 | 66.4 | 66.3 | 66.4 | 66.4 | 66.5 | 66.2 | 66.1 | 66.1 | 66.1 | 66.1 | 65.9 | |
2004 | 66.1 | 66.0 | 66.0 | 65.9 | 66.0 | 66.1 | 66.1 | 66.0 | 65.8 | 65.9 | 66.0 | 65.9 | |
2005 | 65.8 | 65.9 | 65.9 | 66.1 | 66.1 | 66.1 | 66.1 | 66.2 | 66.1 | 66.1 | 66.0 | 66.0 | |
2006 | 66.0 | 66.1 | 66.2 | 66.1 | 66.1 | 66.2 | 66.1 | 66.2 | 66.1 | 66.2 | 66.3 | 66.4 | |
2007 | 66.4 | 66.3 | 66.3 | 66.0 | 66.0 | 66.0 | 66.0 | 65.8 | 66.0 | 65.8 | 66.0 | 66.0 | |
2008 | 66.2 | 66.0 | 66.1 | 66.0 | 66.2 | 66.1 | 66.0 | 66.1 | 66.0 | 66.0 | 65.8 | 65.8 | |
2009 | 65.7 | 65.7 | 65.6 | 65.8 | 65.8 | 65.7 | 65.4 | 65.4 | 65.1 | 65.0 | 64.9 | 64.6 | |
2010 | 64.7 | 64.8 | 64.9 | 65.2 | 65.0 | 64.7 | 64.6 | 64.7 | 64.7 |
It takes at between 100,000 and 150,000 jobs to employ new entrants into the labor market mostly high school and college graduates.
There are currently over 1.1 million new entrants into the labor force that have not found their first job.
Series Id: LNS13023569
Seasonally Adjusted
Series title: (Seas) Unemployment Level – New Entrants
Labor force status: Unemployed
Type of data: Number in thousands
Age: 16 years and over
Unemployed entrant status: New entrants
Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Annual |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2000 | 394 | 420 | 429 | 406 | 466 | 427 | 433 | 499 | 415 | 402 | 419 | 490 | |
2001 | 444 | 396 | 378 | 457 | 468 | 467 | 448 | 485 | 473 | 481 | 495 | 515 | |
2002 | 484 | 507 | 538 | 527 | 497 | 549 | 545 | 612 | 536 | 479 | 591 | 535 | |
2003 | 599 | 584 | 630 | 635 | 630 | 661 | 669 | 652 | 686 | 636 | 593 | 693 | |
2004 | 676 | 666 | 631 | 652 | 718 | 649 | 702 | 704 | 695 | 734 | 700 | 702 | |
2005 | 621 | 753 | 712 | 764 | 710 | 650 | 630 | 626 | 607 | 638 | 673 | 633 | |
2006 | 618 | 710 | 635 | 590 | 522 | 644 | 638 | 647 | 612 | 573 | 583 | 588 | |
2007 | 628 | 599 | 614 | 621 | 536 | 634 | 599 | 590 | 668 | 700 | 661 | 688 | |
2008 | 685 | 660 | 705 | 631 | 807 | 771 | 829 | 826 | 811 | 826 | 735 | 820 | |
2009 | 792 | 1016 | 881 | 919 | 977 | 969 | 994 | 1096 | 1134 | 1114 | 1270 | 1270 | |
2010 | 1235 | 1238 | 1197 | 1231 | 1206 | 1140 | 1188 | 1259 | 1187 |
The unemployment rate for the young, ages 16 to 19, is 26%!
The unemployment rate for the young is currently nearly double the usual unemployment rate for ages 16 to 19 of between 12% and 16% when the economy is growing.
Series Id: LNS14000012
Seasonally Adjusted
Series title: (Seas) Unemployment Rate – 16-19 yrs.
Labor force status: Unemployment rate
Type of data: Percent or rate
Age: 16 to 19 years
Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Annual |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2000 | 12.7 | 13.8 | 13.3 | 12.6 | 12.8 | 12.3 | 13.4 | 14.0 | 13.0 | 12.8 | 13.0 | 13.2 | |
2001 | 13.8 | 13.7 | 13.8 | 13.9 | 13.4 | 14.2 | 14.4 | 15.6 | 15.2 | 16.0 | 15.9 | 17.0 | |
2002 | 16.5 | 16.0 | 16.6 | 16.7 | 16.6 | 16.7 | 16.8 | 17.0 | 16.3 | 15.1 | 17.1 | 16.9 | |
2003 | 17.2 | 17.2 | 17.8 | 17.7 | 17.9 | 19.0 | 18.2 | 16.6 | 17.6 | 17.2 | 15.7 | 16.2 | |
2004 | 17.0 | 16.5 | 16.8 | 16.6 | 17.1 | 17.0 | 17.8 | 16.7 | 16.6 | 17.4 | 16.4 | 17.6 | |
2005 | 16.2 | 17.5 | 17.1 | 17.8 | 17.8 | 16.3 | 16.1 | 16.1 | 15.5 | 16.1 | 17.0 | 14.9 | |
2006 | 15.2 | 15.3 | 16.1 | 14.6 | 14.0 | 15.7 | 15.9 | 16.1 | 16.3 | 15.2 | 14.9 | 14.7 | |
2007 | 14.8 | 14.9 | 14.9 | 15.6 | 15.9 | 16.2 | 15.3 | 16.0 | 16.0 | 15.5 | 16.2 | 16.9 | |
2008 | 17.8 | 16.5 | 16.0 | 15.6 | 18.9 | 19.0 | 20.8 | 18.9 | 19.3 | 20.3 | 20.3 | 20.8 | |
2009 | 20.9 | 21.8 | 22.0 | 21.8 | 23.2 | 24.3 | 24.5 | 25.7 | 26.1 | 27.6 | 26.8 | 27.1 | |
2010 | 26.4 | 25.0 | 26.1 | 25.4 | 26.4 | 25.7 | 26.1 | 26.3 | 26.0 |
Both high school graduates and those who either dropped out or failed to graduate from high school are finding it very difficult to find their first job.
Illegal immigrants, mainly from Mexico and Latin America, of between 10 million to 20 million, has made it even more difficult for young inexperienced American citizens to find entry-level jobs.
Also the Federal minimum hourly wage law prevents many small businesses from hiring young workers.
Good Intentions 2 of 3 Minimum Wage, Licensing, and Labor Laws with Walter Williams
Good Intentions 3 of 3 The Welfare System and Conclusions with Walter Williams
It currently takes between 100,000 and 150,000 new jobs in addition to the 100,000 to 150,000 jobs for new entrants to reduce the unemployment rate by .1%.
The civilian labor force is currently about 155 million.
Series Id: LNS11000000
Seasonally Adjusted
Series title: (Seas) Civilian Labor Force Level
Labor force status: Civilian labor force
Type of data: Number in thousands
Age: 16 years and over
Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Annual |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2000 | 142267(1) | 142456 | 142434 | 142751 | 142388 | 142591 | 142278 | 142514 | 142518 | 142622 | 142962 | 143248 | |
2001 | 143800 | 143701 | 143924 | 143569 | 143318 | 143357 | 143654 | 143284 | 143989 | 144086 | 144240 | 144305 | |
2002 | 143883 | 144653 | 144481 | 144725 | 144938 | 144808 | 144803 | 145009 | 145552 | 145314 | 145041 | 145066 | |
2003 | 145937(1) | 146100 | 146022 | 146474 | 146500 | 147056 | 146485 | 146445 | 146530 | 146716 | 147000 | 146729 | |
2004 | 146842(1) | 146709 | 146944 | 146850 | 147065 | 147460 | 147692 | 147564 | 147415 | 147793 | 148162 | 148059 | |
2005 | 148029(1) | 148364 | 148391 | 148926 | 149261 | 149238 | 149432 | 149779 | 149954 | 150001 | 150065 | 150030 | |
2006 | 150201(1) | 150629 | 150839 | 150915 | 151085 | 151368 | 151383 | 151729 | 151650 | 152020 | 152360 | 152698 | |
2007 | 153117(1) | 152941 | 153093 | 152531 | 152717 | 153045 | 153039 | 152781 | 153393 | 153158 | 153767 | 153869 | |
2008 | 154048(1) | 153600 | 153966 | 153936 | 154420 | 154327 | 154410 | 154696 | 154590 | 154849 | 154524 | 154587 | |
2009 | 154140(1) | 154401 | 154164 | 154718 | 154956 | 154759 | 154351 | 154426 | 153927 | 153854 | 153720 | 153059 | |
2010 | 153170(1) | 153512 | 153910 | 154715 | 154393 | 153741 | 153560 | 154110 | 154158 |
Multiply the civilian labor force of about 155 million by .1% and the result is 155,000.
This is approximate number of jobs that need to be created to reduce the unemployment rate by .1 with no growth in the labor force.
When you add in the natural growth of the labor force by new entrants from population growth you arrive at an estimate of between 250,000 to 300,000 new jobs that need to be created each month to reduce the unemployment rate by .1%.
In a robust economic recovery the private sector should be creating 500,000 to 600,000 jobs per month.
Unfortunately, the private business sector and particularly small and medium size businesses, are not creating anywhere near 250,000 to 300,000 per month.
In September the private sector created only a net total of 75,000 new jobs. This is far short of the 250,000 to 300,000 jobs needed to reduce the U-3 official unemployment rate by just .1%.
Even if 250,000 new jobs were being created each month and the unemployment rate declined 1.2% per year and over 3 million jobs were created in a year, it would take over five years to bring the official unemployment rate ( U-3) down to under a 3% rate of unemployment or a near full employment level.
The stimulus package of over $789 billion plus billions in interest payments was supposed to keep the unemployment rate under 8% and not above 8%!
Stimulus II: A Sequel America Can’t Afford
The stimulus package has been an abject failure of the Keynesian economists including Romer and Berstein who advised Obama that this was what was needed.
Series Id: LNS12000000
Seasonally Adjusted
Series title: (Seas) Employment Level
Labor force status: Employed
Type of data: Number in thousands
Age: 16 years and over
Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Annual |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2000 | 136559(1) | 136598 | 136701 | 137270 | 136630 | 136940 | 136531 | 136662 | 136893 | 137088 | 137322 | 137614 | |
2001 | 137778 | 137612 | 137783 | 137299 | 137092 | 136873 | 137071 | 136241 | 136846 | 136392 | 136238 | 136047 | |
2002 | 135701 | 136438 | 136177 | 136126 | 136539 | 136415 | 136413 | 136705 | 137302 | 137008 | 136521 | 136426 | |
2003 | 137417(1) | 137482 | 137434 | 137633 | 137544 | 137790 | 137474 | 137549 | 137609 | 137984 | 138424 | 138411 | |
2004 | 138472(1) | 138542 | 138453 | 138680 | 138852 | 139174 | 139556 | 139573 | 139487 | 139732 | 140231 | 140125 | |
2005 | 140245(1) | 140385 | 140654 | 141254 | 141609 | 141714 | 142026 | 142434 | 142401 | 142548 | 142499 | 142752 | |
2006 | 143142(1) | 143444 | 143765 | 143794 | 144108 | 144370 | 144229 | 144631 | 144797 | 145292 | 145477 | 145914 | |
2007 | 146032(1) | 146043 | 146368 | 145686 | 145952 | 146079 | 145926 | 145685 | 146193 | 145885 | 146483 | 146173 | |
2008 | 146421(1) | 146165 | 146173 | 146306 | 146023 | 145768 | 145515 | 145187 | 145021 | 144677 | 143907 | 143188 | |
2009 | 142221(1) | 141687 | 140854 | 140902 | 140438 | 140038 | 139817 | 139433 | 138768 | 138242 | 138381 | 137792 | |
2010 | 138333(1) | 138641 | 138905 | 139455 | 139420 | 139119 | 138960 | 139250 | 139391 |
President Bush’s Federal income tax rate cuts of 2001 and capital gains and interest rate cuts of 2003 worked and the negative impact on the economy of the September 11, 2001 Islamic Al-Qaeda Jihadist terrorist attack was mostly minimized and avoided.
However, President Bush failed to control Federal Government spending by not vetoing the massive Government spending increases of both the Republican controlled House and Senate in 2005 and 2006 and the Democratic controlled House and Senate in 2007 and 2008.
President Obama followed the lead of President Bush and the Democratic controlled Congress by more than doubling the Federal budget deficits in 2009 and 2010.
Dan Mitchell on the Deficit
Dan Mitchell discusses Reagonomics vs. Obamanomics
The result is the Obama Depression with more than twice the number of Americans looking for a full-time job than the 13 million Americans that were unemployed in March, 1933, the worse month of the Great Depression.
President Obama is following in the footsteps of Presidents Herbert Hoover, Franklin D. Roosevelt, and George W. Bush by pursuing both the expansion of government with huge budgetary deficits (2009 was over $1,400 billion and 2010 is over 1,340 billion) and tax rate increases by letting the Bush tax rate cuts expire, supporting a massive cap-and-trade energy tax and imposing a mandatory health care plan on Americans that they must purchase or pay a tax penalty.
Feldstein Predicts Dollar to Weaken, Boosting Exports: Video
News Update: CBO Deficit estimates
The result is the same–massive unemployment–over 26 million seeking a full-time job and 41.8 million Americans on food stamps.
My recommendation made February 1, 2009 was to first have a six month payroll tax holiday on payroll and capital gains taxes and at the end of the six month period switch from the current Federal income tax system to the FairTax, which is a national sales consumption tax on the sale of all new goods and services.
American People’s Plan = 6 Month Tax Holiday + FairTax = Real Hope + Real Change!–Millions To March On Washington D.C. Saturday, July 4, 2009! Revised and Updated
The FairTax would replace all Federal personal and corporate income taxes, payroll taxes, Social Security taxes, Medicare taxes, capital gains taxes, interest and dividend taxes, alternative minimum taxes, estate and gift taxes.
The FairTax requires the repeal the 16th Amendment that gave the Federal government the power to collect an income tax.
“The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” |
The FairTax is also progressive for it provides a prebate or check each month to every American to pay the sales tax on necessities of living such as food, clothing, housing, and energy (electricity and gasoline).
Had the FairTax been implemented with a six month payroll and capital gains tax holiday, the unemployment rate would have been significantly below 8% by now and the economy growing at a rate above 5%.
The FairTax: It’s Time
The recommended economic policy of cutting both Federal taxes and Federal Government spending and regulation had been tried and proved successful in the past when the United States entered the roaring twenties:
Why You’ve Never Heard of the Great Depression of 1920 | Thomas E. Woods, Jr.
Keynesian Predictions vs. American History | Thomas E. Woods, Jr.
While the above economic policy recommendations would still work, it will never happen under the existing ruling political class.
Unfortunately, the political ruling class based in Washington, D.C., both Democrats and Republicans, vigorously opposed those proposing the FairTax.
Comprehensive tax reform is opposed by the lobbyist and special interests on K Street in Washington D.C. who benefit from the complicated Federal Income Tax.
Professional politicians of both political parties need the campaign contributions of these special interests and lobbyists to run for re-election.
The real problem is simply too much Federal Government spending.
The high levels of Federal Government spending is what is driving the need for new and higher Federal taxation, every increasing borrowing to finance the deficits, and a reckless expansionary credit and monetary policy.
The solution is to cut Federal government spending by eliminating entire Federal Departments, agencies and programs.
That is why I recommended that Federal Government spending be limited to 80% of FairTax collections with the remaining 20% used to pay down the National Debt and fund entitlement (Social Security and Medicare) unfunded liabilities.
A Common Sense Political Agenda For A New Conservative and Libertarian Party: American Citizens Alliance Party (ACAP)–A CAP On Government Spending, Taxes, Debt and Regulations!
It’s Simple to Balance The Budget Without Higher Taxes
This solution is anathema to the progressive radical socialist of the Democratic Party led by President Obama.
Instead President Obama went with the failed economic policies of the Keynesian economists who always advocate more and more Federal Government spending, which is precisely what the progressive radical socialists want to impose on the American people.
Keynesian Economics Is Wrong: Bigger Gov’t Is Not Stimulus
As a direct result of President Obama and the Democratic Party controlled Congress failure in cutting Federal Government spending, closing permanently many Federal Departments and agencies and ending hundreds of Federal Government programs, while proposing even more and higher taxes, more Americans are now unemployed and seeking full-time employment than any time in the history of the United States.
The number of unemployed are twice that of the Great Depression!
The U-3 official unemployment rate will remain above 8% and the U-6 total unemployment rate will remain above 15% for at least another 36 months.
By then the American people will vote President Obama out of office.
By then the American people will vote those Democratic and Republican Senators and Representatives who failed to institute deep and permanent cuts to the Federal budget, a balanced or surplus budget and the FairTax.
President Obama is a progressive radical socialist ideologue.
Obama wants to grow the size and scope of the Federal Government and use coercion and government intervention in the form of higher taxes and pervasive government regulation to redistribute wealth and limit consumer sovereignty and the liberties of the American people.
Paul Ryan on how to break the capital strike
Krauthammer: “We Are Having A Capital Strike”
President Obama’s economic policies created massive economic uncertainty for consumers and businesses resulting in tens of millions of unemployed and underemployed Americans.
President Obama is a regime that must be changed if there is any hope for the tens of millions of unemployed Americans to find a full-time job.
On November 2, 2010 the American people will vote the Democrats out of office who were responsible for this economic disaster by massive government intervention into the economy and expansion of the size and scope of government.
Most Americans cannot wait to vote President Obama out of office in 2012.
Mr. President, you know you are an economic illiterate.
Do the right thing Mr. President, resign for the good of the country and the American people.
Just think, Mr. President, you will have more time to play golf, smoke and be with your family.
Everbody wins.
Good-Bye and Good Luck.
“Capitalism means free enterprise, sovereignty of the consumers in economic matters, and sovereignty of the voters in political matters. Socialism means full government control of every sphere of the individual’s life and the unrestricted supremacy of the government in its capacity as central board of production management.”
~Ludwig von Mises
Background Articles and Videos
Christina Romer explains a new report about job creation
The Job Impact of the American Recovery and Reinvestment Plan
By Christine Romer and Jared Bernstein
January 9, 2009
http://otrans.3cdn.net/45593e8ecbd339d074_l3m6bt1te.pdf
Christie Romer: The Only Surefire Way for Policymakers to Substantially Increase Aggregate Demand in the Short Run Is for the Government to Spend More and Tax Less
“…In a report that Jared Bernstein and I issued during the transition, we estimated that by the end of 2010, a stimulus package like the Recovery Act would raise real GDP by about 3 1⁄2 percent and employment by about 31⁄2 million jobs, relative to what otherwise would have occurred. As the Council of Economic Advisers has documented in a series of reports to Congress, there is widespread agreement that the Act is broadly on track to meet these milestones…. What the Act hasn’t done is prevent unemployment from going above 8 percent, something else that Jared and I projected it would do. The reason that prediction was so far off is implicit in much of what I have been saying this afternoon. An estimate of what the economy will look like if a policy is adopted contains two components: a forecast of what would happen in the absence of the policy, and an estimate of the effect of the policy. As I’ve described, our estimates of the impact of the Recovery Act have proven quite accurate. But we, like virtually every other forecaster, failed to anticipate just how violent the recession would be in the absence of policy, and the degree to which the usual relationship between GDP and unemployment would break down.
By February 2009, before the Recovery Act was passed, unemployment was already over 8 percent; and by June, before the Recovery Act could have had much of an impact, it was 9 1⁄2 percent… our projection turned out to be wrong even before the Recovery Act had a chance to get off the ground, which is about as clear-cut evidence as one could imagine that the problem was in our assessment of the baseline, and not in the effects of the Act….
I certainly don’t regret having done the study. During the Transition, the little paper helped to build the case both internally and externally for a stimulus of unprecedented proportions. Only in retrospect does saying that our best guess was that unemployment would rise to 9 1⁄2 percent without aggressive action look rosy. At the time, it was scary as hell. It helped convince both our team and the Congress to go for as big a program as possible. And laying down a firm marker that the legislation had to save or create 3 1⁄2 million jobs helped prevent the package from shrinking greatly during Congressional negotiations….
The thing I do regret is that there is still so much unfinished business. I would give anything if unemployment really were down to 8 percent or lower…. That the economy remains as troubled as it is despite aggressive action reflects the fact that this has not been a normal recession. Just as the downturn was uncharted territory, so is its recovery. Because the recession began with interest rates at low levels, we can’t just have interest rates fall and housing, investment, and other interest-sensitive sectors come roaring back as they typically do in recoveries….”
Democratic Pollster: GOP Poised to Seize House and Senate
By: David A. Patten
“…Republicans are on the brink of pulling off a landslide “of potentially epic proportions” that would bring them control of both Houses of Congress and a majority of governorships, Democratic pollster and Fox News commentator Douglas Schoen says.
In an exclusive Newsmax interview, Schoen says he now sees several indications that matters are going from bad to worse for Democrats in this election cycle.
He points to a RealClearPolitics.com analysis that now shows Republicans picking up a net gain of nine seats in the Senate, which would deadlock the upper chamber 50 to 50. And polls show several other GOP candidates, including Carly Fiorina in California and Dino Rossi in Washington state, remain within striking distance, he says.
Schoen, a pollster for former President Bill Clinton, is co-author of the new book “Mad as Hell: How the Tea Party Movement is Fundamentally Remaking Our Two-Party System.”
…”
http://www.newsmax.com/Headline/gop-polls-lead-democrats/2010/10/08/id/373121?s=al&promo_code=AF37-1
Monetization
“…Monetization is the process of converting or establishing something into legal tender. It usually refers to the printing of banknotes by central banks, but things such as gold, diamonds and emeralds, and art can also be monetized. Even intrinsically worthless items can be made into money, as long as they are difficult to make or acquire. Monetization may also refer to exchanging securities for currency, selling a possession, charging for something that used to be free or making money on goods or services that were previously unprofitable. …”
“…Monetizing debtIn many countries the government has assigned exclusive power to issue or print its national currency to independently operated central banks. For example, in the USA the independently owned and operated Federal Reserve banks do this.[1] Such governments thereby disavow the overly convenient ‘slippery slope’ option of paying their bills by printing new currency. They must instead pay with currency already in circulation, or else finance deficits by issuing new bonds, and selling them to the public or to their central bank so as to acquire the necessary money. For the bonds to end up in the central bank it must conduct an open market purchase. This action increases the monetary base through the money creation process. This process of financing government spending is called monetizing the debt.[2] Monetizing debt is thus a two step process where the government issues debt to finance its spending and the central bank purchases the debt from the public. The public is left with an increased supply of base money.
Effects on inflation
When government deficits are financed through this method of debt monetization the outcome is an increase in the monetary base, or the money supply. If a budget deficit persists for a substantial period of time then the monetary base will also increase, shifting the aggregate demand curve to the right leading to a rise in the price level.[3] When governments intentionally do this, they devalue existing stockpiles of wealth of anyone who is holding assets based in that currency. It is in essence a “tax” as the overall value of their assets decrease due to a loss in spending power. This is known as “inflation tax“.
To summarize: a deficit can be the source of sustained inflation only if it is persistent rather than temporary and if the government finances it by creating money (through monetizing the debt), rather than leaving bonds in the hands of the public.[4]
Examples
Monetizing the debt can be used as a component of quantitative easing strategies, which involve the creation of new currency by the central bank, which may be used to purchase government debt, or can be used in other ways.
However, there can be an insidious effect. As one observer noted:
When governments reach the point where they are borrowing to pay the interest on their borrowing they are coming dangerously close to running a sovereign Ponzi scheme. Ponzi schemes have a way of ending unhappily. To get out of the Ponzi trap, governments will have to increase tax revenues, or cut spending, or monetize the debt–or most likely do some combination of all three. [5] …”
http://en.wikipedia.org/wiki/Monetization
Quantitative Easing
“…The term quantitative easing (QE) describes a monetary policy used by central banks to increase the supply of money by increasing the excess reserves of the banking system. This policy is usually invoked when the normal methods to control the money supply have failed, i.e the bank interest rate, discount rate and/or interbank interest rate are either at, or close to, zero.
A central bank implements QE by first crediting its own account with money it creates ex nihilo (“out of nothing”).[1] It then purchases financial assets, including government bonds, agency debt, mortgage-backed securities and corporate bonds, from banks and other financial institutions in a process referred to as open market operations. The purchases, by way of account deposits, give banks the excess reserves required for them to create new money, and thus hopefully induce a stimulation of the economy, by the process of deposit multiplication from increased lending in the fractional reserve banking system.
Risks include the policy being more effective than intended, spurring hyperinflation, or the risk of not being effective enough, if banks opt simply to sit on the additional cash in order to increase their capital reserves in a climate of increasing defaults in their present loan portfolio.[1]
“Quantitative” refers to the fact that a specific quantity of money is being created; “easing” refers to reducing the pressure on banks.[2] However, another explanation is that the name comes from the Japanese-language expression for “stimulatory monetary policy”, which uses the term “easing”.[3] Quantitative easing is sometimes colloquially described as “printing money” although in reality the money is simply created by electronically adding a number to an account. Examples of economies where this policy has been used include Japan during the early 2000s, and the United States, the United Kingdom and the Eurozone during the global financial crisis of 2008–the present, since the programme is suitable for economies where the bank interest rate, discount rate and/or interbank interest rate are either at, or close to, zero.
Consumer Sovereignty
“…Consumer sovereignty is a term which is used in economics to refer to the rule or sovereignty of consumers in markets as to production of goods. It is the power of consumers to decide what gets produced. People use this term to describe the consumer as the “king,” or ruler, of the market, the one who determines what products will be produced. [1] Also, this term denotes the way in which a consumer ideologically chooses to buy a good or service. Furthermore, the term can be used as either a norm (as to what consumers should be permitted) or a description (as to what consumers are permitted).
In unrestricted markets, those with income or wealth are able to use their purchasing power to motivate producers as what to produce (and how much). Customers do not necessarily have to buy and, if dissatisfied, can take their business elsewhere, while the profit-seeking sellers find that they can make the greatest profit by trying to provide the best possible products for the price (or the lowest possible price for a given product). In the language of cliché, “The one with the gold makes the rules.”
To most neoclassical economists, complete consumer sovereignty is an ideal rather than a reality because of the existence—or even the ubiquity—of market failure. Some economists of the Chicago school and the Austrian school see consumer sovereignty as a reality in a free market economy without interference from government or other non-market institutions, or anti-market institutions such as monopolies or cartels. That is, alleged market failures are seen as being a result of non-market forces.
The term “consumer sovereignty” was coined by William Hutt who firstly used it in his 1936 book “Economists and the Public”. …”
http://en.wikipedia.org/wiki/Consumer_sovereignty
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Episode 1: “Happiness Machines”
Episode 2: “The Engineering of Consent”
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Episode 4: “Eight People Sipping Wine in Kettering”
Documentary: The Origin and History of modern propaganda (public relations), and the story of its creator, Edward Bernays. The story exposes how government and big business manipulate the public’s consent and preps them for the next ‘grand’ idea or product.
Episode 1: “Happiness Machines
1. Propaganda in America – History of Public Relations 1/6
2. Propaganda in America – Meet Edward Bernays
3. Propaganda in America – The Art of PR Spin
4. Propaganda in America – Hitler’s Ideological Beast
5. Propaganda in America – Business vs Politicians
6. Propaganda in America – The Enemy Within
Episode 2: “The Engineering of Consent”
The Century Of The Self – The Engineering of Consent 1 of 6
The Century Of The Self – The Engineering of Consent 2 of 6
The Century Of The Self – The Engineering of Consent 3 of 6
The Century Of The Self – The Engineering of Consent 4 of 6
The Century Of The Self – The Engineering of Consent 5 of 6
The Century Of The Self – The Engineering of Consent 6 of 6
Episode 3: “There is a Policeman Inside All Our Heads: He Must Be Destroyed”
The Century Of The Self – There is a Policeman Inside_1 of 6
The Century Of The Self – There is a Policeman Inside_2 of 6
The Century Of The Self – There is a Policeman Inside_3 of 6
The Century Of The Self – There is a Policeman Inside_4 of 6
The Century Of The Self – There is a Policeman Inside_5 of 6
The Century Of The Self – There is a Policeman Inside_6 of 6
Episode 4: “Eight People Sipping Wine in Kettering”
The Century Of The Self – Eight People Sipping Wine_1 of 6
The Century Of The Self – Eight People Sipping Wine_2 of 6
The Century Of The Self – Eight People Sipping Wine_3 of 6
The Century Of The Self – Eight People Sipping Wine_4 of 6
The Century Of The Self – Eight People Sipping Wine_5 of 6
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Background Articles and Videos
edward bernays on letterman
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Read Full Post | Make a Comment ( 2 so far )Chapter 16—International Media
1. In what ways might a nation’s media system be shaped by its government’s political philosophy? Cite some specific examples.
2. Compare the evolution of mass media in Western Europe and Africa. Give specific examples.
3. Describe the role of media before and after the decline of communism in the Soviet Union and Eastern Europe.
4. Discuss the role of radio in developed and less-developed countries. Cite specific examples.
5. Name the media baron who holds the monopoly over Australian media. Discuss his role in his country’s media, as well as that of the Australian Broadcasting Corp.
6. Discuss the pervasive role of the media in Japan. What role do NHK and the three major daily newspapers play in Japanese media?
7. How does accessible worldwide news on the Internet affect the global information marketplace? Cite specific examples.
8. Discuss MTV’s effects on “borderless” communications. How does this affect viewers and advertisers?
9. Define three important issues addressed in the New World Information and Communications Order.
10. Discuss at least three ways in which the 1996 international copyright treaties have changed the Internet.
Read Full Post | Make a Comment ( None so far )