By: Casey_Research
L: Doug, I saw a Wall Street Journal headline a few days ago that boldly proclaimed, "Car Makers May Hire Soon." Be still, my trembling heart! It’s hard to believe the WSJ would stoop to such a meaningless headline, but I guess they are just trying to give their desperate customers what they want: some hope, whether valid or not. What do you make of the unemployment situation?
Doug: Well, they say that during the depression of the 1930s, unemployment went as high as 25%. That’s interesting, in that at the time, half the people in the country were still farmers. They knew how to make the things they used in daily life with their own hands, and how to grow their own food. There was less specialization in the economy, and people were more self-sufficient. That made them better able to cope with an economic depression.So it seems to me that that depression wasn’t anywhere near as bad as this one is going to be. It was caused by the inflation of the currency in the 1920s, by the Federal Reserve, and was prolonged by the actions that Hoover took, which were in exactly the same vein as those Roosevelt took later. Hoover was quite a dirigiste – I mean, Roosevelt applauded all the things Hoover did, but Hoover didn’t have the panache and good PR that Roosevelt did. But everything these two did – and both were disasters, lengthening and deepening the depression – was trivial by comparison to what’s being done today.
The government today is making things far worse than in the 1920s and 1930s. Everything the government is doing is not just the wrong thing; it’s exactly the opposite of the right thing. But more importantly, as far as unemployment is concerned, this inflationary boom has gone on much longer than that of the ’20s. Not only does that call for a bigger correction, but unsustainable patterns of production and consumption have become far more ingrained.
L: Consuming more than you produce is not sustainable, but people can tighten their belts…
Doug: That’s only part of it. If people lose their jobs today… Well, they are pretty far from the land, and I’m not sure people today think about that. Back in the ’20s and ’30s, if your car broke down, it was expected that you would get out and, under a shady tree, fix it yourself. And you could – you could even take the engine apart and fix a bearing. That’s not in the least practical today. You’ve got to have the money to pay a specialist to fix your car today.
Back then lots of people who weren’t even farmers had vegetable gardens and chickens in their yards. Today, people live in suburbs – chickens and goats are out of the question.
L: I get it: what will unemployed golf cart salesmen do when they can’t find jobs – today, they can’t just go back to the farm and help with the chores. But they say unemployment is only around 10% now; even if that’s low, it will need to get more than twice as bad before it compares to the 1930s.
Doug: The government is saying the unemployment is around 10%, but that’s a fraud. They don’t count things the same way as they did then, not even as they did in the recession of 1982. Furthermore, they should count many government employees among the unemployed, since relatively few of them produce anything that anyone would voluntarily pay for. I’m not talking about police, garbage collectors, judges, and the like. The market would employ many of them in their current jobs even if the state were to disappear. But many of the apparatchiks filling offices not only don’t serve any useful purpose, but they actively destroy, and prevent the creation of, wealth. These people are worse than just unemployed.
Something else. Very few of the 1.5 million people in the Armed Forces actually create wealth or would be paid, in a free market, to do what they do. The same goes for the perhaps several million contractors and employees that compose the so-called "defense" industry. Obama is giving veterans preference in hiring for government jobs as well. Which means people who are not only quite jingoistic as a group but most used to taking orders – and giving them – will increasingly dominate the civil service. And, benefits included, government jobs now pay about 50% more than those in the real world. This is not a good trend any way you look at it.
The government’s unemployment figures basically include people who are paid to dig ditches during the day and others who fill them up at night.
L: And they don’t count "discouraged workers" as being part of the workforce, so they’re not unemployed.
Doug: Yes, it’s like that cartoon you ran in this month’s International Speculator, showing all the groups of people who are not working but who are not counted as unemployed. People who’ve given up looking for jobs are not unemployed, Ph.D.s working a few hours a week at Wal-Mart are not unemployed, and there are more stupid evasions like that going on. So fewer and fewer of the numbers they give us are meaningful.
But I always look at the bright side. Many of these people will find their way into the underground economy and provide goods and services to others without government approval. All the taxes they’re saving means they can effectively double their take-home income, or charge half as much, or some combination. And, very important, it denies revenue to the state, even as it puts the thought into people’s heads that they don’t need the state – the state needs them. Many who spend time in the "black economy" might even get the idea that being independent is preferable to being a serf.
Doug: So, it’s already much worse than people think. And on top of that, people seem to suffer from a mass delusion that things will get better soon. I don’t think things will get better anytime soon. For one thing, the level of debt in the U.S. is off the charts. Debt means you’re borrowing from the future, saving means putting something aside for the future. The level of debt in all areas – real estate, credit cards, personal loans, and so forth – has brought Americans to negative savings in recent years, a first. That didn’t even happen during the Great Depression.
One of the things that makes this particularly serious now is that rumors are circulating about the government licking its chops over all the money sitting in personal pension funds, Keogh plans, HR-10 plans, etc. The Pension Benefit Guarantee Corporation (PBGC – like the FDIC, but for pension funds) is bankrupt, and it’s going to get much worse. It’s still early days in this grand misadventure. Usually – not always, but usually – when things get really bad, they float some trial balloons to see how people might react to things they are considering. One of the most dangerous proposals floating out there now is that, since people’s pension plans have been hurt so badly, people should be required to buy annuities with their pension funds.
Full article HERE
