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The State of the Economy and the Solution

Official government-manipulated figures show that the unemployment rate dropped in January from 10% down to 9.7%. At the same time, the report shows that 20,000 more jobs were lost in the same month.

I'm not sure how they reconcile those figures, unless a lot of people are now working two jobs.

The unemployment figures do not really tell us how many unemployed people there are. It only tells us how many are receiving unemployment checks. When those checks cease, those who remain unemployed are re-classified as "unemployable" or "discouraged." It is assumed that they have stopped looking for work, and so they are not longer unemployed!

Last December the government originally reported job losses at 85,000, but they have now revised those figures to 150,000. Figures for January show another 20,000 jobs slashed from payrolls. And yet the unemployment rate went down to 9.7%. Go figure.

". . . the figures for December were revised to show 150,000 jobs were slashed from payrolls, instead of the 85,000 job cuts first reported."

http://www.usnews.com/money/careers/articles/2010/02/05/what-a-97-percent-unemployment-rate-means.html?PageNr=2

From the same article above, we read,

Morgan Stanley's Wieseman and Greenlaw said they are getting "closer to calling the peak in the unemployment rate." Still, the unemployment rate could bounce higher again if workers who dropped out of the job hunt are encouraged enough to jump back in.

In other words, if a lot of people believe that the job market is opening up again, and they actually start looking for work again, then the unemployment figures will "bounce higher again." Why? Simply because the official figures do not really count all the unemployed; they merely count those who are actively looking for work.

Trouble in the Eurozone

The recent default of Dubai World is having a huge but hidden effect upon the rest of the world. Dubai is probably the main source of the derivatives market, and so their default will affect many other countries.

Then there is Greece, Portugal, and Spain, all of which are in or near default. They call this "sovereign default," when nations default on their loan payments.

America, too, is going to have to cough up $3 Trillion in payments on its short-term debt this year. There is not enough production in the entire economy to do that. The Fed will have to default or create still more trillions out of thin air.

This economic problem is not going away, nor can it be resolved by throwing more new money at it. New money merely creates more debt. While that policy may solve the problem in the short term, it only increases the problem long term. Of course, they are hoping that postponing the problem will give the economy time to turn around before the ship hits the ice berg.

Most nations have been postponing the problem by quick fixes and by "stimuluus" programs that only make things worse long term. No one recognizes the 10-ton elephant in the living room. It is the fact that the Treasury must BORROW money from the Fed in order to maintain a supply of money in circulation, instead of issuing Treasury Notes that are debt free. Until we repeal the Federal Reserve Act and give back the power to create money to the Congress, the problem will only get worse, the private bankers will only get richer, and the people will be left impoverished in their own land.