Unemployment: Our Greatest Enemy

Since the era of FDR and the New Deal, America's leadership class has shown a sporadic willingness to "do something" in response to the suffering caused by unemployment. Money has been spent on 'Welfare' & food stamps programs, unemployment benefits, retraining programs, housing assistance, larger police forces and more prisons. What we have not seen in recent decades is any attempt by Congress to take on and solve the essential problem of unemployment directly. Instead, we have received a series of "band-aid" remedies that have been justly criticized for failing to fix the problem.

Unemployment is not some kind of horrible economic demon that we are helpless to defend ourselves from. It is a sad & tragically unnecessary affliction that occurs for just one reason: most members of our Privileged Class believe their interests are best served when the economy is experiencing a labor surplus. The reasoning is simple. They know that with a labor surplus, market forces put downward pressure on wages. Business owners expect to maximize their profits in such an environment, since wages are typically one of their largest costs. That is what they want and that is what The Fed gives them.

This perception is, unfortunately, a grievous misunderstanding of the economic realities we face. Business and financial leaders have never quite understood that when they participate in collectivist schemes like this to lower the costs of all the members of their group (another example: tax cuts for the rich), they are actually guaranteeing that none of them will benefit. They don't understand that the marketplace will always thwart any and all attempts by groups to obtain "easy enrichment." Why is that true? Well, imagine what would happen if our representatives in Washington were to try to solve all of our economic problems by handing out a million dollars to every household in America. We'd all be able to share the same great experience of luxury living, right?

Well, no... Economists know that such an experiment would simply produce an explosive round of inflation. Over a fairly short period of time, the price of everything would skyrocket dramatically. After the hyperinflation had finally run its course, there would still be the same number of rich and poor and Middle Class citizens in the country as there were before the million-dollar gift was distributed. Why? Because the amount of goods & services available in the country the day after the million dollar giveaway would be essentially the same as the amount that had been available the day before. The scarcest goods & services in the economy do not multiply magically just because the amount of money being held multiplies dramatically.

The true reason why there are rich people is not because they have more money than everyone else. Forget about the money. They are richer than everyone else because they have possession of the highest quality goods & services & experiences that are available in this life. There are not enough of these experience opportunities available for everyone to experience them. They get to experience them. That is why they are rich. It's not possible for everyone to become rich because some desirable experiences are always going to be more scarce than others. There is only so much beach front property. Rich people have been a problem to the lower classes not because they are rich, but because they are responsible for running the economy in a way that will benefit the rest of us, especially when it won't cost them anything in real terms if they were to do so. They have failed to do so because of their incompetence...

Members of America's Privileged Class misperceive their true interests primarily because they do not understand the very important distinction that must be made between Financial Wealth and Real Wealth. To better understand this distinction, simply imagine what it would be like if everyone were to somehow become extremely rich in dollars one day and then we all decided to retire and live off of our accumulated 'wealth.' What we would soon discover is that we would actually possess no real wealth at all, because no one would be producing anything of value that we could buy.

The only reason why money has any value to us because it gives us a claim on the productive efforts of others. How wealthy you actually are depends more on what others are doing than it does on your personal accumulations of paper notes. The Real economy is the productive behavior of people; it is the actual goods & services that people are producing and trading and consuming. When we speak of the "Wealth of Nations", we are not talking about the amount of currency they have in circulation; we are talking about their productive output. The only economic question that should ever matter to us, as a society, is how might we act to increase our production of real wealth?...