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US Unemployment Out of Control?

The Horror Show ... The employment situation in the United States is much worse than even the dismal numbers from last week's jobless report would indicate. The nation is facing a full-blown employment crisis and policy makers are not responding with anything like the sense of urgency that is needed. The employment data for July, released by the government on Friday, showed that private employers added just 71,000 jobs during the month and that the unemployment rate remained flat at 9.5 percent. But as bad as those numbers were, if you look beyond them you'll see a horror show. - New York Times/Bob Herbert

Dominant Social Theme: A situation that needs to be addressed.

Free-Market Analysis: We've written about the difficulty of reigniting employment in the midst of a crack-up boom, and now even the New York Times is starting to come around to that point of view. For those conspiracy-minded folk that like to chant "out of chaos, order," we want to point out as we have before that the power elite enjoys controlled chaos, not out-and-out chaos, which is unpredictable and can turn violent. Unemployment on a vast scale is a real problem for the powers-that-be. Hence, Bob Herbert's alarm.

The power elite has controlled society, certainly in the past 100 years, through the production and promotion of dominant social themes that have controlled people's expectations and behaviors even though the subjects themselves thought they were reaching their conclusions voluntarily. If the elite sought chaos, it wouldn't bother with dominant social themes. It would simply rule through intimidation and fear.

Of course, in the long run, the few cannot rule the many simply via brute force. This is the reason, ultimately for the development of hierarchical societies, religious structures, etc. It is the reason that the elite is obsessed with its fear-based promotions and counts on them to retain power. But too much unemployment generally makes people doubt the system. Herbert understands this. He writes:

At some point we're going to have to claw our way out of this denial. With 14.6 million people officially jobless, and 5.9 million who have stopped looking but say they want a job, and 8.5 million who are working part time but would like to work full time, you end up with nearly 30 million Americans who cannot find the work they want and desperately need. We're not heading toward the danger zone. We're there. The U.S. will not remain a stable society if this great employment crisis is not addressed head-on - and soon. You cannot allow joblessness on this scale to fester. It's wrong, and the blowback will be as destructive and intolerable as it is inevitable.

Here at the Bell, we've recited the figures that the US government provides. These claim 10 percent unemployment. We've also cited "shadow statistics" that claim to show that unemployment is closer to 20 percent. Finally, we've indicated that we think the "real" unemployment in the US is closer to THIRTY percent. We have no way of proving this number, but it seems realistic to us. Let it include people who have taken minimum wage jobs that hardly guarantee subsistence because they cannot find anything better and certainly the US workforce might approach that number. We wonder if it is any better in Europe, at least among the PIGS.

Of course, with such horrendous numbers, commentators will doubtless explain with more and more fervor that capitalism simply doesn't work. But the fault is not capitalism. High taxes. Draconian regulation and mercantilist private/public central banking have virtually ruined Western economies, especially America, which once had the most vibrant economy of all. Central banking is perhaps the biggest culprit with its debt-based money system creating endless, escalating booms and busts. Every boom tricks people into trading good jobs for promising, ephemeral ones. Every bust throws people out of work and kills jobs not just for the cycle but for good.

Central banking is exceptionally hard on small businesses and businesses that depend on making things to stay afloat. Service businesses can cut back on employees but production-businesses need a steady flow of orders or they go under. One cannot fire a plant; debt service needs to be made. So as central banking continues over time, service businesses gradually take the place of productive businesses, which go elsewhere. When this happens, academic and mainstream media apologists begin writing articles about how a "mature" society is actually a "service" society. Serving hamburgers at McDonalds is a sign of economic strength and financial superiority.

Of course it is not. The interesting thing about central banking is that is a thoroughly merciless and convenient mechanism for the power elite. It functions on its own, killing business, centralizing power, making people helpless and dependent on the dole. It is most of all a centralizing, authoritarian force, building up corporate power at the expense of entrepreneurship, advancing public sector employment because people eventually will flee to the shelter of the state as the private sector is gradually eroded.

The cost of central banking, as we have pointed out before, must be measured in more than dollars and cents. There is the destruction of the private sector and the tragedy of individual business failure. Inevitably, larger and larger corporations arise out of the destruction. They are the product not only of the centralizing influence of central banking but also of the regulatory state itself. Regulatory democracy is another result of the central banking boom/bust cycle.

What one ends up with is an economy that is basically run by fantastically large corporations that are in a constant dialogue with the state that has helped create them through judicial and legal means. Regulation is pervasive and entrepreneurship is increasingly difficult. A tiny elite achieves and the rest, not so numerically apt, have difficulty surviving. The public sector expands as private business is squeezed out. These trends continue so long as central banking does.

A final and mostly undiscussed part of central banking is that it makes it increasingly difficult for people to lead authentic lives. If one is a teacher in America or Europe, one is subject to strict rules about what is teachable and how it is taught. Unions enforce these rules and those who do not go along are forced out of the system, or their lives are made miserable. The same holds true for most every other sector of a regulatory economy.

Central banking has ineluctable logic of its own. It perverts professionalism. Advertising celebrates corporate achievement even when the corporation produces nothing more valuable than soda pop. Police officers join to serve but end up being adversarial to the civilian community. Lawyers are interested in justice but find little or none. Businesspeople in a regulatory democracy end up building entire careers round regulatory structures rather than legitimate competitive needs. On it goes.

We would argue that at this point the social compact is compromised. People have perceived in the endless bailouts, the essential immorality of money creation, and its availability to large institutions but not to them. Unemployment has illustrated increasingly that the system doesn't work as advertised. The jobs that people do get are unsatisfying from both and emotional and compensation standpoint. The elite increasingly has abandoned its dominant social themes (thanks the truth-telling of the Internet) and is trying to sustain its vision of society through the sheer force of legislation. As a result, opposition is rising to laws and the state increasingly is seen as arbitrary, greedy and unjust.

We wouldn't expect Herbert to write about all the above. But in his own way, he understands what is at stake. He knows instinctively that high unemployment puts the system (in which he is invested) at risk. What he doesn't understand is how to fix it. But we would argue that it cannot be fixed unless its underlying structures are reconfigured and, most importantly, mercantilist central banking is done away with.

Those who have promoted the system in our view had a plan. They knew that the system as it is currently configured puts a premium on bigness. The logical conclusion of the system (before it thoroughly blows apart) is global governance. But it is most difficult to make the transition from nation states to an over-arching international authority. The situation has been complicated - perhaps beyond redemption - by the Internet itself, which has shown those who choose to look how thoroughly the sociopolitical environment is manipulated.

Conclusion: We know it's a minority view, but we think the intended transition is not going to go smoothly and may even have been rendered impossible. At the very least the timeline will have to be readjusted once again. Hebert is worried about unemployment but the crack-up boom may have ramifications that are far more serious and historical than joblessness. It could eventually include new kinds of socio-political solutions and even a return to a private gold-and-silver standard. Here at the Daily Bell we'll continue to analyze those ramifications because you won't read about them in the mainstream press, not even the New York Times.

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