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US Unemployment (U3) Will Peak At 13%

There is a theory that Government Stimulus can create jobs. That’s a theory; there is another theory (mine) that government created jobs lead to more unemployment.


When President Obama announced his stimulus plan it was going to save or create 3.0 million to 3.5 Million jobs depending on what you were smoking.


This is the chart from the study put out by the Council of Economic Advisors and the Office of The Vice-President Elect on 9th January 2009.



Some Plan! (Actual and my projection are overlaid in red).


Governments don’t create employment, they create waste.


Case in point Hong Kong, Singapore and Dubai; jobs there are created by reducing government meddling and red-tape and generally doing what they are supposed to be doing which is provide a legal framework, arrest and prosecute crooks, make sure the basic infrastructure works, provide a safety net for the less fortunate (including free medical), and otherwise mind their own business.


That works, I’ve seen it work, I’ve yet to see central planners create anything more than do-nothing jobs for professional leeches and bring the whole system down to its lowest common denominator, case in point UK which excelled at that under Gordon Brown, he was inspired by the “success” of USSR.


Right now the stock market is stalled and likely will remain stalled (it might retrench a bit), waiting for the government to stop handing trillions of dollars to banks at 0% interest rates so they can buy Treasuries at 4%, so that more money can be pumped into more ineffectual stimulus plans.


That’s a feedback loop guaranteed to create more unemployment, what’s needed to get America back on it’s feet is for SME to be able to borrow again, which is never going to happen whilst banks can “earn” their way out of their hole speculating on Treasuries (and oil, and commodities).


“Traditionally” lowering interest rates increased economic activity, that’s not working. (And please don't explain the theory to me, I've heard enough economic theories over the past year to last me a lifetime).


Here’s a suggestion, how about raising interest rates so banks are forced to go out and lend money to decent businesses rather than make their bonuses gaming the system?

There's a theory, interest rates were dropped, unemployment ahot up, why not try the opposite tack, like when you get into skid, turning into it?

Eistein He Say, "the definition of a lunatic is someone who goes on doing the same thing again and again even when it's obviouis it's not working" (something like that).