The ugliest American scandal of all is that the have-nots do not have a handle on what's really going on.
Part of personal growth is improving our understanding of things that affect us. With a better understanding we can reshape these beliefs and finally escape the associated fears. We've already fallen for shenanigans such as “weapons of mass destruction” and “too big to fail.” This time around we don't have to be fooled or frightened by how high the unemployment rate is or by the mention of inflation. Let's explore what those two things really mean.
Inflation starts occurring when the cost of things rise over time. What causes prices to increase? More money in our pockets does. The more money individuals/consumers have, the more things they demand. When demand exceeds supply, prices increase.
Unemployment reduces the disposable income of a population of individuals which reduces demand which in turn reduces inflation. In high unemployment economies, those who are employed, since they are now grateful to have a job, settle for less disposable income by agreeing to wage and benefit concessions and by not asking for raises while the costs of things around them continue to rise. More people spend less.
Not only does high consumer spending add to inflation but also high spending by the government. The government is already spending money on at least two wars and has been for years, now add to that stimulus spending upon stimulus spending upon stimulus spending.
Where did this stimulus money come from? They simply printed it as always. This adds to inflation. But inflation hasn't gotten worse as the government continues to spend more and more money for several reasons. Less spending by consumers due to unemployment, less spending by those who are employed due to uncertainty of how long their job will last and less spending by individuals and business because banks are not lending money.
The government helped reduce spending by individuals and businesses by allowing crucial economic areas such as banking and real estate to go unchecked, which caused the economy to become unstable and take several steps backwards. Adding to this was the continued behavior of Wall Street and insurers of financial products. Our government allowed enough unscrupulous behavior for businesses to fail in rapid, trickle down, domino succession then came to the rescue. This set the stage for rising unemployment and a nervous nation.
Let's jump to 2010. Government stimulus spending and war spending will remain in full force and effect which is why unemployment will remain high. Also, there will be fewer conflicting reports about the economic recovery. Once more individuals start believing what is already taking place, individual spending will increase and banks will lend more money. These two things will cause businesses to spend more. This is why unemployment must remain high. You can't have everyone doing better, at the same time everyone is believing, things are better. Why? Because they will spend more money which creates more demand for goods and services faster than they can be supplied which will increase prices and create inflation especially now since a lot of purchases have been delayed over the past two years.
The unemployed are the last ones to be reinvited to the party of consumption. In the meantime, the government appeases them with extension of benefits to keep them from becoming completely hopeless, desperate and dangerous which would create additional societal problems. At the same time, the government takes this opportunity to say we also need job creation measures and incentives so they can give businesses “too little to grow on their own” tax breaks, bailouts and handouts while most are left out. This is what happens to those “too asleep to suspect anything.” If we fail to understand what's really going we will always have to settle for a smidgen compared to the smörgåsbord others are invited to partake. On a related note, Congress has voted to not give seniors a cost of living increase in their social security but are considering giving them $250 next year. They must be “too old to need much.”
Finally, let's revisit the automatic, underlying thought we have when we hear the words, “high unemployment” or “rising unemployment.”
If we think those words mean there are no jobs, we are wrong. There are thousands upon thousands of advertised and open positions and more that are not. Jobs are not hard to find.
What's difficult is the lengthy hiring process that is antiquated, highly inefficient and filled with bottlenecks. Another reason unemployment remains high is many employers don't want to hire too quickly because they can temporarily get existing workers to pick up the slack while saving the cost of a new employee. The third part of the problem is employed people seeking jobs. It's their right but it slows down the timeframe for some unemployed people to become employed if the already employed person gets the job. This creates another open position and the process starts again. The last thing that makes the job outlook seem worse than it is, is that many job seekers are not willing to work anywhere doing anything for any pay which is their prerogative. It takes time for all these things to sort themselves out.
Now as the events in the economy continue to play out, we should be able to make better assessments since we know a little more about the script. We already knew who most of the players and actors were. It's up to us to decide if we want to continue to be used as extras or have a more significant role in the next episode of this delightful democratic drama.
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