The US is a world leader in joblessness

Jan 20, 2011

Paris, France

A short DR today...we're in the airport, on our way back to Washington. Below...we'll tell you more about one family's economy...but first, let's look at the whole world's economy...

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Nothing much happened in the markets yesterday anyway.

"Why jobs aren't part of US revival," asks a New York Times headline.

The US now has a higher unemployment rate than Russia...or Britain...or Germany...or Japan. When it comes to joblessness, the US is a world leader.

But why? Economists can't figure it out. Harvard economist Lawrence Katz says it's 'genuinely puzzling.'

After admitting that he has no idea why there are so many people without job, columnist David Leonhardt goes on to tell us that "fixing the job market will take years."

Hmmm.... How does he know that? And how does the think he can fix something if he doesn't know how its broken?

No point in asking questions like that...the fixers never know what is going on...but they're always ready with a solution.

In Leonhardt's case, he proposes a few meddles that are bound to make the situation more complicated...and generally, worse.

So, since we've been giving unsolicited advice lately, we won't hold back today.

First, why are so many people unemployed? The answer is very simple. Because there is no profitable work for them to do at present labor rates. Thanks to previous meddles, the US economy focused itself on building houses and importing geegaws from overseas for people who couldn't afford to pay for them. This was a dead-end economic model. And the end came in 2007. Now, the latest figures show an uptick in manufacturing...which is clearly the direction to go. But it will take years before the US economy has made the adjustment to a new, healthier model...making and selling things at a profit.

In the meantime, unemployment levels will remain high.

But wait...there's more. For which the adjustment is taking place, US authorities are trying to block it. How? By taking resources from the new, unborn industries and using it to prop up the old, dying ones. Like Wall Street, for example. The financial industry grew like Topsy in the bubble years. It began to shrink in the crisis of '07-'09, but the feds came in and pumped more than a trillion dollars into the financial sector, producing record profits for the big banks, but depriving the rest of the economy of much needed capital.

Not only that, the feds also take the pressure off labor to make adjustments. Food stamps, minimum wages, unemployment compensation, make-work, shovel-ready boondoggles - all these things cause workers to think they can continue as before...that a 'recovery' of the good ol' days is just around the corner...and that they'll soon be earning as much as they were in 2007. Maybe more!

Want to really fix the unemployment problem? Listen up. Eliminate all bailouts, subsidies, giveaways and support systems - both to business and to labor. Abolish all employment restrictions and employment paperwork. All free labor - undocumented non-citizens - to compete equally with native born workers. Cut taxes to a flat 10% rate for everyone. Abolish every government agency that begins with a letter of the alphabet. Then abolish the rest of them.

We confidently guarantee that the nation would be back at full employment within 30 days.

But're not reading the Daily Reckoning to solve the nation's problems. And we're not delusional enough to think our advice is going to make any difference whatsoever anyway.

So, let's turn back to our normal, dreary work...trying to figure out what is going on in the world economy.

Keep reading...

And now...back to our thoughts...such as they are. They have little to do with the world economy, it's true. But they may be helpful to your family's economy:

*** On this trip to Europe, we visited two of our Family Office partners...

The 'Family Office' is the organization we use for investing, and preserving, our own family money.

What's 'family money?' Glad you asked. It's money that is owned by a family, rather than by one person alone... It's money that is expected to grow and endure...for generations, if you're lucky.

Not many people have 'family money.' It's hard to get. And hard to hold onto. You can get money by accident. You can get money by accident too. But you can't get family money by accident.

Of course, you need some money. But that's the easy part. You can have a family fortune of any size. It's how you look at it...and how you manage it that matters...not how much money you have.

But it's the family that is hard...that's where most family wealth usually washes up. And it's why you have to prepare the next generation...develop a family culture that lasts...and avoid conflicts that destroy both the family and its money.

It's hard work. And it's getting harder. And becoming more necessary too. When the European and American economies were in full expansion, each generation could make its own way. Now that growth has will be harder to start with nothing and build a fortune. The next generation may need help...

Stay tuned.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

Disclaimer: The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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3 Responses to "The US is a world leader in joblessness"

Dilipkumar A Shah

Jan 22, 2011

Your analysis for the higher unemployment is quite right.There should be nothing for free or for favour.One has to earn.
We recently visited US and Canada and found that some people do not try for the job sincea they get unemployment allowance.Some like to have retirement and would not like to work.
If details of the unemployed persons with age groups is available , it may throw more light on this issue.



Jan 21, 2011

I agree with the first part. That is why one should never import when it is available locally.

However, i am not sure what you are saying about debt. Assume that , If I am importing raw materials so that more people in my country can get employment then your proposition fails.


Balakrishnan R

Jan 20, 2011

When a product is manufactured out side a country, it may, for the time being cost less to the citizens but it means employment goes outside. With increase of imports unemployment shall bound to increase. Hence unemployment is associated with foreign debt. Hence if foreign debt is more, certainly unemployment shall also be more. I do not have data, but if compiled we can get a correlation.

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