Within the Keynesian paradigm used by the current administration, there is supposed to be a tradeoff between employment and inflation. If you want to have low unemployment, you have to put up with inflation. If you want low inflation, you have to put up with high unemployment. Of course, according to Lord Keynes, it isn't true inflation until and unless you have reached full employment. Any rises in the price level prior to reaching full employment are, according to Keynes's General Theory, "associated with an aggregate real income." (The General Theory, III.10.ii)
In other words, consistent with Keynes's belief that the State has the power to "re-edit the dictionary" (A Treatise on Money, Volume I: The Pure Theory of Money. New York: Harcourt, Brace and Company, 1930, 4) — that is, change reality, "inflation" understood as a rise in the price level resulting from more units of currency chasing a quantity of marketable goods and services that have not increased in the same degree as the amount of currency is simply "edited" out of existence. In Keynesian economics "inflation" means whatever Keynes found it convenient to mean — and that means whatever was necessary to support his dogmatic belief in the wage system and the ephemeral goal of full employment, always understood in terms of wage system jobs, not full employment of all resources to reach full production.
Thus we have the misguided focus on "job creation" without first asking whether the jobs are necessary. Artificial job creation is simply a complicated form of redistribution. If employers are given direct cash payments from the State, the money could only come from taxing other people directly and thereby reducing their income, or by inflating the currency by printing money, thereby reducing everyone's real income through the "hidden tax" of inflation by making each unit of currency purchase that much less. If an employer is given a tax credit, that is, a dollar-for-dollar reduction in the tax liability, that simply means other taxpayers must make up the shortfall, or the State must print more money, with the same results as before.
The bottom line is that, unless jobs are created naturally because the labor is needed as an input to increased production, all that is being done is to divide up a shrinking pie into smaller and smaller pieces. Keynes's approach is, ultimately, self-defeating. Unless production increases, you won't need additional labor input, and real aggregate income will not increase: in accordance with Say's Law of Markets, production equals income. Instead, all you will accomplish is to redistribute what already exists.
Because the policymakers are convinced that the Keynesian solution is the only solution, however, the situation can only get worse. Hence we've been seeing an upsurge in panic-stricken articles and commentary by baffled pundits who give us such gems of wisdom as, "The recession is over statistically, but is still going on in human terms." (National Public Radio, Sunday, January 31, 2010.) An Associated Press report posted this morning on Yahoo! carried the depressing headline, "Job Losses from Great Recession About to Get Worse" — and this not more than a week after people were apparently convinced that Mr. Obama's job stimulus program had (once again) saved the day.
Instead, the January unemployment report to be issued today by the Department of Labor is expected to "adjust" the number of jobs lost so far to 8 million. This will have a further depressing effect on the stock market, of course, but even more of an effect on policymakers, who will hasten to demand more artificial job creation. They have finally, after decades of ignoring the obvious, finally realized (at least for the most part) that demand for capital goods is derived from consumer demand: "High unemployment is likely to hold back consumer spending, which has led most recoveries in the past." (Actually, consumer spending has led all recoveries in the past, as Harold G. Moulton demonstrated in The Formation of Capital, 1935.)
The problem that will continue is how consumer spending is financed. If it comes from extending more consumer credit, artificial job creation, or direct redistribution, there may be a brief pseudo recovery, but it will soon fade away. The only way out of the hole is the way no one seems to be looking at: increase productive investment, make certain that the new capital is owned by people who will spend the income generated by the new capital first to repay the acquisition loan and then for consumption, and create the money for the new capital investment by commercial banks extending capital credit secured with capital credit insurance, and establish a 100% reserve requirement by mandating all qualified loans for capital investment be discounted at the Federal Reserve.
While we wait for that to happen, here are the few news items for this week:
• A number of important meetings took place this past week. What made them significant is the fact that each meeting opened up a new avenue to a potential prime mover. This is a graphic demonstration of the importance of being a "door opener" so that word of the Just Third Way can get out to where it will be most effective and do the most good.Those are the happenings for this week, at least that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we'll see that it gets into the next "issue." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.
• CESJ has asked two important natural law scholars to become CESJ "Counselors." A CESJ Counselor is an individual who supports the aims and goals of CESJ and shares the philosophical orientation of the Just Third Way of economic and social justice. That is, a Counselor is someone who supports CESJ and has a philosophy consistent with that of the philosophy of Aristotle as corrected and refined by Thomas Aquinas, Moses Maimonides, and Ibn Khaldûn. Sheik Dr. Ahmed Mansour is a Quranic scholar and head of the International Quranic Center of Northern Virginia. The Reverend Edward Krause, C.S.C., Ph.D., is a professor of moral philosophy at Gannon University in Eire, Pennsylvania and head of the Central Bureau of the Catholic Central Vereins of America in St. Louis. Both are valued additions to the natural law thinkers who support the implementation and maintenance of the Just Third Way.
• We have made some interesting advances this week, all due to people in the network who gave careful consideration to their contacts and acquaintances and "spent" some of their political capital in order to bring the Just Third Way to the attention of people who have the potential to open doors to prime movers. What we have to realize is that political capital, unlike financial capital, increases when we use it to put prime movers into contact with ideas that not only help the people and improve the common good, but advance their personal careers. We don't lose our "political chips" when we spend them, but increase them.
• As of this morning, we have had visitors from 42 different countries and 45 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, the UK, Philippines, Brazil, and Ireland. People in China, Australia, Taiwan, Poland, and Venezuela spent the most average time on the blog. "Waiting for the Penny to Drop," the exchange with Rabbi Lerner of Tikkun magazine, and the news items are the most popular postings.