We've been saying for months . . . no, make that years, that the current so-called "recovery" is anything but a recovery. As Harold G. Moulton explained in his study of the recovery program implemented in the United States under the New Deal (The Recovery Problem in the United States. Washington, DC: The Brookings Institution, 1936), there are two critical features that any program of economic recovery must stress above anything else: employment and production. So, in terms of the 1930s, how does the last year of the first decade of the 21st century measure up?
The headlines and news reports are phrased in terms of complete astonishment. STOCKS DROP AS JOBLESS CLAIMS RISE UNEXPECTEDLY(!!) (What gets us is the "unexpectedly.") JOBLESS CLAIMS RISE TO HIGHEST LEVEL IN 9 MONTHS (!!!!) (Uh, huh. But that's only if you're limiting yourself to the "official" unemployment rate. The real or "unofficial" unemployment rate, according to the Bureau of Labor Statistics, has been up around 20% for quite some time now.)
According to the Bureau of Labor Statistics, the consumer price index is up (i.e., "inflation"), payroll employment is down, hourly earnings for those who are left went up 4¢ per hour, the producer price index is up (vide "inflation," supra), employment cost index (cost of hiring) is up, "productivity" (output per labor hour . . . capital produces nothing in the Keynesian universe when measuring productivity) is down, big time — and, yes, almost 1% is "big time" when you're talking about a GDP of more than $10 trillion — and the import price index is up.
Translation: anyone lucky to have work is getting 4¢ an hour more, but a lot more people aren't lucky enough to have work. Inflation is up, employment is down, production is down, and we're paying higher prices for what we import from overseas to make up for what we're not producing ourselves. In short, we're trapped into the very situation that Keynes said was impossible, both inflation and unemployment.
Here's a potential shocker of a headline: PRESIDENT OBAMA READS MOULTON'S FORMATION OF CAPITAL, followed by OBAMA REPENTS OF KEYNESIANISM, PASSES CAPITAL HOMESTEAD ACT. Frankly, the three major schools of economics are inextricably bound to the British Currency School of finance. All three, whether Keynesian, Monetarist, or Austrian, reject the tenets of the British Banking School, especially Say's Law of Markets and its application in the real bills doctrine.
The Capital Homestead Act would lower inflation, eventually eliminate it completely, put people back to work, shrink the size of government and, overall, make the world a better place to live.
So what's stopping it? You are. Open doors to get these ideas to prime movers, and we will get Capital Homesteading by 2012, if not sooner.