Jobs Harder to Find, Powell to Party?
Amazing is the U.S. media’s reverence for, of all institutions, the Federal Reserve.
You’d think that our Democrat-leaning press might be just a little skeptical about an institution that takes ensuring the nation’s titan saurian banks never have a bad day as its most sacred calling.
And yet the media, even our beloved Wall Street Journal, are out there every day affirming one of the Fed’s most cherished and wicked beliefs: that what America needs is more citizens without work.
Deafening was the hallelujah chorus at this week’s news that job openings have gotten scarce. Only a few months ago, according to the Department of Labor, the American economy was a Surf City of opportunity with two jobs for every boy (or girl). Dangerous! we were told. Could lead to Americans getting raises, which would “fuel inflation” or even “institutionalize” a “wage-price spiral” from which there would be no safe escape.
Now, however, all is well. The ratio of available workers to jobs has come down to about 1 to 1.3. Mirabile dictu, some job seekers will stay unemployed and poor! Even better, fewer workers will find an upside surprise in their pay envelopes.
How can anyone believe that more people, doing more work, and producing more goods and services is “inflationary?” Even accepting the dismal visions of orthodox economics, hopelessly bound in myths of equilibrating supply and demand, shouldn’t additional supply reduce prices? Haven’t we just been making our way out of a period when prices soared precisely because the massive forced shut down of national economies wreaked havoc on supply chains?
It did really seem, for a moment, that even the government had been about to admit that pandemic prices rose largely because the supply of goods fell. Even some Fed folk recently were heard saying right out loud that refilling supply channels was the way to cut prices. Yet now they are back at it with the notion that more productivity will makes us poor.
Yes, more workers working and getting paid more means they will have more money to spend. Even by the standards of orthodox economics, this could drive prices upward only if the workers are paid more than they are worth. As long as workers on average produce value greater than or equal to what they are paid, their increased earnings cannot be “inflationary,” even in the sense of boosting what the orthodox call “aggregate demand” over supply.
In the wake of the great Reagan reforms, the United States enjoyed 40 years of mostly unbroken prosperity. Even the occasional policy-induced financial crises healed with remarkable speed. The longer prosperity persisted, the further inflation declined. Through all those decades the Fed relentlessly demonstrated its own irrelevance, as even Fed Funds rates approaching zero failed to ignite inflation.
Then Donald Trump brilliantly augmented the Reagan effect, chopping corporate income tax rates by nearly 40% and driving unemployment down to historic lows circa 3.5%. Still, inflation did not reappear.
As our friend John Tamny reminds us, “inflation” is meaningless unless it means a devaluation of a currency against some reliable standard. Prices shifting up and down across economic sectors are not inflation but useful signals to producers and consumers to adjust their behavior opportunistically.
Even to measure inflation accurately, much less control it, we need that reliable standard, the most reliable being gold.
The world’s gold stock has increased relentlessly at 2% annually for centuries. (Even as mining technology improves, the gold still in the earth becomes harder to reach). That phenomenon, besides piling on the evidence for a providential God, makes gold the perfect money. It makes gold a measure of time, which is the only coherent meaning of money.
It is our time that we barter for any of the goods of this world. A man in a desert dies of thirst not because he runs out of water but because he runs out of time to get to an oasis. One man is poor and another prosperous because the prosperous man’s time commands a higher price.
As long as a gold standard is politically impossible, the only reliable enemy of inflation is a robust, free economy in which money keeps its value because there is always something useful to do with it. Destroying jobs won’t get us there.