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Saturday, May 21, 2011

What Is The Real Unemployment Rate?

State comedians publish the "unemployment rate", as a measure of how the economy is doing overall. However, that statistic is completely misleading.

The "official unemployment rate" does not count people who are underemployed. The "official unemployment rate" does not count people who have a job but don't actually produce anything.

For example, I'm currently underemployed. It's a waste of my abilities to be writing stupid financial reports. Anyone who accepts a low-quality job is underemployed.

A pro-State troll says "If you don't like it, start your own business!" I'm going to try that. Unfortunately, the State makes it hard. For example, if I start an independent filmmaker business or independent journalist business, then part of the taxes I pay subsidize large corporate cartels.

I'm also wastefully employed. The financial reports I write are completely meaningless. I follow the algorithm I'm asked to implement. However, the result is meaningless. I'm participating in the farce that the financial industry produces something useful.

I'd rather have a job producing something useful. However, the non-free market offers me the highest salary when writing financial software or other meaningless software. In retrospect, all the jobs I've ever had were a complete waste of time.

I'd rather do something useful. However, I have to respond to the signals of the non-free market. The State offers me the best job writing meaningless financial software. It is a great tragedy, that the State pushes intelligent people into careers that are wasteful or outright destructive.

The financial industry produces nothing. Suppose the financial industry hired 10% more people. The unemployment rate would go down. The amount of useful work remains unchanged. In fact, it's a bad thing. By hiring more workers, the financial industry raises labor costs in the productive sector of the economy.

Many people are employed in the parasite sector of the economy. They have a job, but produce nothing. It's a drain on the economy, but counts as lower unemployment.

The "official unemployment rate" is completely misleading. It doesn't count underemployed people. It includes people who are employed in the parasite sector of the economy. If you have a job but produce nothing, you aren't really employed.

I'm underemployed. I'm also employed in the parasite sector of the economy. However, I have to respond to the signals of a non-free market and take the best job I can get. The non-free market says it wants me to write financial software. I will try my own business, agorist-style or on-the-books. That may take awhile to get started.

Unfortunately, the parasite sector of the economy is growing and the productive sector of the economy is shrinking. This will lead to collapse.


Polo said...

I hear this all the time,-"Finance Industry" is not needed.

This is not true. Finance is not very different than the Transportation. It dos not produce anything by itself, it only facilitates the production of others.

But the patrons of transport do ride with a purpose to produce, some say. We do not know that. If the endeavor is fullish then all the employees will use the transportation to foolish end, and as a result, the role of transport will turn out to be a waste.

Just imagine a whole day of NY Subway system filled with, well, why not, financial engineers! What a waste! Of course, there is a cost to use transport. Riders have to pay it. It acts as a check, a short term check, against a ride purpose being a waste. This cost can be subsidized or obfuscated.

Enter finance. Like transport, it is here to facilitate a productive enterprise. By itself, finance can't know if the enterprise it is facilitating is productive. Thus, it has to compensate itself and make profit short term. Therefore, there are costs to use financial services, no different than subway tickets.

These costs can be subsidized or obfuscated. In this case, there will appear to be no cost, and there will be nothing to factor as a cost of finance in the break-even calculation for the activity considered to be financed. Therefore, the bar is lowered, and a lot of activity which is not profitable, will use finance industry service, making it appear that the finance itself is a waste.

The costs of finance can also be obfuscated even to the financiers themselves. In this case, they will lower the prices and no further subsidy or obfuscation will be needed to take place before a lot of wasteful activity will be served by finance.

I hope that I made it clear in the paragraphs above, that just like the transportation, for instance, the finance in itself can not be judged useful or wasteful. It is a service, and the judgment of the end result will be dependent on the result of the enterprise it is serving.

What makes it appear wasteful today are:

-First, the government use of finance. As government can not have a profit motive, it can not be allowed to use finance by definition, as without profit, the necessity of finance can not be estimated. This is why children are bared from signing up credit card agreements.

-Second, the government has obfuscated the finance costs to the finance industry itself, and it's clients. Accordingly, the activity surplus due to this factor is a waste.

FSK said...

In a really free market, banks match people with surplus capital with people who need capital. In a really free market, banking is an honest business.

In the present, the Federal Reserve fixes interest rates, distorting price signals.

Bank can make money borrowing from the government and lending to the government. They don't need customers.

This is an important fallacy. In a really free market, banking is an honest business. In the present, it's almost entirely about corruption, rather than matching savers and people who need capital.

Polo said...

Glad we agree on something. More on banks:

Not only as you noted, banks do not need customers, the entire monetary regime was designed with a purpose to allow banks to "earn" the interest multiple times on the same one dollar they managed to attract paying interest minus spread only one time.

We exist, as far as US monetary regime is concerned, only to create wealth that banks can "earn", and the thicker they earn, the better.
The excuse for this is that such a scheme will act to lower the interest rates banks charge to loan out money, and so more productive enterprise will take place.

This, of course is a fallacy. No doubt the designers of US monetary regime knew and understood this, which only proves that the original design was not in the slightest interest of the people.

If profit is removed from a motivation, then nothing would function. In theory of Keynes, the profit can be lowered or eliminated all together, with only the cost compensation remaining, and the system would continue to function on purely altruistic motives.

This is very dangerous because first, the margin that guaranties the future enterprise is not a waste would be missing, and therefore, more waste would happen.
Second, as people are willing to pay excessively for the things they need, this additional payment not registered as profit will end up being accumulated by the state.

A rich state is a menace, a worst kind of a menace. We should absolutely not allow that to ever happen. Thus, the system where producers are compensated beyond the cost of recovery is a very healthy check that insures that wealth is accumulate in hands of private producers, and not in the hands of a state.

FSK said...

In the present, the banksters and insiders control practically everything.

I read that banks own more "home equity" than individuals. Plus, via property taxes, you never fully own your home. Property taxes help pay off government bonds, owned by banks.

FSK said...

Private ownership of wealth is mostly an illusion. Via regulations and taxation, insiders control practically everything.

Polo said...

So true, FSK! I do not call the house ownership in US a private property.

If I had a house in my private property, then after it is paid off, there is nothing I have to pay to keep the house. Obviously, I would have to switch off the water service, gas, electric and telephone to bring my bills to zero, but all those services are not essential and can be shut down if so desired. I would then have no payments due, and can live for free, because the house is mine.

This is not the case in US. Paying off is theoretically impossible because of property taxes. There is no private property in US.

Beside taxation, there is also an Eminent Domain. It is impossible to reconcile the existence of such a draconian law as ED, and private property.

I conclude, that only a fool may believe that there is private property. This is why I am not even attempting to buy a house.

When housing prices do fall to 25% of the peak levels, as I expect them to, then it would make sense to buy and rent again, but only from point of view of business, not "property ownership". There isn't such thing in US.

FSK said...

You still might be better off "buying" a house. If you plan to stay at least 7 years, the total cost of "owning" is usually cheaper than the cost of renting.

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