Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
9% Unemployment is Strike 3 for QE2
The rise in unemployment to 9.0% in April was the third strike for QE2. The first strike was February's trade data (Exports down. Imports down. Growth estimates down), The second strike was the first quarter GDP growth data (GDP growth was just 1.8% in first quarter. New Depression not Over).
Bernanke's expansion of money supply to buy treasuries (QE2) was supposed to build up aggregate demand. It indeed helped bring GDP above 3% and unemployment below 9%, but those gains did not last. We're left with a collapsing dollar and surging inflation instead of lasting growth.
Bernanke's failure immediately followed Obama's failure. Obama tried expanding government spending to build up aggregate demand. His stimulus almost produced a "summer of recovery" in the second quarter of 2009, but a surging trade deficit took away all of his momentum. We're left with a huge and growing government debt instead of lasting growth.
John Maynard Keynes explained the current U.S. economy in his chapter on mercantilism and its victims in his 1936 magnum opus, The General Theory of Employment Interest and Money. He wrote:
There are three factors required for economic stability: (1) balanced trade, (2) balanced budgets, and (3) balanced monetary growth. In the fall of 2008 the U.S. experienced a huge recession caused by the debt that comes from persistent trade deficits, but instead of balancing trade through a WTO-legal scaled tariff , Obama and Bernanke tried imbalancing budgets and imbalancing monetary growth.
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