Another must-read from Mark Dow.
This article gives America too much credit for what it does and not enough for what it is.
Yes, unemployment is lower in America than in most of Europe. However, the U6 rate, which measures those who have given up on work, is at a level comparable to European unemployment. In addition, more Americans work part-time than ever before and jobs are pooling in low-wage areas such as retail and food service.
The Fed HAS, indeed, been aggressive with monetary policy — but it is hard to judge the result. Some areas of the economy, such as housing, have experienced a mini-boom and that puts people back to work. However, savers have been robbed blind, as have all those on fixed incomes, so the real result is just an impoverishment of one sector of the population in order to transfer wealth to another sector. There are plenty of front page stories about new housing starts — not so many about deferred or abandoned purchases on the part of those tens of millions who have seen their interest income run to zero.
American kids generally can find jobs — although they have a good long wait after graduation. It is doubtful the Fed deserves any credit for this. No employer decides to hire based on what the federal funds rate is that month.
What America DOES have is a genuine continental economy with a single central bank and a tradition of extreme labor mobility. It also has a welfare policy less generous than that of most of Europe and this is a real incentive for people to take responsibility for their own lives. It has taken more than two centuries for all this to evolve and none of it is government policy. It is just what America is, regardless of what party is in power.
Finally, there is the extraordinary political stability of the USA. There are no parliamentary crisis since America has a presidential system. There are no coalition issues since America has only two political parties. Political change occurs entirely by the calendar and is as predictable as the phases of the moon.
(Europeans love to criticize America’s “violent gun culture” but prefer not to notice the rock-solid peacefulness and stability of the American political system from the White House down to the local village constable. All in all, America is the safest and most stable place on the globe — except for Canada, which is really just the USA North.)
In short, neither the Fed nor the Administration nor Congress really can claim that much credit for relative American success. It is bred in the nation’s bones. Americans expect to have to support themselves; they expect to have to move to find work; there is not a single barrier of language, law or custom to impede trade; the political system is utterly sound; governmental uncertainty is impossible because of the the presidential system; a single true central bank regulates currency; a single legislative assembly (Congress) sets fiscal policy for the whole 3 million square miles.
This isn’t financial acumen at work. This is history at work.