The media is rejoicing at the prospect of an unemployment rate below 8
percent in the most recent report released by the Bureau of Labor Statistics. However, I would not get too excited at this prospect just yet.
The reason why the published unemployment numbers are going down is
because people are falling off the dole. Because they no longer receive
unemployment checks, people are not only without jobs but without
government benefits. These people are one step away from food stamps,
which is why the requests for food stamps are at an all-time high.
Back in the days of the Great Depression, the masses of people looking for food assistance would stand in “soup lines.”
This is the most synthetic economy we have witnessed in a very long time.
So why does the Federal Reserve continue to support programs like these when they don’t seem to be working? The reason the Federal Reserve continues to support the economy with programs like quantitative easing is so that the people who do have money continue to spend it. Otherwise it would exacerbate the problem. If everyone became savers, it would create a vicious cycle.