New York City Councilwoman Gets Ratioed Into Oblivion Over One Question
Federal Court Makes Major Ruling on Ballot Verification in Pennsylvania
Jon Stewart's Skewering of Trump in New York Civil Fraud Cause Just Blew...
Sam Bankman-Fried Sentenced in Massive Crypto Fraud Case
Charlotte Radio Host Speaks Out About His Interview With KJP That Made Headlines
Trump, Biden Will Both Be in New York on Thursday...but for Very Different...
Democrat Flips Republican District in Alabama Special Election. Here's What She Campaigned...
Here's What Trump Had to Say About RFK Jr.'s VP Pick
VDH Explains What Any 'Normal' President Would Do About Border That Would End...
Here's When Impeachment Articles Against Mayorkas Will Be Presented to the Senate
Tennessee Music Venue to Host ‘Trans Day Of Vengeance’ Event One Year After...
There Was Very Little Pete Buttigieg Was Able to Tell Us About Bridge...
An Illegal Alien Encouraged Others to Invade American Homes. Here's What Happened Next.
Time for Another Bizarre, Easily-Disprovable Lie From Joe Biden
Did Jamaal Bowman Just Help His Primary Challenger?
OPINION

At the End of the Credit Line

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.
Advertisement
Advertisement
Advertisement

From Barack Obama to Michele Bachmann; everyone is looking for the key to job creation. 

In order to find the answer, you must first understand the problem.  So far, I’ve heard nobody (and I mean nobody), and that’s both left and right, state the overwhelming reason for monumental job loss. 

Advertisement

Most blame outsourcing (Donald Trump) and I don’t disagree, it does contribute.  Others will look at the demise of Blockbuster and Borders and remark that job loss is created by increased technology. 

I also agree with that assessment to a certain degree.  However, the most significant cause of joblessness and why it will be years before it will be better (as corroborated by the Fed’s most recent statement) is debt.  How can debt create job loss? 

Well, grasshopper, pay attention and learn from an Austrian (please never confuse me with a Keynesian.)

For many years, the head of household was the sole provider for food, clothing, and shelter.  Then, the dynamic suddenly changed.  People decided they wanted material possessions instantly, not sometime in the future.  That required a dual income, with both husband and wife bringing home the bacon. 

Standards of living rose, one car became two cars or sometimes three cars.  Small convenient houses became larger and larger, and periodic low-key vacations became worldwide excursions.  Imagine a married couple earning a combined $80,000 per year (well under Obama’s $250,000 “rich” level.) 

In the late 1990’s and through the turn of the century to 2008, people found that $80,000 was not enough.  Through credit cards, home equity loans, refinancing, and job switching, a couple could live as if they were making $120,000 per year.  Sorry to say, it just wasn’t one couple, it was the entire country. 

Advertisement

To keep up with the extra spending demand, the service sector was dramatically expanded.  Instead of six restaurants, a community needed ten.  Rather than just two movies theaters, there were now four, and a town that had four electronic stores now had six. 

You get the idea. 

Every additional enterprise required more employees who were only trained to serve, not manufacture. (Manufacturing became a thing of the past in our country a long time ago.)  The inevitable end result should have come as no surprise. 

When the married couple maxed their credit cards, witnessed their houses go upside down (mortgage), and faced the threat of imminent unemployment, spending came to a complete standstill.  Thus, citing our example, if the couple had to live on $80,000, at least $40,000 had disappeared from the economy.      

The cycle of boom-bust (growth and contraction) has to occur naturally without outside interference, and in 2008 that certainly wasn’t the case.  Therefore, we will experience high unemployment for many years to come because there is no extra money to spend; there is no need for extra businesses, and consequently no need for extra employees. 

In fact, in their statement released on Tuesday, the Federal Reserve basically echoed my thoughts verbatim.   

Advertisement

We are in a very regrettable situation, but that’s just the way it is.    


See more top stories from Townhall Finance, new home page, more columns, more news:

Larry Kudlow More Jackson Hole Shock-and-Awe?
Lincoln Brown A Marine Came Home Today
Marita Noon Gore Claims High Ground with BS
Mike Shedlock The Bear is Back
Bill Tatro At the End of the Credit Line
Jeff Carter The Recession that Killed Keynes
John Ransom Just in Time, Another Obama Nine-Day Vacation
Email Ransom thfinance@mail.com
Facebook http://www.facebook.com/bamransom
Twitter http://twitter.com/#!/bamransom

Click right here to be the best informed fiscal conservative you know! 

Join the conversation as a VIP Member

Recommended

Trending on Townhall Videos