Only “Essential” Government Employees Need Report for Duty

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It was “snowmaggedon” here this weekend. On Friday the city was on the verge of panic. Governor O’Malley announced that snowfall might reach 30″… Salt trucks were everywhere… They were lined up around the beltway like the National Guard waiting to stop an invasion…

..and everywhere people went home – or went out to buy food, movies…the essentials…

“How much wine do we have stocked up,” we asked Elizabeth.

“Not enough…” More below…

There was a storm raging on Wall Street too. And by the end of the day, traders, investors and speculators probably wished they had stocked more alcohol for the weekend.

The Dow was up 10 points. After being down 100 points. Gold fell $10.

“Clearly we have entered the worry, fear camp,” said one pro.

Unfortunately, today’s action was not as clear-cut as we would like. There was no bounce back. And no further decline. Our guess is that stocks will probably trend downward for a long time. Most likely, the long-awaited – at least by us! – resumption of the bear market has begun. We’ve had our crash. We’ve had our bounce. Now, we’ll take the long slide down to the ultimate, final, this-is-where-it-stops end.

Listening to the radio this morning, the announcer told us that only “essential” government employees had to report for duty this morning. We wondered if any of them really were essential. Surely, not the fellows who are watching after the African horned beetle. Surely, not the ones who are designing a new health care overhaul for the nation. Surely, not the ones who are coming up with a revision to subsection 4.503.02 of the Internal Revenue Code dealing with unlicensed backdated further codicils of provisions dealing with gifts to one-armed wonton turners who are beneficiaries of insurance policy proceeds upon which sufficient basis has been revoked because they failed to read the fine print. Or something like that.

Take out all the non-essential federal employees? Who’s left?

Anyone? Probably a couple guys in the Pentagon who make sure the Canadians are not amassing troops on the border.

But that is another subject, isn’t it? Not exactly. The federal payroll is the only payroll in the nation that is expanding. Government is a growth industry. Just about everything else is in decline.

Wait. The latest number from the feds tells us that joblessness declined by 0.3% last month. Do you believe that, dear reader? Where’s the SEC when you need it? Aren’t the feds misleading investors – intentionally?

There was another ad on the radio this morning asking for census takers. More federal employees! Why not get the non-essential employees to count people?

We don’t have a separate count, but we wouldn’t be a bit surprised to find that the feds’ unemployment number hides as much as it reveals. After all, as near as we can tell, we’re still in a period of private sector de-leveraging. That means fewer jobs. The mistakes of the bubble era must be un-done. Jobs must be eliminated. And employment won’t rise again until the private sector can find ways to put people back to work at a profit.

But how?

********************

What a delight it would be to have some inflation! Yes, dear reader, that’s the real reason that fiscal stimulus appears to work. That is, that’s the reason inflation can sometimes boost employment. It creates inflation. And inflation lowers wages. Lower wages make it cheaper to hire people. And they make US output more competitive on the world market – so exports tend to increase.

And one other thing. Inflation reduces the debt burden. Right now, debt is crushing the private sector…and the whole economy. But it will soon crush the public sector too. Nouriel Roubini says government debt is a “ticking time bomb.” He’s right.

That’s why the government would love to have some inflation. Trouble is, inflation is harder to conjure up than you might think.

The more we see the Geithner, Bernanke, Summers team in action, the more convinced we are that the nation is headed for serious trouble.

Alan Greenspan was a knave, no doubt about it. But he understood how money worked. He was even a follower of Ayn Rand and a member of the libertarian ‘collective’ in New York. When he joined the president’s council of economic advisors, Rand was on the scene. She said she had ‘her man in Washington.’ Trouble was, her man was a sell-out. His convictions were no more solid than ocean foam. They disappeared as soon as he got to the capitol. After that, he spoke in gobbledygook sentences that no one could decipher…and played the game.

Here at The Daily Reckoning we don’t particularly like sell-outs, hypocrites and turncoats. We have our principles. And we wouldn’t turn our back on our own convictions. Not for less than, say, $10,000.

The current team, on the other hand, are not sellouts. They’re fools. They really have no idea what is going on. They think the problem with the economy is that consumers and bankers have gotten the jitters. They believe that a lack of demand is the root cause of a weak economy. So, all they have to do is to replace the missing private demand with demand from the government.

Anyone who bothered to think about it seriously for a few minutes would see that demand is not what causes an economy to grow…or what makes people prosperous. People always have demand for goods and service. Demand is always, theoretically, unlimited. It’s the purchasing power that is lacking.

And purchasing power comes from earnings – both accumulated and current.

The key to a real recovery is to increase earnings – not increase demand/consumption. How do you do that? Well, if you’re a government economist, you can’t do a bloody thing but get out of the way. You have to let private businesses find ways to make money…which they then share with their employees.

Think Summers, Bernanke and Geithner will get out of the way? Not a chance…

Bill Bonner
for The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Bill Bonner

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2 Comments on "Only “Essential” Government Employees Need Report for Duty"

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Tricky Dicky
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Oh wow Bill, you got that one wrong. Purchasing power comes from earning *plus* increase in debt. And debt deleveraging is the main game now. Please talk to Steve Keen and then get back to us. Thanks

wtf
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To take what you’ve written above to it’s logical conclusion, if we need purchasing power, then we need jobs, and these cannot be supplied by the private sector. Surely then governemnt should give a job to anyone who needs one (at minimum wage), increasing purchasing power/demand until the private sector has recovered enough to offer a more desirable job.

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