Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Why More Money Printing Will Increase Unemployment

Economics / Unemployment Aug 07, 2012 - 10:06 AM GMT

By: Michael_Pento

Economics

Money Printing Doesn’t Create Jobs
The developed world’s central banks are now foolishly preparing for a full assault on their respective currencies in an attempt to lower unemployment rates. Spurring these central bankers into action is persistently anemic markets and employment data, which they believe can be rectified by creating inflation.


U.S. jobs data showed that the Non-farm payroll report for July produced 163k jobs. That sounds ok at first glance. However, the Household Survey conflicted with the Establishment Survey, in that it concluded 195k net individuals actually lost their jobs last month; and that the unemployment rate ticked higher to 8.3%. Americans continue to leave the workforce—150k left last month—while our unemployment rate has now been above 8% for the last 41 months. That stubbornly high and rising unemployment rate will likely cause Mr. Bernanke to announce QE III in September.

Taking a look over in recession-ravaged Europe, the unemployment rate in Spain rose to 24.6% in the second quarter of 2012, which was an all-time high since records were kept starting in 1976. That has already caused Mr. Draghi to promise an unprecedented and unlimited bond buying scheme that will necessitate hundreds of billions in freshly printed Euros--just for starters.

Adding to the fears of weak growth and increased joblessness are the depressed stock markets around the globe. The Shanghai Composite Index is down 13% in the last 3 months. The Nikkei Dow has shed 15% in the last 4 months. And Spain’s IBEX has plunged 21% in just 5 months.

So Bernanke and Draghi have threatened to unload a massive debt monetization and inflation strategy to get people back to work. That all sounds great and wonderful, except the total disregard for a currency’s purchasing power is one of the reasons behind those long unemployment lines.

If one doesn’t know their history, you might be duped into believing money printing has a chance to reduce unemployment. In fact, all central bankers need to do is open their eyes and see what is going on around them to understand their folly.

Spain’s unemployment rate, which has soared from 9% in 2008, to just below 25% today, hasn’t stopped inflation from rising. Spanish inflation rose 2.2% YOY in July, and that was up from 1.8% in the month prior. That’s not runaway inflation by any means. However, it is certainly not deflation either. According to the philosophy of today’s central bankers, having one quarter of your workforce in perpetual siesta should bring about massive deflation. Which, of course, must be fought with the full force of the printing press. But all that accomplishes is to bring rising prices along with the misery of being unemployed. The saddest part is that the ECB launched their LTROs in December 2011 and March 2012. Therefore, the full inflationary impact from these programs is only just beginning to be realized.

The history of the U.S. shows the same results. Our inflation rate reached its apex in 1980 at 13.5%. According to those who place too much faith in counterfeiting, that should have brought with it full employment. But the unemployment rate was a lofty 7.2% at that time and reached 10.2% within the next two years.

The truth is that destroying the purchasing power of your currency serves to increase the unemployment rate. That’s because it erodes the impetus to save and invest, robs the middle class of its standard of living and leaves the economy in ruins. Economic growth comes from stable interest rates, low inflation and a sound currency. Persistent money printing erodes all of the basic principles of a strong Economy.

What you eventually end up with is a chronically weak currency, intractable inflation, onerous tax rates, a sovereign debt crisis and a depressionary economy.

Michael Pento

President
Pento Portfolio Strategies
www.pentoport.com
mpento@pentoport.com
(O) 732-203-1333
(M) 732- 213-1295

Mr. Michael Pento is the President of Pento Portfolio Strategies and serves as Senior Market Analyst for Baltimore-based research firm Agora Financial.

Pento Portfolio Strategies provides strategic advice and research for institutional clients. Agora Financial publishes award-winning newsletters, critically acclaimed feature documentaries and international best-selling books.

Mr. Pento is a well-established specialist in the Austrian School of economics and a regular guest on CNBC, Bloomberg, FOX Business News and other national media outlets. His market analysis can also be read in most major financial publications, including the Wall Street Journal. He also acts as a Financial Columnist for Forbes, Contributor to thestreet.com and is a blogger at the Huffington Post.

Prior to starting Pento Portfolio Strategies and joining Agora Financial, Mr. Pento served as a senior economist and vice president of the managed products division of another financial firm. There, he also led an external sales division that marketed their managed products to outside broker-dealers and registered investment advisors.

Additionally, Mr. Pento has worked for an investment advisory firm where he helped create ETFs and UITs that were sold throughout Wall Street. Earlier in his career Mr. Pento spent two years on the floor of the New York Stock Exchange. He has carried series 7, 63, 65, 55 and Life and Health Insurance Licenses. Mr. Pento graduated from Rowan University in 1991.

© 2012 Copyright Michael Pento - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Michael Pento Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in