The jobs report is great, we are told.
The economy is sound and strengthening.
So when is the Fed going to raise the interest rate above zero?
Ron Paul: Hello everybody, and thank you for tuning in to The Liberty Report. Daniel McAdams is with me today. Daniel, it’s good to see you.
Daniel McAdams: It’s good to see you, Dr. Paul.
Ron Paul: There is a report out today on employment, and it did not meet expectations and it was slightly worse than they expected, but it wasn’t a disaster. It was the first time jobless claims came out, and the jobless claims went up by 15,000. That’s not a whole lot, because the total number still stays below 300,000, and that’s not considered as a really weak economy. Even though this had a temporary reactions that maybe there was some weakening there, it’s really not that bad. But they expected 275 and they got 295 and that plays a game with the marketplace. But the continuing claims are that it went up by 69,000, and that figure there is a longer term indicator.
People are not getting employed and, of course, the Fed’s complaining that they’re not making a whole lot of money and therefore they’re getting hesitant. The people who are continually getting these claims are at 2.3 million [unemployed], but a lot of them have probably given up, and that’s why the number that we have been looking at a lot more is the labor participation rate. It used to be that only the esoteric web pages carried this number, but it’s already on the business news now, and it is significant because if you look at that chart, the number shows that the recovery didn’t do anything, but drive everybody into non-participation. But guess what that did? Last week, the figures showed exciting news: 5.3% unemployment rate and people thought, “Man, the whole problem is over”. But still, the Fed doesn’t come through and say, “Well, it’s time to raise interest rates”.
Daniel McAdams: Seems like they deliver good news and they want everyone to think everything is going well, but they don’t want to do what the good news requires should be done.
Ron Paul: That’s right, and the market players sometimes know it is bad news, but they think the spin will be good for the markets. Those short term plays aren’t as important as long term fundamentals, and the participation rate is one of those. Last week, when they did those reports, they said there were 293,000 new jobs. Well, that’s good, but when you dissect it out – thanks to Zero Hedge who does a very good job on sorting this out – that the part time jobs were increased by 161,000, and that’s where the big increase came from. You may think, “Maybe the rest of the 293,000 new jobs were fulltime employment”, but fulltime jobs were down by 349,000.
Daniel McAdams: It decreased.
Ron Paul: It decreased and it went down, so it shows that the economy remains weak, and yet the stock market is doing well, the Plunge Protection Team is doing well. Also, last week, the number of people who are not participating anymore totals up to almost 94 million people. Just last week, when all these good numbers came out, 650,000 of them went into non-participation. I don’t know how they get away with spinning this as great news.
Daniel McAdams: What does “non-participation” mean, what do these people do then in the day?
Ron Paul: It’s a mixture, maybe some people retired early, maybe some people might have been looking for jobs, but then they drop out of looking for jobs. Some people may be on disabilities and maybe they’re pushed into disabilities for economic reasons; so it’s a mixed bag. But it’s a hit: by that chart you can see that historically this is very, very bad and it doesn’t look good for the economy. I think this is the reason why the Fed is not about to raise interest rates. I predicted they won’t, but that’s just my thoughts. But they know what we’re talking about, they know things are weak and they also keep thinking of 1937 because they blame the Fed for extending the depression by continuing to regulate the economy, which delayed the correction.
The Fed has not responded yet, and they’re also waiting. This always seems so ironic to me, a Fed official will say, “Well, we’re not quite ready to do this, because what we’re really looking for is inflation. We want to see the prices going up, we want to see currency destruction, we want to see more discouragement for people who want to save, we want to hurt the elderly who save money, we want to punish the people who are frugal and want to take care of themselves. We need to destroy that money, by government statistics, at a greater rate than 2%”. But I think it is already being destroyed for certain people, much faster if you look at utilities and doctor bills and food products. I think that’s going to delay them from doing anything. Internationally this has some significance, too, when you wonder about how you should look at the Chinese market.
Daniel McAdams: It’s interesting, because the Chinese have been relatively hands off on their economy, it’s the one thing that characterizes communist China. But we saw this last week that they’ve come down with a heavy hand after the bubble feels like it …
Ron Paul: Well, when push came to shove, they were true Keynesians. Of course, they would be more tempted for central economic planning, they never gave up government intervention planning, but at least they adapted to some of the Western thoughts on a freer market. But they have all been sucked in to believing that economic planning can occur through monetary manipulation. Once again, they encourage people to buy stocks, just like our government does. We protect the stock market, you get it up and you get a bubble, its mal-investment, it’s not true wealth. And when it starts to break, I see the Chinese are a little bit more authoritarian than we have been when they come to solutions.
Daniel McAdams: If you short your stocks, you go to jail.
Ron Paul: Yes.
Daniel McAdams: Can they contain this, what was the alternate?
Ron Paul: For a short while, as we speak, the Chinese market responded to this sluggish approach, and they said, “Don’t do it, or we’ll put you in jail. Don’t sell”. And probably the people who are true traders say, “The market might go up for a couple of days”, and markets go up very rapidly. But it cannot be contained, the bubble always bursts. I’m impressed with the ability of our central bank to re-establish so much of a bubble economy after the collapse of 2008 and 2009. But they weren’t able to restore sound investments and real growth in labor, but they were able to restore growth in money making in the financial markets, and this is why there’s such a political division now: the division between the middle class and the poor, very the people who really get the benefits. I think that is going to be the key issue in the campaign. You hear a lot of noise right now about immigration and other things, I wish they talk more specifically about the Fed or the foreign policy issue or these things. But I think the real issue will be the demagoging that goes on when you see a Bernie Sanders doing well, and here he is a devout socialist, and once again it’s the inequality of income. But there is a lot of destruction in that, which we’ve talked about, but it comes from the Federal Reserve. But if you’re an interventionist then you come and say, “We’re going to change it. this group isn’t getting high enough wages, so we’re going to mandate a wage. You used to get $7/hour, we’ll give you %15/hour and it will solve all our problems”.
But that resorting to economic planning doesn’t work, but I think that’s going to be the big issue, whether it’s the democrats or the Republicans, they’ll just have a different twist on it. But, unfortunately, both parties generally have supported intervention. One said, “We want to redistribute wealth and give it to the poor and give them free houses and free medical care”, and look at want happened to all the free housing and look at what’s happened to the educational system, so that doesn’t work. The other side say, “Well, we can solve all our problems by deregulation”. There are a lot of deregulations we should have, but there’s more to it than that, because it’s the business cycle that they have to deal with, and they have to deal with the Federal Reserve. But time will tell just what will happen here, but I think it’s moving quickly, because we have China to deal with and we don’t know exactly what will happen there. But the big thing going on in Europe is Greece, every week there is a solution: “Okay, there’s going to be a vote this week and this will decide it”, and this has been going on for 5 years, and then there is a crisis. The other day, when there was a so-called solution, I think it was swing of 650 points in one day: 300 up and 400 down, it was up and down, and that is not what happens in stable free market economy. Things are based on real value, but now, it’s purely a bet on trying to understand what the next move will be on the Fed and anticipating how these market players are going to react and what will happen. They are a long way off from having a solution. It’s just too bad that we don’t have a greater emphasis on understanding free market economics and how the Federal Reserve has created this monster and how we always tend to bail out the rich with the pretence that we’re going to take care of the poor.
That’s what’s going on in Greece, yes, there were a lot of people with their hands out and it was a welfare state, but the big guys were ripping them off and making these loans. Where is this money coming from to make all these loans to Greece? It came from the central banks and easy credit, just like it does in this country. So until we understand monetary policy, the business cycle, central banking, and why big government is almost always our enemy … the government should be there to protect our liberties, not to run our lives and not to run the economy, and not to police the world. When we come to that point, believe me, we could at least establish peace and prosperity for this country. But if the world would accept those principles, believe me, it would be a much better place in which to live.
I want to thank everybody for tuning in today to The Liberty Report, and please come back soon.
This video was published by the Ron Paul Institute.