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Job Creation, Part One

09/25/2012

Government Driven Job Creation

QE 1, 2, 3

Money is printed and used to buy the assets of banks, thereby providing them with fluid cash and enable them to make more loans.

↓                                                                ↓

People borrow                                             Businesses borrow

(entering into greater debt)                         (increasing their debt load)

↓                                                                   ↓

People use the                                                Businesses use the

borrowed $ to make purchases                            borrowed $ to grow their business

↓                                                   ↓

When business grows enough, it will hire new employees

People find jobs

Previous low interest rates begin to rise to more normal levels (or beyond).  They cannot stay at near zero forever.  Those with savings accounts and CDs are seeing near zero growth.

As interest rates rise, consumer and business debt starts to take a toll.

People cut back on spending and struggle to pay their bills

Businesses struggle to keep afloat and many do not.  Jobs are lost.

Just like the housing market boom  was built on false economics collapsed, a recovery that is built on false economics will collapse as well.  As you can see, printing money to bolster the economy cannot work, because the money bolsters the economy by encouraging debt, debt, and more debt. When reality returns, the debt load will pull consumers and businesses down again, and when they are pulled down it will be into a deeper hole than before.

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