The Federal Reserve has to be kidding.
Last week the Fed announced that monetary policy would be tied to the nation’s unemployment rate. Fed Chairman Ben Bernanke, who has already done more than enough to destroy this country’s currency, must need a change of prescription.
I could understand if Bernanke tied monetary policy to something tangible — like, say, making interest rates rise when an NFC team wins the Super Bowl and go down when the AFC is victorious.
Or simply flipping a coin would be good, too. Heads, rates go higher; tails, they go down. Two out of three, if you really want to get sophisticated.
But using the unemployment rate is the most senseless, useless, inane, insane, idiotic and ridiculous thing the Fed could have proposed.
My readers already know a lot about this, but it needs to be restated here because Bernanke suddenly seems to be off his rocker.
The jobless rate in November fell to 7.7 percent from 7.9 percent in October. I told you in a column last week why it declined so much: It wasn’t because people had suddenly found jobs. No, it was because people who wanted a job couldn’t find any work and left the workforce.
If you are so discouraged that you tell Labor Department pollsters that you stopped looking for work, then you are not counted as unemployed.
If you don’t believe me, call up Labor and someone there will tell you that 351,000 people left the workforce in November — and that’s why the unemployment rate surprised everyone by dropping by 0.2 percentage point.
Think of this in its most extreme example. If there were suddenly so few jobs that everyone stopped looking for work, the government’s official jobless rate — called the U-3 by the Beltway pencil-pushers — would be 0 percent.
So the Fed — if it really were to use the unemployment rate in its decision-making — would technically be thrilled that there was 0 percent unemployment and that all discouraged people had stopped looking for work.
And the Fed would start raising interest rates — the exact opposite of what it should be doing.
This mistake will also occur if things happen in reverse.
Let’s say the job market suddenly improves dramatically (I know, that’s a dream) and all the discouraged workers suddenly start looking again for work. That would automatically drive the unemployment rate higher.
So, under its new guidelines, the Fed would be fooled into raising interest rates just when things were getting better in the job market. And those higher rates could stop job growth right in its tracks.
We likely are stuck with Bernanke for another presidential term. Let’s hope his latest decision is a big misunderstanding.
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In my last column, I suggested that Americans may have the right to own guns but that there is nothing in the Constitution that says we have to make weapons affordable. Tax the hell out of them and we kill (yes, I used that word on purpose) two birds with one stone, I wrote.
We’ll control guns and reduce the federal budget deficit.
I also mentioned that restricting the sale of new guns won’t help much because there are already so many weapons in America. And these weapons will last forever.
Ah, but there is a way to combine both these thoughts — by taxing the hell out of bullets as well as guns.
That’ll control violence, help the federal deficit and also limit the use of existing guns.
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Bankrate.com says 1 in 3 Americans have cut back on personal spending over the past 30 days because of what they’ve read about the fiscal-cliff negotiations
And you gotta figure that homebuyers are holding off in case the mortgage tax deduction is eliminated as part of the cliff talks. (Don’t count on that deduction actually disappearing, because it would — in one action — send every homeowners’ net worth plummeting.)
Oh, by the way, Happy Holidays!
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The good news is that the Mayans say the world is ending tomorrow.
You might say “it’s about time” — but I’ll have none of that kind of talk in this column.
We might be going over the fiscal cliff. And Washington may be getting set to take our last dollar in taxes. And we might be afraid to send our kids to school.
But soon I’m going to get some smart people to tell you how to invest your money just in case the Mayans are wrong.
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There’s a move afoot in Washington to cut the increases in Social Security payments as part of the fiscal cliff deal.
Well, let me tell you this: Social Security has nothing to do with the fiscal cliff because it has nothing to do with the federal deficit.
Social Security has its own pot of money, euphemistically called the Trust Fund. And the government takes extra cash out of the Trust Fund and replaces it with government bonds.
The cash is then used for everyday expenses.
Giving you less in Social Security payments will only mean there is more cash in the Trust Fund for the government to replace with its bonds. This is not going to reduce the federal budget deficit.