Daily: Different approaches to generating sustained full employment

Jobs and wages

I want to highlight three articles on the issue of jobs and full employment because they give one a view of the employment issue from various angles. First is the brief history of unemployment in Britain covering data from 1855. What we see are wild swings due to the boom-bust nature of the economy with a "highish" central tendency to unemployment of 5.1%. This is followed by a period of near-full employment from 1945-1973 and another volatile period since 1973. My overall assessment of the data squares with the authors in that it demonstrates that the 1945-1973 period was the so-called "Goldilocks" one in terms of full employment. The author concludes that:

"The idea that free market policies can generate sustained full employment lacks any historical foundation, unless you want to argue that there were severe labour market regulations that caused mass unemployment in the 19th century"

I think that’s right. Free markets are not necessarily highly correlated with full employment. The corollary of this then is that full employment would have to be a stated goal of policy as it is in the US for economies to achieve it in a free market system. That said, even in the US, where the Federal Reserve has an employment mandate, policy makers have fallen short of full employment.

The second link is a slide show that shows trade balances during the euro’s existence, with a clear statement that Germany’s wage suppression policies have worked to Germany’s "first mover advantage". German policy makers would say that wage suppression can co-exist with if not lead to full employment. Germans have argued that the labour reforms they undertook which undercut worker power and limited wage gains were exactly the ones which set them up for success today. This is highly debatable but it does give one a sense that there are different views on how to achieve full employment.

The last link is on China and concerns there that the Chinese economic strategy is running into difficulty on the jobs front as malinvestment comes a cropper. The Chinese model is yet another way governments are looking to achieve job growth and this one is much more dirigiste than the German or the British models. I will leave it there.

Stumbling and Mumbling: Unemployment: a brief history

How Germany’s Labor Market Reforms Crushed the French and the PIIGS

Chinese unemployment will become ‘more severe’, Wen Jiabao warns – Telegraph

That’s it. Here are the links.



The two Spanish language articles show property prices falling at an ever faster rate in Spain and Germany auctioning off two-year paer at negative rates for the first time ever.

Angela Merkel unsure European project will work – Telegraph

El precio de la vivienda sufre la mayor caída desde el comienzo de la crisis | Economía | EL PAÍS

Alemania logra vender por primera vez bonos a tipos de interés negativos | Economía | EL PAÍS

Hans-Werner Sinn’s Simplistic Euro Crisis Theories Divide German Economists – SPIEGEL ONLINE

Finanzkollaps: Italienische Regierung warnt vor Pleite Siziliens – Nachrichten Wirtschaft – WELT ONLINE


Banks, credit and money

The first article here is complete bollocks. What that chart in the article misses is the change in prevailing interest rates in each time period. 1952-64 was benign. 1984-91 was also benign. 2000-08 was super benign then. Debt accumulation is not as severe a problem when rates are dropping. But clearly debt levels do cause recessions when interest rates are rising. This article is just a weak attempt to justify useless econometric models that exclude debt and therefore were unable to predict the financial crisis, nothing more.

The Credit Suisse capital exercise should give you more faith in Swiss banking. It is good to see the Swiss take capital levels seriously so as to not get caught out next time around.

TheMoneyIllusion » Debt surges don’t cause recessions.

The Stock Market, QE3 and Voodoo Finance | The Spellman Report

Level of bank reserves at a central bank not linked to loan growth – FT.com

Credit Suisse counters critics with $15.6 billion capital plan | Reuters

Capital One to pay $210 million in credit card probe | Reuters

BBC News – Capital One fined for misleading millions of customers



The second article is a potentially huge deal for Apple in being able to litigate away the competitive threat that Android is. I will update you when I know more but it sounds like a real coup.

Apple Loses Patent Claim Against Motorola Xoom in Germany – John Paczkowski – News – AllThingsD

Newly granted Apple user interface patent could cause headaches for Android camp


Other links

The second Spanish language article predicts a devaluation in Argentina as the black market price of the Peso diverges ever more from the official price. Dollar transactions are now banned in Argentina to prevent this.

Am I a China Bear? « Patrick Chovanec

El dólar paralelo se dispara y llega a un precio de hasta $6,65

Faber breaks habit of a lifetime and loads up on European equity – Citywire

Grantham: There will be multiple entry points to buy EU equities

Response to the FEC on Missing Big Ticket Money Data | News & Politics | AlterNet

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