Uphill Battle of Unemployment
The root cause of the unemployment problem is debt based monetary system and interest based economy coupled with fractional reserve banking. Now, for some of you that is a lot of fancy words, so let me explain how deep the rabbit hole goes.
When we borrow, banks create money. They do not lend existing money. They demand interest for it. This new money inflates the money supply, makes it easy to earn, makes it easy to pay old debt. Government likes inflation thus they use policies that encourage borrowers. They tolerate fannie mae, freddie mac, mortgage interest deduction, sub-prime, no 20% down, liar loans, 8K home buyer credit etc. Why do they do this?
We borrowed the entire money supply. It is X. But banks want us to pay back X+I. I is interest. The money to pay existing debt with interest does not exist. When borrowing stops (when money creation stops), this shortage of money supply becomes apparent. This is how deflation happens.
Why would borrowing stop? The borrowing capacity of the population is limited by how much debt they can service. If we cannot afford monthly interest payments, we stop borrowing and deflationary crash starts.
http://www.kondratieffwavecycle.com/economy/deflationary-crash/
Deflation is the reason why people foreclose. Entire population cannot possibly find a job that pays enough to pay existing debt. The money does not exist, thus it cannot be earned. Similarly, this is the cause of unemployment. Existing debt puts pressure on the population to ask for high wages. They cannot afford to accept lower wages. Thus, employers cannot pay these wages because the money simply does not exist.
This is because when we borrow, banks only create the principal but they do not create the interest portion of the debt.
U3 is not an accurate indicator of unemployment. There are many people who want a job but they do not qualify for benefits and they are not counted! Real unemployment rate is about 18-22% right now.
http://www.kondratieffwavecycle.com/unemployment/
There are 2 solutions:
A. Let deflation run it's course in a free economy, and let the banks go bankrupt. This will cause high unemployment in the financial sector. Since banks run the country, we are not doing this.
B. Switch to debt free monetary system and let the government print the principal + interest of the debt at the time we borrow and spend it into the economy in place of taxing people. This way, borrowers will be effectively paying more tax than savers. This is the opposite of today. We are not doing this because banks run this country and in this model, borrowers pay interest to the people, and not the bankers. This would wipe out banking elite who run the world. Web of Debt by Ellen Brown is a good book on this subject: