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I hope that the unemployed/under employed are using their time to find work, improve their skills or retrain, or enjoy extra time with their families and other interests (if they have the means). My guidance counsellor said that we should expect to have three jobs during our lifetimes and should develop employable skills other than those learned in school and on the first job. The social and economic costs of unemployment and under employment outweigh the political benefits of creating unnecessary booms or manipulating individual choices through tax, fiscal, monetary, and regulatory policies.
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The financial industry is highly regulated, which means that Judge Posner's analysis is incorrect. The federal government, since the 1970s, has bailed out creditors, which distorts the markets because creditors do not feel the pain from lending to risky borrowers. In the latest "crisis," the federal government bailed out investment banks, insurance companies, and automobile manufacturers, which further distorts markets. In the 1990s, the federal government began a policy of encouraging home ownership by setting unrealistic targets for the GSE's ownership of sub-prime lending, which created artificial demand for residential housing and financial instruments that facilitated further investment in residential housing. Political goals and incentives have no basis in reality and lead to unsustainable booms, corruption, and fraud as everyone tries to make money where there is no real consumer demand. Using private institutions to facilitate political goals is corporatism or political cronyism. The wisest policy is to end the federal government's policies of bailing out creditors and using them to facilitate political agendas.
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Aug 1, 2012