Tuesday, February 14, 2012

Unemployment--Good for The Fund Managers, Bad for You

To get some honest to God truth, read the business press.  The following article, entitled "Fidelity, Vanguard, Pimco say inflation to be contained," really lays it out clearly for us.

What do we learn?  Well, the masters of the universe, aka the mutual fund managers, are breathing a sigh of relief as thankfully, unemployment promises to remain high.  Wages will remain nice and stagnant.  This is good, they say, because this means the economy won't "overheat."  "Overheat" is a code word for reduced unemployment.  We wouldn't want that.  Reduced unemployment is bad.  It is even worse when wages increase, because this leads to inflation, which makes creditors, bondholders, and others who hold large monetary assets lose money.  Essentially, their investments are worth less.

These also happen to be the folks who contribute huge amounts of money to electoral campaigns and super PACs to help ensure that unemployment remains high and wages remain stagnant.  Why do you think politicians are more worried about the national debt?  All of this is a smokescreen to avoid solving the real problem of unemployment.  Why do you think wages are being frozen for federal employees?  Why do you suppose the Republicans are against any and all jobs bills that Obama proposes?

From the perspective of your average worker, the economy sucks.  From the perspective of fund managers, things are stellar.  Just read the business press.  They are breathing a sigh of relief that people will remain unemployed.

This isn't surprising.  These fund managers are legally obliged as fiduciaries to maximize short term profits.  If they don't, they get fired.  This is just how the system works.  It's nothing personal.  If you own mutual funds, this is also good for you, but not if you have a 401(k) through your employer who decides to downsize your job and outsource the work to India.

Now if you live on mutual fund income, like Mitt Romney, then you aren't going to be too worried.  The problem is that this is short term thinking.  In the long run, as the greater share of people in this country become destitute and hopeless, they are also going to become restless.  This means more civil unrest and protests, kind of like the ones we see with the Tea Party and the Occupy Wall Street Movement.  If things get bad enough, we could see riots like we saw in the 1960's.  Protests are good for democracy.  Riots are bad for everyone.

Unfortunately for the mutual fund managers, we are all in this together.  What you do affects me, and vice versa.  If you work to keep me unemployed, I'm not going to be able to buy your products, which in the end is bad for you.  If you deny someone preventative health care to save a few bucks, you end up paying much, much more when you treat a serious illness.  You can deny the diabetic test strips to save money now, but when they go on dialysis, your tax dollars are footing the huge bill.

"Penny wise and pound foolish are we," says Yoda.

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