The Fed and "Maximum Employment"
Keep the definition of “maximum employment,” as explained by the Federal Reserve, forever in mind; and remember it every time an economist or central planner uses it to justify their interventions in your life:
Maximum employment is the highest level of employment or lowest level of unemployment that the economy can sustain while maintaining a stable inflation rate.
However, the Fed cannot reach this lofty goal, as they are unable to articulate exactly what the goal is. This is concerning. Maximum employment is one of the primary mandates of the Federal Reserve. However, they make no apologies. They explicitly state that the Fed
seeks to judge how far the economy is from maximum employment, the Fed will assess a wide range of information on the labor market and not rely too much on any single estimate of a sustainable longer-run unemployment rate.
Jerome Powell told the Economic Club of New York on Wednesday:
maximum employment will require more than supportive monetary policy….It will require a society-wide commitment, with contributions from across government and the private sector.
For us to attain this goal, supposedly, we need more than “supportive monetary policy” (from the Fed). Therefore, it will require more threats of violence, theft, and coercion by the government. Although Powell did not explicitly state these methods, there is no other way to implement a national policy other than with a certain degree of force.
It seems odd to build a society around such vague ideas. But this is the society we live in. It comes as no surprise that Powell’s speech includes a subtitle called: "The Broad Responsibility for Achieving Maximum Employment." He refers to the wake of World War II, seventy-five years ago:
Congress's response was the Employment Act of 1946, which states that "it is the continuing policy and responsibility of the federal government to use all practicable means…to promote maximum employment." As later amended in the Humphrey-Hawkins Act, this provision formed the basis of the employment side of the Fed's dual mandate.
Alarmingly, he is suggesting the quest to attain maximum employment will require sacrifices not seen since World War II! Of course, anytime someone refers to the wartime era as an economic model, we must also consider that higher taxes, tariffs, subsidies, grants, loan programs and even make-work programs will soon follow.
It was Powell who first invoked wartime economics, and he even finished his speech with a national appeal, saying:
I am confident that with our collective efforts across the government and the private sector, our nation will make sustained progress toward our national goal of maximum employment.
While on the subject, it would be a disservice to ignore the central planning schemes of other countries during that time, as dutifully noted by the BBC:
Hitler aimed for full employment and by 1939 there was virtually no official unemployment in Germany.
Unfortunately, even the BBC succumbs to shining a positive light on collectivism:
Despite the loss of freedom, some aspects life improved in Germany for many ordinary people if they were prepared to conform in order to have a job and a wage.
We already see Biden and Yellen working tirelessly on a $1.9 trillion stimulus plan, while the Fed is now aiming for an “inflation at the rate of over 2 percent over the long run.” The Fed continues to increase the money supply, adding over $100 billion of new money to the system with each passing month, while the question of “asset bubbles” continues to be on everyone’s radar except our central bank's. It becomes difficult to imagine just how many more sacrifices society must make for something scarcely articulated.