Eurozone Unemployment Hits Record High

Across the eurozone the number of unemployed rose by more than 1.8m in the past year. Unemployment among those aged under 25 is more than 52 per cent in Spain and Greece, according to Financial Times, 2nd July 2012

ING’s Mr Brzeski said economic confidence was “far below historical averages in all eurozone countries” except for Germany, where unemployment remains low. But confidence is also declining in Germany, with the country’s manufacturing sector shrinking at its fastest rate in three years…

“It will not be long before the eurozone is officially in a recession,” said Mr Brzeski.

High unemployment is one of the negative consequences of allowing banks to create money as debt.

When banks create new money and pump it into the economy through personal loans and credit cards, it causes a ‘boom’ that creates jobs on the high-street. But because the boom is all fuelled by debt, sooner or later it causes the crash that results in millions of people losing their jobs.

As long as banks control the money supply, we’ll have an unstable ‘manic depressive’ economy…

The fractional reserve banking system is inherently unstable and highly pro-cyclical. This pro-cyclicality and instability is hugely harmful to ordinary workers. The system first creates a boom that pushes up the cost of essentials such as housing and rent, forcing workers to get into ever higher levels of debt. Because the debt is unsustainable the bubble eventually bursts, causing a crash that throws millions out of work. Then, as the economy finally starts to recover, employers are slow to hire and invest, fearing that they may need to make further redundancies if the recover turns out to be a false start. All together, this makes it harder for workers to find jobs, makes the jobs that they do find less secure, and significantly increases the amount of debt that they will fall into.

This process is referred to as the ‘credit cycle’ by central bankers, but could just as accurately be called the ‘debt cycle’:

1. increasing debt, causes a boom,

2. which encourages even more debt, leading to

3. too much debt, leading to

4. the bubble bursting, leading to

5. mortgage defaults, leading to

6. asset write-downs by the banks leading to

7. reduced lending and recession

This cycle was at the root of the financial crisis and is likely to be the underlying cause of most recessions. If we don’t stop it (by stopping banks from creating huge quantities of money as debt) then we can look forward to endless cycles of boom followed by bust, and therefore lower growth, investment and jobs.

If we want a healthy economy with good jobs, then we need the right conditions for entrepreneurs to start and grow businesses. These businesses then produce goods and services and provide employment to the population. By setting up the ‘rules of the game’ correctly, hard work is rewarded, investment is encouraged and growth and jobs are created.