How much unemployment do we need?

Posted by Peter on Oct 9, 2009 in Economy | Comments Off

Just reading an article in the star that reminded me about the role of unemployment when the bank of Canada sets interest rates.

When I was younger, I first read about the concept of NAIRU (Non accelerating rate of unemployment) and it got me upset for obvious reasons. If you don’t know NAIRU basically means that when the rate of unemployment falls “too far”, interest rates need to be increased for fear of inflation creeping in. Basically, the bank of Canada tries it’s best to avoid unemployment falling below 6.5 to 7 percent. That’s right kids, the bank of Canada is actively trying to keep a 7% rate of unemployment in Canada. Pretty insidious,no?

But then I watched what the Federal reserve has been able to accomplish (remember the federal reserve still targets full employment) by letting interest rates basically fall to zero. We got insanity. And one hell of a bill at the end for a bunch of banker bonus pay. Now that’s retarded.

So reading over the concept of NAIRU again, I still get that angry feeling in my stomach but somehow feel that atleast they are being honest in what they are up to.

But I’m still a fan of getting rid of all of them and dropping this Fiat currency concept all together.

Peter