The nation’s high unemployment rate is a result of a severe drop in demand for goods and services and is not a reflection of longer-term structural changes in the economy, a top adviser to President Barack Obama said Saturday.

Why is there a drop in demand for goods and services?  Because the government has [HYPERBOLE ALERT] confiscated all of our money and anyone in their right mind is being cautious about how they use what they have left.  Christina Romer, however, will use this drop in demand to increase government spending MORE of our money in order to “stimulate” the economy.  How has that worked for us so far?

“It reflects the fact that we are still feeling the effects of the collapse of demand caused by the crisis,” she said. “Indeed, at one point I had tentatively titled my talk, ‘It’s Aggregate Demand, Stupid,’ but my chief of staff suggested that I find something a tad more dignified.”

No, it isn’t the aggregate demand.  It isn’t even the aggregate supply (although that is something that could more easily be controlled than the demand).  It is the uncertainty caused by a lot of factors, not the least of which is how much will Obama’s new health care reform cost us and will I really be able to keep my insurance.

The Fed cannot actually lower interest rates any more, but Romer cited a study last year that said “economic conditions would lead it to cut its target for the federal funds rate by an additional 5 percentage points if it were able to do so.” She added: “That is, despite the very low level of interest rates and all the attention to the growth of the Federal Reserve’s balance sheet, current monetary policy is in fact unusually tight given the condition of the economy.”

I am no expert in monetary policy, but does the first sentence even make sense?  “The Fed cannot actually lower interest rates any more, but…they could be cut by an additional 5 percentage points.”  Huh?  To me, it sounds like, if I could make wishes come true, I’d wave my little magic wand and, POOF!, it would all be better.

via Obama adviser ties jobless rate to demand drop: Rutland Herald Online.

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