Monday, December 31, 2012

Central Banks and UnEmployment

I chanced on this topic while reading two articles by eminent authors -  
 and  . The articles were about how U.S. Federal Reserve and other central banks are shifting priority from inflation to unemployment. Apparently, Fed chairman seems to have made an explicit statement about targeting unemployment. 


The topic on employment / human engagement in future had been touched by me in my previous posts -


One of the authors, in particular, pointed to low-cost global workforce and labor-saving technologies to be prominent factors contributing to the growing unemployment. I think these factors are factors that are here to stay. 

To ensure that young people acquire skills required to participate in global economy, we need to point their learning energy towards such sectors that are relatively immune to the above factors (e.g. Medical Research, Fundamental Scientific Research, etc) and last for a career long. 


My visualization on how money flow should be channeled to right sectors

But such 'long-term' sectors are not yet big employers yet due to the short-term yield and low-risk inclination of the present post-recession capital markets. These sectors didn't attract much investment in the past either. See my tweet below -


A general dumping of money into economy might mean inconsequential investment in certain sector-specific bubbles. We need to nurture the 'long-term' sectors by providing alternate and long term capital through a sector-specific approach. Central Banks have to discover sector specific tools to control money supply. 

To sum up, I think Central Banks can no longer follow the same thought paradigms as in Early Industrialization Era where all industries/sectors were the same.