Central Banks and Jobs Creation (Unemployment)

Central banks of the world always obsess about economic growth, job creation etc. They mistakenly believe that they can effect job creation by changing the interest rates, increasing M1 and M2 money supply, and all kinds of economic data jargon. I believe that central banks can't do squat to create jobs.

Why? Money is a way to exchange goods. It is a unit of measure, a very convenient unit of measure, but nothing more than that. It is the standardized unit by which people compare and exchange whatever they produce.  When google millionaires spend their money on a vacation in Hawai or going to a fancy restaurant; they really exchange their product, the search engine, with what a vacation rental company in Hawai offers them, or what the fancy restaurant company offers them. That is the real exchange going on between people; money is a convenient way to quantify these exchanges, and compare the relative values of these exchanges.

That you can somehow magically change people's production power, what products they make, by changing the units of measure, sounds bizarre to me. If they resort to low interest rates or giving money to everyone as gifts, they will only cause the prices of goods in money terms go up; but the real value of these goods or products, will not be affected. Nor will the productive powers of the people who make these products.

Just by changing a unit of measure and exchange you can't make people produce things which other people  will find useful and will exchange their products for. i.e. you can't generate employment by playing around with interest rates, etc.

Instead of dollars and yuans, if we were to decide that sea shells were a unit of exchange, will you believe the sea shell makers and suppliers when they tell you that they can increase everyone's ability to produce the stuff they produce by changing the amount of sea shells which are used to circulate their products? You obviously wouldn't--then why would you believe a central bank can?

Do you think that a poor nation in Africa with unemployment of 40% can become suddenly rich  or lower their unemployment by an intelligent banking system alone-that a central bank of that nation, playing with interest rates, money supply, etc. can reduce unemployment? If money and interest rates don't have a major  role to play there, why would you think that in a developed economy like the US or Japan or EU, you could suddenly increase employment by playing with interest rates?

The bankers obviously believe that they are the most important part of the system. But a farmer and a computer-maker has an equal right to claim that. No one sector of the economy can single-handedly improve the productive powers of other sectors. Not the least a sector which like sitting on their asses and watching noise like inflation and GDP growth to decide interest rates, etc.

The take home message-don't expect the central banks or Governments to help the country's employment numbers. They are claiming to have powers which they don't really have.

Sanjay