Bloomberg recently posted an article on how the unemployment rate has held steady at 6.7 percent while U.S. payrolls have increased, despite more Americans entering the labor force. This means that Americans who had stopped trying to find work are now renewing their job hunt. The limitations of U.S. government have had little to do with this hopeful sign. Here’s why:

1. People Assume The President Has Too Much Power

When it comes to economic policy, aside from tariffs or taxes, the Federal Reserve has the more relevant hand in the interest rates banks charge for loans, savings accounts, capital accounts and stocks.

The Federal Reserve controls the money supply by tinkering with bank reserve ratios or how much currency a bank can hold. The President can affect inflation through drastic action, such as removing the gold standard (see Richard Nixon).

2. People Assume The President Has Too Little Power

The economy is not some ethereal being who lords over all controlling prices and jobs. The economy is the public. It is a market, in which people trade and consume, and income and prices fluctuate accordingly. The Federal Reserve simply reacts to the behavior of people, not the other way around.

It all hinges on something called aggregate demand, or how much the general population wants to consume and buy. The government does best when it does not interfere in markets at all. The Great Recession occurred because too many people put all their eggs in the housing bubble basket. The Great Depression occurred because people stopped consuming, lowering the money supply, and demanded money from banks with insufficient supply. Even now, as the unemployed population rejoins the workforce, they do so because of choice.

3. It all Runs in Cycles

Businesses and the markets they operate in run on cycles. There are booms, recessions and recoveries, and eventually this cycle repeats. It’s the ebb and flow of economics. If anticipated correctly, the cycles could pass through without any serious repercussions. However, the length between these cycles vary so widely, the public, the Federal Reserve, and the government often seem to forget about them. As a result, policies and behaviors are enacted that can prove detrimental once the cycle restarts.

This view of economics not only applies to the United States, but to the world as a whole. The power of the markets should lie with the people, and in a way, always has. Unless the government is linked directly to markets or totalitarianism, its economic power is somewhat limited. The government can guide and suggest movements for businesses, but at the end of the day, its not the government, the Federal Reserve, or the President that determines the one’s livelihood: it’s the individual.

– Matthew Price

Sources: Bloomberg, Daily Infographic
Photo: Housing Works

Asirvad Microfinance Initiative India
In short, Asirvad Microfinance is an organization that aims to provide services to poor women in India. According to Bloomberg Businessweek, it offers an income generation program, through “micro enterprise, housing and festival loans.” According to CNN Money, Microfinance groups are nonprofit, and help “fill the gap” when entrepreneurs can’t get loans. They lend money, but usually smaller amounts under $35,000, to companies with just a few employees. CNN Money said their guidelines for lending are “much more flexible than traditional banks.”

Asirvad lends between 50,000 and 100,000 Indian rupees to people doing business or improving current business. This amounts to about US$812 to US$1,628. These loans do have stipulations. For instance, a rural household income cannot exceed 60,000 rupees a year, and urban or “semi-urban” households cannot exceed 120,000 rupees a year. The borrower also cannot be more than 50,000 rupees in debt already.

The company was founded in 2007, and is based in Chennai, India, though it has branches in eight other cities in India. Another of Asirvad’s goals is to “empower at least one million families by 2013 by providing financial assistance.” Asirvad is managed by a team of seven people.

They define their values by way of an acronym:

                A for acceptance,

                S for support,

                I for integrity,

                R for resilience,

                V for viable,

                A for adaptable,

                D for dependable.

Asirvad is trying to lend a minimum of one billion rupees to the women of urban and rural India by 2015. They intend to “organize groups of committed poor women” and hope to provide financial services “in a sustainable manner” with an eye trained on eradicating poverty “through viable income generation activities.”

– Alycia Rock

Sources: Asirvad Microfinance: Vision, Asirvad Microfinance, CNN, Business Week