Billionaires Are killing The Economy And Blaming It On Government Spending
There is a rather unsexy economic indicator called velocity of money, which is now at an all time low. Here in simple terms is how it works.
Say that you have a five-dollar bill with which you purchase a hotdog from a street vendor. The vendor then goes out and buys more rolls and hotdogs from his suppliers and they in turn buy stuff to keep their businesses humming. That money changing hands is call velocity of money and is what keeps the economy and jobs going along in high gear.
But suppose instead of a five-dollar bill you are a billionaire with a five billion dollar bill. You surely aren’t going to buy five billion dollars worth of hotdogs. So how is your money going to get into the real world, productive part of the economy? In short mostly its not, and that is what is killing the nation’s economy and driving debt unsustainably through the roof by endless trillions.
It is what Senator Sanders has been crying loudly about, most of America’s wealth is flowing evermore to a handful of billionaires. Yes, income inequality is bad enough, but it is what is happening to those billions that is even the bigger problem.
Back in the 1950’s and 60’s when those, say, making over 250,000 bucks a year were paying their fair share in income taxes, that money was invested in job creating programs like building America’s great interstate highway system, which generated an enormous velocity of money flow, thus creating a vibrant economy and growing middle class.
Over the years, however, the moneyed class has been relentlessly pushing for lower and lower taxes on the theory that lower taxes means more job creation — not! Now instead of their wealth flowing back into the main street, job creating economy via taxes, those above 250,000 in income are parking their gains in locked out of the real economy fixed income instruments, a virtual zero velocity play.
To make up for the nation’s falling money velocity due to the wealthy soaking up the bucks and locking them away from productive use, the Federal Reserves has felt compelled to print money far beyond that which is necessary to match an expanding economy. And so at present such things as home and stock prices are suspended on thin air. It is not that the government is spending way too much money or that the Fed is out of control with its printing press. Without such activities the economy would run immediately back into the ditch. Rather the fundamental problem is that the real wealth that has traditionally powered the economy and kept the government solvent has been squirreled away by the trillions. In the end it is the greedy ones on top that will end up killing the goose that lays the golden eggs for all of us.