Wealth Creation Advice for Your Children and Grandchildren

“You can either pretend to be rich now, or really be rich later, but not both.” In other words, frugality now is essential to building wealth. The key to obtaining great wealth is to first recognize that in most cases the return to capital is much greater than the return to labor. In fact, in some sense, the whole point of your career is to make the transition from getting your money from labor to getting your money from capital. Once you are generating a lot more wealth from your investments than from your work, you can retire comfortably and confidently.

Whether you are part of the poor getting poorer or the rich getting richer usually depends upon which side of the interest rate you are on. When the interest rate goes up, the poor say: “Oh, no. Now I will have to pay more.” while the rich say: “Oh, great. Now I will be getting a better return on my money.” But to invest, you need money to make money. Where does that money come from?

There are some investments that pay off big time. A college education is one of them. But that doesn’t mean that you should borrow excessively to go to college. Keep the expense down by getting tuition waivers, scholarships, and student-work arrangements. Going into debt should never be taken lightly. It is a major barrier to wealth creation. Avoid debt whenever you can. Debt is only to be taken on as a last resort when the payoff is clear.

Take public transportation, especially if it is subsidized or free as in Kansas City. If you must have a car, buy a dependable used car, and not a fancy new car. With a car, you need liability insurance, because it is often required by law, and you probably can’t afford to hire a gang of lawyers to defend yourself if you get sued. But if you have enough money to replace your rusty old car with another dependable rusty old car, you may not need collision insurance unless you are an especially poor driver. It is important to remember that insurance has to have a negative expected value. The odds have to be against you in a gambling casino. The house on average has to make money, which means you on average have to lose money. The same is true in insurance. Self-insurance is usually better on average than commercial insurance if you have enough money to self-insure.

The key to wealth creation is to appreciate the power and importance of compound interest. The number of years it takes to double your money after checking the box that says “Reinvest Dividends” is given as follow: Number of years = ln(2) / ln(1+(APY/100)) where “ln” refers to the natural logarithm and “APY” is the annual percentage yield of your investment including the value of the additional shares you obtained by reinvesting your dividends. For example, if APY=10 percent, then APY/100 = 0.10 so the number of years to double your money = ln(2)/ln(1.10) = 7.27254 or about seven and a quarter years. To calculate how many years it would take at 10 percent APY to grow your investment by a multiple of 10 use the formula: Number of years = ln(10)/ln(1.10) = 24.1588579 or just over twenty-four years before your investment reaches ten times its initial value. An investment of $10,000 becomes $100,000 in a little over 24 years, and $1,000,000 in just over 48 years. At that rate, an investment of just $10,000 at age 20 becomes more than $10,000,000 by age 93.  Young people who ignore the power of compound interest may be leaving a lot of money on the table.

But where do you get a good return on your money? For most people the answer is the stock market. As long as corporations keep emphasizing shareholder value with great dividends and stock buybacks that drives up their stock price, you can expect to get a good return over the long term. One conservative strategy is to simply invest in broad market exchange traded index funds with very low expense fees such as Schwab’s SCHB, Vanguard’s VTI, or iShares’ ITOT. When you get older you may want to transition to the corresponding broad market dividend funds. Purchasing shares in individual stocks sometimes amounts to gambling while investing in broad market funds tends to be less volatile and does not require the day-to-day attention to a particular stock’s performance.

Young people tend to think in terms of the next few weeks or the next few months and not so much in decades. Old people in their 80s and 90s have learned to think in terms of decades, but it is too late. Thinking long-term can pay off big time if you are young, and not so much if you are really old. In retirement my wife and I often go trash walking in the campus parking lots. Unfortunately, it is in the student parking lots where we often find (in addition to lots of trash) loose change — pennies, nickels, dimes, and quarters, and occasionally a few dollars. We hardly ever find money in the faculty-staff parking lots. 

When you and your friends eat at McDonalds, do you buy the big mac or the quarter pounder with cheese, or do you buy the chicken sandwich off the dollar menu? Being secretly rebellious can be fun. Don’t let them know that you are beating them at the frugality game. Take pride in being secretly “cheap.” Buy as little as possible and pay as little as possible for what you buy. Thinking longer term means not trying to impress your friends by buying the latest, most expensive gizmos or keeping up with the latest fashions but knowing that many years from now at your class reunion, you may be the wealthiest person in your graduating class.

( Important Note: The author takes no responsibility for any investment decisions, decisions regarding insurance, or other actions you may take in response to reading this column. The author is not a certified investment advisor. If you want specific investment advice, you need to contact a professional, certified investment advisor. )

Winning as a Team Takes Us Beyond Individual Identity

We all love the story of the rugged individual — hard-working, self-reliant, and through the magic of Adam Smith’s invisible hand, inadvertently helping others while pursuing one’s own self-interest. An entire world of economics has been built around this story. There is a lot of truth to the idea that this country was built on the frontier spirit of individual efforts overcoming difficult challenges to get ahead.

The problem with this story is that it ignores, or at least relegates to the background, the idea of each of us being part of a larger entity — be it our family, our neighborhood, our work team, or our country as a whole. Yes, we are out for ourselves to some extent, but we are also very likely to sacrifice our own interests to help others. Few people totally ignore the best interests of their family or community in their day-to-day choices. Our community identity can be as strong, and sometimes stronger, than our individual identity. Think of the basketball player who passes up the chance for glory in making the long shot and, instead, passes to a teammate closer to the basket. Think of the medic in combat who puts his or her own life at risk to save others. We thank our soldiers, police and firemen for their service knowing that they are risking their lives on a day-to-day basis to help protect us.

In some ways we are so interconnected that it is not clear that an intelligent alien entity from elsewhere in the universe would see us as separate individuals at all. To such an entity, we might be seen as the mass of humanity spread out across the globe. The dangers of world war, asteroid strikes, and irreversible climate change bind us together in a way not fully appreciated by Adam Smith’s invisible hand.

In displaying and waving the American flag, we are revealing and relishing in our larger identity as Americans. We are proud to be part of the greater team. Hopefully, we feel that same about our family. Some explore their genealogy to better appreciate their family heritage. But what about our work team. For some, there is great pride in the team’s efforts and achievements. For others, not so much.

If each individual is directly and completely responsible for a specific output or outcome, it is easy to provide incentives to reward their work. But what if your work team is producing and selling a product or service where the quality of the work in production and the marketing of the product in advertising is combined to produce sales. Are those sales the direct result of better quality or better advertising? It is sometimes hard to tell.

Moreover, the outcome of a team effort might only be determined by the interaction of team members in supporting and enhancing the efforts of the individuals on the team. This interaction and support is enhanced when the team as a whole is rewarded. For sports teams, the glory comes in winning as a team. Each member of the team understands that the others must do their part to enable the team to win. Rewarding the team as a whole can sometimes be just as important as rewarding each individual team member.

Going to one extreme or another in this regard can lead us astray. To the extent that it is possible to identity and measure an individual’s contribution that individual should be rewarded to that extent. However, it is also important to recognize and reward the team as a whole so that each team member will have an incentive to encourage, and sometimes cajole, other team members to do their best for the team. Success often requires team cohesion and coordination that cannot be achieved by each member just doing their own thing. We have our individual identity, but we also have our collective identity. Only rewarding individual identity misses the importance of our group identity in enabling good outcomes for the team.

On the other hand, if we only reward the team, as a team, and ignore the extent to which a particular individual has contributed to the team’s success, we run the risk of encouraging free riders who make little effort with the hope that their teammates will make up the difference. This was the fundamental mistake of communism — simply dividing up the team’s profits equally without regard to individual efforts. Clearly, maximizing economic productivity requires just the right combination of rewarding the team as a whole and rewarding individuals according to their individual contributions. Every enterprise may be different in this regard so broad oversimplifications of this complicated challenge are likely to be misleading. Too much emphasis on individual effort alone can be just as foolish as simply rewarding the team as a whole without regard to each member’s contribution.

Disequilibrium Economics and Adam Smith’s Two Invisible Hands

In competitive markets with sufficient elasticity, equilibrium is established and maintained relatively easily. Consumer demand and supply respond quickly to the mantra: “The solution to high prices is high prices; and the solution to low prices is low prices.” Obviously, the point is that in the face of high prices, consumers cut back demand and suppliers increase supply to bring down prices. Conversely, in the face of low prices, consumers increase demand and suppliers cut back supply to raise prices. We achieve equilibrium quickly and efficiently.

Except this doesn’t work very well or very quickly in the financial markets and in the economy overall. The problem is that traditional equilibrium economics assumes rational, independent decision makers with full information and sufficient mental energy to compute and re-compute their optimal behavior in complex situations that can quickly change and invoke emotional responses. Contagion effects in financial markets can drive prices dramatically higher in irrational exuberance as higher prices cause people to jump in and follow the crowd to purchase even more in the face of those higher prices instead of less. Conversely, a downward price spiral can be hard to stop when fear overtakes hope and prices fall precipitously. Dan Ariely’s book “Predictably Irrational” reveals a problem that economists have tried to ignore and marketers have profited by exploiting. An irrational herd effect can quickly overwhelm market participants to leave markets in disequilibrium for an extended period. It is hard to understand why economists have taken so long to catch on to consumer irrationality when the people in marketing have understood consumer irrationality and have been exploiting it for hundreds of years.

Moreover, too many people confuse optimal microeconomic behavior with optimal macroeconomic outcomes. The aggregate economy does not converge toward equilibrium when microeconomic incentives do not lead to the intended desirable macroeconomic effects. The classic example is the paradox of thrift where during a recession, when people see friends and neighbors losing their jobs, they try to save a larger share of their earnings in case they might lose their jobs, but the total amount of savings falls because the drop in spending causes more cutbacks in working hours and jobs as consumer demand and prices fall causing businesses to cut back production of goods and services. The microeconomic incentive to save more leads to less total savings at the macroeconomic level. My spending contributing to your earnings and your spending contributing to my earnings can sometimes lead to greater disequilibrium instead of a convergence toward an overall equilibrium for the economy as a whole.

It would be nice to have a world that even in primitive times would have allowed individuals to compete freely and fairly with perfect competition resulting in a natural, efficient and dynamic equilibrium being established in every market. But that is far from reality. In most primitive and many modern societies, the big guy gets what he wants. The equal opportunity and competitive environment is not the natural state. Far from it. It takes a strong and active government to enforce freedom with equal opportunity and competitive markets. In his book “The Myth of Capitalism” Jonathan Tepper has revealed the surprising extent of reduced competition and increased concentration in most major industries in the United States.

For example, consider the market for eyeglasses. Glass and plastic should be very cheap. After all, we throw a lot of glass and plastic into recycling bins every week. But instead of two or three dollars, eyeglasses typically cost about one-hundred and thirty dollars or more. In reality eyeglass manufacturing is basically a duopoly with only two eyeglass manufacturers dominating the market. In the eyeglass market, Adam Smith’s first invisible hand of competition has been suppressed by Adam Smith’s second invisible hand of market power where he said: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the publick, or in some contrivance to raise prices.”

Moreover, government can interfere with freedom and competition by imposing patents, copyrights and licensing requirements, among other restrictions such as child labor laws and government sponsored monopolies. Sometimes government intervention is good in solving problems that the free market is incapable of solving on its own. At other times, government intervention can create problems or make problems worse, so it is important to distinguish between good government intervention and bad government intervention. With limited mental energy, we have a natural tendency to think in all-or-nothing terms, but reality requires careful analysis to devise effective and efficient policies to fix free market problems without introducing significant other inadvertent difficulties. For a better understanding of the role of government in our economy see Mariana Mazzucato’s three books: “The Entrepreneurial State,” “The Value of Everything,” and “Mission Economy.”

Adam Smith’s explicit invisible hand of competition suggested that we just need to focus on maximizing our own personal utility function or profits, and others will benefit from our self-centered behavior. But Adam Smith wrote implicitly about a second invisible hand where competitors conspired together to block competition and exploit consumers. While the invisible hand of competition led to lower prices with a focus on quality, the second invisible hand led to higher prices with less concern for quality. Assuming that the first invisible hand will always dominate is naive at best. The rules and regulations set by government play an important role in determining the balance of power between these two invisible hands.

As of May 1st, I-Bonds now offer 9.62 percent interest

Great news!!! As of May 1st, I-Bonds offer a 9.62 percent interest rate. But for most middle-class Americans, there is nothing here to celebrate. As currently structured, I-Bonds are not designed for lower or middle-class people.

I-Bonds were presumably created to try to get middle-class people to save more money and spend less. In theory I-Bonds should be especially helpful in times of inflation to reduce overall consumer demand as well as in recessions in providing savings to draw upon to keep consumer demand from falling too abruptly. The I-Bond savings limit of $10,000 per person was supposed to benefit the middle class without giving the wealthy another way of leveraging their wealth to further exacerbate economic inequality.

We all like to think of ourselves as being in the middle class. But remember that two-thirds of Americans do not have a college degree and forty percent of Americans could not come up with $400 in an emergency without having to borrow money. Most of the wealth of the sixty-six percent of Americans who own their own home is tied up in the value of that home. Still, getting people to save more money is a worthy goal.

However, the other features of an I-Bond limit its usefulness to the very people that I-Bonds were created to benefit.  Money invested in I-Bonds may not be withdrawn for one year. Money withdrawn after a year, but before five years, is subject to a loss of three months of interest payments. Wealthy people have very low marginal propensities to consume because giving them a little bit more or less money has virtually no effect on their spending patterns. However, poor and middle-class people have high marginal propensities to consume in that they adjust their spending up or down significantly as they get more or less money at the margin. Consequently, for I-Bonds to serve as an automatic stabilizer in times of inflation and recession, the poor and middle-class should be the primary beneficiaries of I-Bonds, but they are not.

The challenge is to design an attractive flexible investment that will work for poor and middle-class people and to make sure that they know about it and how to access it easily even if they are currently unbanked or underbanked.

People with little money need access to their money whenever an unexpected expense arises. For example, an automobile accident may require the repair or replacement of their vehicle. A medical problem may require unexpected expenditures. An unanticipated increase in rent may mean withdrawing money from savings while looking for a cheaper place to live. I-Bonds just don’t work well for people who would like to save more but can’t afford to tie up their money for extended periods.

Since most people in the middle-class are not familiar with the bond market anyway, they probably don’t know about I-Bonds to begin with so they may not feel left out of this opportunity to try to stay ahead of inflation.

Unfortunately, what at first appears to be a great wealth-building opportunity for the middle-class, turns out to be just another snack for the wealthy (or at least for those wealthy who want to bother with such a small amount of money ($10,000)).

Inflation from multiple causes requires multiple cures

Consider all the relevant and important factors that have generated our current inflation.

First, the pandemic has played an important role in interfering with our unexpectedly fragile supply chain. Other commentators have already pointed out that too much emphasis on efficiency created our rather unstable “just-in-time” system. This needs to be replaced with a more secure “just-in-case” system that is robust and resilient to disruptions.

Second, many economists have reported that COVID-19 also caused people to cut way back on services (e.g., travel and dining) and to use those savings to increase demand for durable goods such as automobiles. This occurred just as the vehicle computer chips were in short supply. There has also been a significant increase in demand for housing driving up prices partially due to a new, widespread effort by some Wall Street investors to buy up single family homes around the country and turn them into rental units. Perhaps you have received a phone call recently from one of them offering to buy your home.

Third, consider the stimulus packages. Larry Summers was among the first to point out that the Biden stimulus package was too big and would result in too strong consumer demand. Ironically, President Obama had made the opposite mistake in 2009 in trying to compromise with Republicans who sought to minimize the stimulus to minimize the role of government in recovering from the Great Recession. Ultimately, Obama failed to gain bipartisan support for his stimulus package anyway. Obama’s stimulus bill was too small, but President Biden went too far in the other direction and produced a stimulus that was too big.

The pandemic also discouraged some people from going to work so the workforce was reduced just when more supply was needed to meet an increase in demand. At the same time demand increased for medical and other essential workers. The surge in demand led to a shortage of workers in general and truck drivers in particular who are needed to provide the corresponding increase in supply. The increase in wages due to the shortage of workers helped raise prices of many commodities including food and fuel. President Trump had better relations with the OPEC countries, especially Saudi Arabia, than President Biden, due, in part, to their different reactions to the murder of Jamal Khashoggi, which didn’t seem to bother Trump, but deeply upset Biden. Biden’s pleas to the OPEC countries to increase the supply of oil have gone largely unanswered. Obviously, the war in Ukraine will only make things worse so expect prices (especially food and oil prices) to continue to rise substantially.

On top of all this is an economy dominated by less than fully competitive firms which took advantage of the new inflationary environment to raise their prices even if not justified by supply shortages or excessive demand. Jonathan Tepper wrote “The Myth of Capitalism” to reveal the amazing amount of concentration in American industries. For example, our patent laws have allowed the production of eye glasses to be dominated by just two companies. You would think that a small amount of glass and plastic would cost just a few dollars, but glasses typically cost close to 100 dollars or more. Patent laws originally were intended to encourage innovation, but in many cases have suppressed both competition and innovation. Adam Smith actually provided us with two invisible hands: (1) the explicit invisible hand of competition to increase quality and lower prices, and (2) the implicit invisible hand of economic power where firms conspired together to suppress competition and raise prices. It is this second invisible hand that has become so active in our current inflationary economy. To restore competition and reduce prices patent laws must be severely limited in their application and large dominant firms must be broken up. Some import duties may be necessary to avoid excessive dependence on production in overseas countries. 

Our politicians have been reluctant to take responsibility for all this and have instead relied on the Federal Reserve to stop excessive inflation. The Fed, in turn, has emphasized the need to ‘’stay in its lane” by limiting its action to cutting back or even reversing its purchases of securities and raising interest rates. This means increasing the cost of borrowing. Unfortunately the Fed’s restrictive policies suppress both supply and demand. To meet excessive demand for its products, a firm may want to add another line of production. This requires investment. Borrowing the money to invest in another line of production may turn out to be too expensive after the Federal  Reserve raises interest rates to suppress borrowing. This approach to stopping inflation slows the economy to the point of causing a recession.

It would be much better if the Fed could target demand by those people with the highest marginal propensities to consume (hundreds of millions of poor and middle class Americans). The whole point of the existence of interest rates is to pay someone to delay consumption. Private banks cannot afford to offer a higher interest rate on savings than the interest rate they charge on borrowing. But the Federal Reserve could offer a high interest rate on savings if it was limited to relatively small balances aimed at reducing consumer demand by those most likely to spend any extra dollars. Such small balances would not have much effect on private banks or the rates that they set for borrowing and saving. Most of the money in our banking system is owned by a few thousand wealthy families who have very low marginal propensities to consume and would probably not bother taking the time to move such a relatively small amount of money. However, the total increase in savings by hundreds of millions of Americans could amount to billions of dollars in reduced spending. Most prices would stabilize in the face of such a substantial reduction in consumer demand.

Too often policy is devised by politicians, who interact with the bankers, doctors, and lawyers who represent the small minority of Americans who are exceptionally wealthy. Instead we need to target middle class families who would save more money and spend less if offered a high enough interest rate on relatively small amounts of savings. This could be done by creating Federal Reserve digital currency bank accounts for every American. To combat excessive inflation very high interest rates could be offered on small balances for only one account per Social Security number. Anyone else in the world would be allowed to have a digital currency account with the Federal Reserve (unless sanctioned by Congress) but they would not be allowed to earn interest on their account balance. The Federal Reserve is currently considering the possibility of offering such digital currency bank accounts, and I have answered the 22 questions they have asked on how this new policy tool could be implemented. Going forward we will see if they follow my never-too-humble advice.

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Stock Market: Prudent Investment or Gambling Casino?

My father, Edward Cady Marsh, was a Wall Street investment banker. He took the train in to Wall Street each morning from Westfield, New Jersey and returned in the late afternoon. He specialized in industries such as the automobile industry, the steel industry, and the grocery industry. His compensation was based in part on his recommendations to the board, regardless of whether the board accepted and acted on his recommendations. As someone who lived through the stock market exuberance of the late 1920s and the crash and depression thereafter, he was very aware of the downside of stock market investing.

I learned early on that the profitability of a company was only one aspect to consider. The stock’s price was of equal importance. Overpaying for a very profitable company’s stock could be just as big a mistake as buying a cheap stock that had poor profitability prospects. Another factor that retail investors often overlook is the time horizon of stock market pricing. My own experience suggests that the typical stock is evaluated on a six month return basis. In other words, on average the market appears to be pricing stocks on the basis of how well they are expected to perform in six months. After the Great Recession the stock market bottomed out in March of 2009, but the economy took about six months before it was clearly heading up again.

If you get into a great stock too early, your investment may just flounder around rising and falling without much direction before it finally takes off, whenever that might be. Getting in to a good stock too early can be just as bad as getting in too late after its price to earnings ratio has reached unrealistic levels.

Another common mistake made by retail investors is sitting on too much cash and not investing for fear of short term losses. The general pattern of the stock market is to fluctuate up and down for some time and occasionally slip into a bear market, but, more importantly, suddenly move upward to establish a new level. It is these sudden upward moves, when you have too much of your investable funds in cash, that can make stock investing unprofitable. Many studies have pointed out that missing out on just of couple days of extraordinary gains in a very profitable year can eliminate most of the profit.

For the retail investor, investing in individual stocks can be very dangerous. Although most stocks tend to move up and down with the market over the short run, individual stocks can drop dramatically or move up unexpectedly. For the retail investor, investing in individual stocks is more akin to gambling that investing. As a retail investor, I have benefited from investing in broad market index funds with very low expense fees. Professional investors are much better positioned to determine which stocks are best to invest in at a particular price and time. However, sorting out the good professional investors from the bad and overcoming the fees charged by professional investors might not be worth the time and trouble. Index funds with low fees can sometimes be more cost effective and efficient than actively managed funds.

Clearly there are trends that may signal substantial increases in profitability going forward. A professional investor might consider whether the time is right to invest in stocks of companies producing lithium in anticipation of a big increase in the sales of electric vehicles that require lithium batteries. But what if there is a breakthrough in battery technology that replaces lithium with some other ingredient? In that case, the value of lithium stocks could drop dramatically.

Individualized medicine is another area ripe for expansion in coming years. Most of our doctors do not even have a sample of our DNA. Moreover, the randomized trials compare the average person’s response in the experimental condition with the average person’s response in the control condition to determine the statistical significance of the average person’s response to a drug or other medical intervention. But if the distribution is bimodal with half the people at one end and the other half at the other end, the average person may not exist. With more and more individualized data becoming more widely available, a professional investor may want to consider investing in companies with personalized medical data (e.g., DNA) that are able to zoom in to subsets of individuals sharing common characteristics to get closer to the uniqueness of an individual patient in order to provide individualized diagnosis and prognosis. For the retail investor these potential breakthroughs may introduce too much uncertainly and potential volatility but may be of interest to the professional investor.

Finally, one might consider the use of leveraged funds. Such funds provide multiples of the price movements of their corresponding indices either in the same direction (leveraged longs, UDOW) or in the opposite direction (leveraged shorts, SDOW). The opposite strategy would be to seek out the least volatile stock indices which tend to the ones that emphasize dividends. One approach might be to move from a broad based stock index fund into a fund emphasizing dividends when the stock market seems overextended in an irrational exuberance phase. If one is really into gambling, substituting broad-market leveraged shorts would be an alternative strategy at such times. On the other hand, when the stock prices have fallen significantly, one could move into broad-market leveraged longs, which could dramatically increase yields when (and if) the market recovers. Note that the expense ratios for these leveraged funds tend to be quite high and may be restricted to accredited investors.

In general, successful stock market investing requires being reasonably cautious and very patient. Most importantly, the investors style and strategy must match their personality. What works for one person may be entirely inappropriate for someone else. If you become distraught and tear your hair out when your portfolio’s value drops with a market decline, including a bear market that lasts for some time, then your style and strategy do not match your personality.

( Note none of the above commentary should be considered professional investment advice. This commentator does not accept any responsibility for losses incurred as a result of reading this commentary. Investors who want professional advice should seek out a professional investment advisor.)

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Why Punish the Poor to Stop Inflation and Make It Harder for Firms to Increase Supply?

Why Punish the Poor to Stop Inflation and Make it Harder for Firms to Increase Supply?

When the Federal Reserve raises interest rates in New York financial markets, it becomes harder for businesses to borrow, which causes businesses to cut hours, lay off workers and close outlets. This is an indirect and rather brutal way to reduce demand for goods and services that also reduces supply. The effect is to make it harder for firms to increase supply and harder for people working paycheck-to-paycheck to handle medical emergencies, automobile accidents and other situations where they need a small loan just to get by.

But trashing the economy to stop inflation is not necessary. A more direct, more efficient and more effective way to stop inflation is possible. When the demand for goods and services exceeds the supply, prices rise. Demand can be reduced with either a carrot or stick approach. Why use the stick of raising interest rates on loans that punishes poor people facing a personal crisis and businesses that want to supply more, and instead offer the carrot of higher interest rates on savings to get people to voluntarily put off unnecessary spending and save some money?

In 2018 Senator Kirsten Gillibrand introduced Senate bill S.2755 as “The Postal Banking Act” as a way to use post offices to restore the “The Postal Savings Act” of 1910 which allowed people to cash checks and set up savings accounts in the over 30,000 post offices throughout the United States from 1911 to 1966. Senator Gillibrand sought to use our local post offices as a venue for the poor to get small loans to deal with various crises without becoming prey to loan sharks, pawn shops, payday loan dealers, or “cash now” providers who typically charge exorbitant interest rates.

The Federal Reserve is already considering creating a central bank digital currency (CBDC) as China and several other countries have already done. The Federal Reserve could use post offices as physical locations to access individual CBDC savings accounts. People could also register their smartphones at post offices for more direct and immediate access to their CBDC accounts. When excessive inflation threatens, these CBDC accounts could offer a high interest rate on savings. Encouraging people to save money and spend less will reduce the excess demand where too much money is chasing too few goods and driving up prices.

Ordinarily, to make a profit a bank must charge a higher interest rate on loans than it pays on savings. But as the creator of money, the Federal Reserve is in a unique position. To reduce demand for goods and services, the Fed can offer a higher interest rate on savings. However, in line with “The Postal Savings Act” of 1910 and in order to avoid disrupting commercial banking, the Fed will need to set a limit on the size of savings accounts. With one account per Social Security number and a limit of $10,000 per account, the Fed can avoid competing with private banks for the large savings of wealthy investors.

Encouraging people to build up their savings will also serve as an automatic stabilizer for the economy. Whenever an economic downturn threatens, people with savings do not have to cut their expenditures so dramatically. This avoids a sudden drop in expenditures which would just make economic downturns more severe. A larger pool of savings would shorten and lessen the severity of recessions.

If everyone had a Federal Reserve bank account accessible from their computer or smartphone, it would become easier to transfer money. If someone cuts your grass, rakes your leaves or shovels your snow, you can pay them easily with a smartphone-to-smartphone transfer between your individual Federal Reserve accounts.

Alternatively, when inflation is low and unemployment rises, the Fed could lower the interest rates on both savings and loans to help stimulate the economy. This new tool would give the Fed much tighter control in meeting its mandate of maintaining full employment with stable prices.

Large banks already have bank accounts with the Federal Reserve. There is no reason why the rest of us couldn’t also have bank accounts with the Fed. The rise of digital currencies, especially stablecoins, threaten the Federal Reserve’s dominance and control over our currency. By setting up digital currency smartphone postal savings accounts for every American, the Fed can reestablish its control over our currency and gain a much better way of dealing with the challenge of excessive inflation on one hand and high levels of unemployment on the other.

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Distorted Money Flow Creates Chronic Disequilibrium in our Economy

January 7 – 9  is the American Economic Association Conference with 115,000 economists attending virtually where I present a rough draft of my new book in a poster session, followed later by a presentation at the Midwest Economics Association meeting in Minneapolis. Instead of emailing you my 70+ page research paper, I am providing below the content of the PowerPoint slides that summarize the paper.  

 “The Public Banking Act ” Should Allow for Individual Federal Reserve CBDC Bank Accounts (“FedAccounts”) To Transform Monetary Policy.  Adjusting interest rates on Wall Street is ineffective in stimulating and too brutal in slowing the economy, but injecting stimulus money and adjusting interest rates on small individual consumer Federal Reserve bank accounts could impact consumer demand more effectively and more immediately.  Note the author’s  proposal for stopping inflation using “FedAccounts” at: https://www.youtube.com/watch?v=nnMT7DVyK0g This follows from the money flow paradigm in the author’s book “Optimal Money Flow” which also considers the case of deflation where aggregate demand is inadequate to match aggregate supply which is summarized on YouTube at: https://www.youtube.com/watch?v=-hqBD3ZEhIM  

Digital Currency Threat => Will Central Banks lose control of money?  Banks creating their own money caused bank panics that continued even after adopting a common currency (dollars).  Wide use of private digital currencies could cause excessive volatility, tax avoidance, and criminal activities. Central Banks need to create their own digital currencies.

STOP  INFLATION without causing a RECESSION. The supply-side tool of raising interest rates in New York financial markets causes layoffs as businesses cut back. Don’t trash the economy to stop inflation. A demand-side tool can be created to stop inflation more effectively and more efficiently.  

Control demand to avoid economic downturns. NYC financial markets already have more money than can be put to work. Lowering interest rates further and supplying more money is just “pushing on a string.” A demand-side tool can be created to stimulate economy more directly using much less money. 

Velocity of Money Falls => Milton Friedman  M V = P Q  inflation always a monetary phenomenon with V (velocity) constant, and P (prices) constant only if M (quantity of money) rises at same rate as Q (economic output) rises. But V falls as population ages. And V falls as economic inequality increases. To keep Q growing at full employment, M must rise faster than V is falling so P can be constant.

Adam Smith =>  Two  Invisible  Hands: 1. Economic competition (lower prices). 2. Economic concentration (higher prices). USA economy has become less competitive with greater oligopoly and monopoly (as well as oligopsony and monopsony) power. See Jonathan Tepper’s book: “The Myth of Capitalism” about the dramatic drop in competition in the USA economy.

Pure Profits at Zero Marginal Cost => The explosion of information on the Internet has produced a commodity with essentially zero marginal cost. For example, with premium access you can gain access to extra information that already exists but only requires changing a zero to a one in computer code for you to access, which is done automatically when you make your payment for premium access. See book by Jeremy Rifkin: The Zero Marginal Cost Society. New York: St. Martin’s Press, 1014.

Profits rise as labor and capital shares fall => Barkai (2020) calculated the capital costs for the U.S. non-financial corporate sector over the period 1984 to 2014 and found that while labor’s share has dropped by 11 percent, the share of real capital has declined 22 percent with a corresponding increase in pure profits. Barkai, Simcha. “Declining Labor and Capital Shares.” The Journal of Finance, 75(5), pp. 2421-2463. 2020.  https://doi.org/10.1111/jofi.12909 

Distorted Money Flow => extreme wealth inequality leads to instability. Most of the money flows to the already wealthy who put it into the New York financial markets (stocks and bonds). The money flow has become so distorted the middle class can no longer afford to buy back the value it creates. Individuals go deep into debt while the government runs large deficits to keep the economy from sliding into recession. However, recently a combination of a large stimulus and COVID related supply shortages temporarily disrupted this chronic problem of inadequate demand relative to extensive global supply.

Disequilibrium Economics => Hyman Minsky explained that while most markets for well-defined goods and services move toward equilibrium, the economy as a whole and especially the financial markets are prone to swing between an upward irrational exuberance and a downward recessionary spiral. As John Maynard Keynes said: “In the long run we are all dead. Economists set themselves too easy, too useless a task if, in tempestuous seasons, they can only tell us that when the storm is long past the ocean is flat again.”

Darwinian Natural Selection Paradox => As countries reach about $6,000 per capita, birth rates drop like a rock, eventually falling below the 2.1 replacement rate. Wealthy and well-educated countries and families have fewer and fewer children in recent decades. Instead of success in education and wealth breeding bigger populations, human populations fall dramatically. As world population shrinks to zero, last one remember to “turn off the lights.”

Private and Public Debt => Decline of unions and Citizens United’s one dollar = one vote cuts workers’ real pay. Middle class unable to buy back the value of the goods and services it produces. Low pay and low interest rates drive people on Main Street deep into debt as more and more money flows to Wall Street. Government debt needed to fill in for the money flow going to Wall Street to maintain full employment.

Financial vs. real economy => Money flow to wealthy goes mainly into stock and bond markets on Wall Street driving down interest rates and inflating stock prices. Large amount of money not used for real investment (physical and intellectual) but goes into financial investments (dividends and stock buybacks). Consequently, the middle class is unable to purchase the value of the goods and services it is capable of producing at full employment.

Money Flow Paradigm => George Cooper in “Fixing Economics” identified key problem of too much money flowing to Wall Street and not enough money flowing to Main Street. Government sets the rules and regulations, and provides the money for free enterprise system. Government investment in common property resources is key to economic efficiency and growth. See Mariana Mazzucato’s 3 books: The Entrepreneurial State, The Value of Everything, and Mission Economy. 

The Age of Oversupply => Globalization and the collapse of communism. Cheap labor makes large quantities of high quality products available at very low prices and leads to deflation in prices of goods and services when demand is inadequate relative to enormous global supply. Read Daniel Alpert’s book: “The Age of Oversupply.”

Policy Driven Excess Supply => Chinese take resources and work hard to make products for USA in return for pieces of paper with George Washington’s picture on it. To keep Chinese products inexpensive for USA and Chinese workers employed, China collects USA dollars and buys U.S. Treasury securities in New York financial markets instead of driving down value of dollar in foreign exchange markets.

Antithesis of Say’s Law => population growth > food supply  reversed!!! Global supply exceeds demand when too much money flows to Wall Street and too little money left on Main Street. Supply-side economics replaced with demand-side economics. “Supply creates its own demand” replaced with “Demand creates it own supply.”

Distorted Money Flow => extreme wealth inequality leads to instability. To understand how “Distorted Money Flow” can become “Optimal Money Flow” visit the following website: https://optimal-money-flow.website/  For more information on the author visit the author’s public website at: https://sites.nd.edu/lawrence-c-marsh/home/ 

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Please provide your insights and comments on “Distorted Money Flow Creates Chronic Disequilibrium in our Economy” by scrolling down to the bottom of this page and writing your comments in the textbox “Comment.”
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Lawrence C. Marsh is Professor Emeritus in Economics at the University of Notre Dame and author of the 2020 book: Optimal Money Flow: A New Vision on How a Dynamic-Growth Economy Can Work for Everyone
You can donate the entire purchase price of the book to student scholarships by buying a hard-bound copy of the Optimal Money Flow book at the Avila University Press website at:  https://www.avila.edu/aupress/optimal-money-flow-by-lawrence-c-marsh with no charge for shipping and handling.  

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Economic theory must change to accommodate irrational, inconsistent and altruistic behavior

Traditional economics is based on three key assumptions: (1) rationality, (2) consistency, and (3) self-interest. It assumes a cold, calculating, rational choice by each individual based on a stable set of preferences. It frequently doesn’t work out to be that simple, because social factors intervene.

We are all highly interdependent. Automobiles, cell phones, even breakfast cereals are created collectively. Stock market and housing bubbles are evidence of important contagion effects. Aliens from outer space may not see us as individuals at all, but rather as cells in a collective body that is spreading across the face of our planet. Economic theory needs drastic revision to better incorporate our collective interdependence.

Economists tried to devise methods of aggregating individual preference functions into a community-wide preference function, but finally had to accept economics Nobel prize laureate Kenneth Arrow’s Impossibility Theorem that said that under somewhat general circumstances no such aggregation of individual preferences could produce a legitimate community-wide preference function. Thus, no formal, mathematical proof has been forthcoming of Adam Smith’s idea that our collective, economic well-being as a nation can be improved from each individual pursuing their own economic self-interest, as expressed in his 1776 book An Inquiry into the Nature and Causes of the Wealth of Nations.

Instead economics detoured into game theory which provides many interesting results but does not solve the fundamental problem. Moreover, the outcome of any particular game tends to be sensitive to its own, game-specific assumptions. A more general economic theory is needed that is robust to a wider range of assumptions in general and allows for our collective interdependence in particular.

A good beginning for thinking about developing an economic theory of our collective interdependence is the 1976 book by Fred Hirsch called Social Limits to Growth published by Harvard University Press.

A new branch of economics called behavioral economics tests these assumptions by performing scientific experiments to determine how people actually behave. Behavioral economists have recorded numerous situations where people do not behave rationally.

For example, advertisers have long understood that people will go to great expense to get something for “free.” One professor set up an auction system that caused his students to bid more than $20 for a $20 bill. An irrational sense of commitment leads people to tenaciously hold on to stocks they already own, but otherwise would not be willing to purchase. These are not just trivial irregularities. There are a wide-range of situations where people behave irrationally from the point of view of traditional economics.

From its beginning, economics has had to fend off evidence of irrationality. Giffen goods that defy the law of demand by responding positively to price increases and negatively to price cuts were dismissed as special cases with little importance for overall economic policy. When some individual consumers and investors made foolish choices, economists employed the law of averages to try to reaffirm rational market outcomes. The term rational expectations was coined when this was extended to the behavior of monetary and fiscal policy makers.

Is it enough to simply dismiss irrationality by throwing it into the error term, or could it sometimes be the main effect? Bounded rationality depicts decision making in a restricted context where information is incomplete and available choices are limited. Such analysis provides the dismal science with a new basis for moving away from excessively optimistic forecasts.

The hedge fund Long Term Capital Management collapsed in 2000 when the market did not move back toward equilibrium in a reasonable amount of time. Such unexpected events are described by Nassim Taleb in his book The Black Swan: The Impact of the Highly Improbable.  Are markets ultimately efficient in the long run or is the long run just too far off? After all, it was John Maynard Keynes, the father of macroeconomics, who pointed out that “in the long run we’re all dead.”

The Achilles heel of traditional economics was uncovered when researchers found that irrationality is often predictable. Dan Ariely’s 2008 book Predictably Irrational is a recent popular contribution while the 2004 compendium volume Advances in Behavioral Economics provides a more extensive coverage from the professional literature. Also see The Paradox of Choice by Barry Schwartz, Sway by Ori and Rom Brafman, and Free Market Madness by Peter Ubel.

Economists such as Nobel prize laureate Gary Becker led the extension of economics into the social realm in studying such things as the economics of marriage and drug addiction. Becker and his followers showed how economics can influence social behavior. The new economics is showing how social considerations can impact economics. The Nobel prize in economics was won in 2009 by Elinor Ostrom and Oliver Williamson for research that showed how organizational factors can affect economic outcomes. Social factors can have an even bigger impact on the day-to-day decisions of all of us.

For example, if you ask a friend to help you move, she may be willing to sacrifice a few of her precious Saturday hours to help out. If instead, you offer her $10 a hour to help you, she may turn you down flat. How can it make sense to be willing to work for nothing, but not be willing to do that same work for money? The answer is that social relationships are quite different from economic relationships. As soon as you make it a monetary transaction, you have changed the nature of the relationship.

An important irrational distortion occurs when a person takes possession of an item. A study randomly sorted an equal number of people into two groups. In one group each person was given a coffee mug. In the other group everyone got a candy bar. They were immediately given an opportunity to exchange the item they received for the other item. Since membership in the two groups was random, on average the ratio of people with candy bars to coffee mugs should turn out to be the same in the two groups after the final exchange. To the surprise of the researchers, the proportion of candy to mug lovers turned out to be quite different in the two groups. Each group tended to hold on to its initial gift much more than traditional economics would predict.

Decision making is more than just taking into account time and money. We also must consider the mental energy necessary to make decisions. Behavioral economists have unearthed substantial evidence of omission bias in economics. The stock market provides a perfect example. Researchers have found that people who own stock A which turns out to be a loser but could have purchased stock B which ultimately turns out to be a winner have much less regret than a person who initially owned stock B and then sold it to buy stock A. Even though both people end up with the losing stock A, they feel much different about it. A recent decision to hold onto a loser is not considered anywhere near as bad as the decision to buy that loser even when the monetary loss turns out to be exactly the same.

The desire to be a winner frequently distorts economic outcomes and not just when an item is offered for “free.” A study offered people either $100 for sure or, alternatively, a chance to win $200 or nothing with a fifty-fifty probability. Since the expected value of the two alternative offers is the same, researchers expected about half of the people would take the $100 and the other half would try the gamble. A large proportion of the people chose the $100 with certainty. The $100 is enough to make the person a winner while the chance to get an additional $100 was not as important as the possibility of getting $0 and losing the winner status. The opposite was found when people were given a choice to lose $100 with certainty or lose $200 or $0 with a fifty-fifty probability. Most people chose the gamble since a loss of $0 was the only way to avoid being a loser.  Traditional economics does not provide a mechanism for understanding such an irrational inconsistency.

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Please provide your insights and comments on “Economic theory must change to accommodate irrational, inconsistent and altruistic behavior” at the bottom of this page.
. _______________________________________________

Lawrence C. Marsh is Professor Emeritus in Economics at the University of Notre Dame and author of the 2020 book: Optimal Money Flow: A New Vision on How a Dynamic-Growth Economy Can Work for Everyone
You can donate the entire purchase price of the book to student scholarships by buying a hard-bound copy of the Optimal Money Flow book at the Avila University Press website at:  https://www.avila.edu/aupress/optimal-money-flow-by-lawrence-c-marsh with no charge for shipping and handling.  
To sign up for this free monthly Money Flow Newsletter =>  click here.

International Trade – U.S. dollars flowing around the world

What are the implications of the U.S. importing lots of products from abroad? Does our trade deficit imply that we are getting ripped off and need to impose trade restrictions? For example, consider our trade with China. China takes its resources, and its people work hard producing products for us. In return, instead of sending lots of our products to China, we send them pieces of paper with George Washington’s picture on them (U.S. dollars). Ordinarily, all those U.S. dollars would find their way into the international currency exchange markets driving down the value of the U.S. dollar and raising the price of the Chinese yuan. That would make Chinese products more expensive for us to purchase and U.S. products cheaper for China to purchase.

You would think that making U.S. products less expensive for the Chinese people to purchase would be good for China. But traditionally most Chinese have been very poor and not able to afford even lower priced U.S. products. A more immediate problem for China’s government has been the flow of peasants from rural areas into the urban centers where products are produced for export. China needed a way to avoid high levels of unemployment and keep its citizens employed through the manufacture of products for export. Instead of allowing those U.S. dollars to go into the currency exchange markets, China used those U.S. dollars to buy U.S. Treasury securities. In other words, China gave us products, we gave China U.S. dollars, and China gave us our money back again by investing money in U.S. financial markets by buying U.S. Treasury securities. Who is getting ripped off here? (Hint: it is not us.)

Issuing a lot of U.S. Treasury securities attracts U.S. dollars situated abroad that would otherwise drive down the value of the U.S. dollar in international currency exchange markets. This makes it more difficult for the Federal Reserve to suppress inflation through the supply-side. Overseas investors, especially sovereign wealth funds, may move U.S. dollars into New York financial markets leaving a stronger U.S. dollar in international currency exchange markets than would otherwise be the case. Japan and China have purchased large quantities of U.S. Treasury securities with U.S. dollars that would otherwise have gone to drive down the value of the dollar, which would have lowered the price of U.S. exports and increased the price of imports into the U.S. helping move toward a better balance in tradable commodities and services.       

However, some foreign governments (e.g., China) may have motives for investing in U.S. Treasury securities other than seeking an attractive return on investment in the form of interest payments. China requires that Chinese exporters turn in U.S. dollars to the Chinese government in return for renminbi (yuan) to keep those dollars out of foreign exchange markets. China’s return on investment in U.S. Treasury securities may be less in the form of interest payments and more in keeping its population fully employed to maintain both economic and political stability by maintaining either a low value for the yuan in international exchange markets or, somewhat equivalently, a high value for the U.S. dollar. 

It is important to consider the underlying cause of trade imbalances, especially those that have kept the U.S. dollar strong.  China and several European countries, for example, have highly unequal internal wealth distributions such that an insufficient amount of money is flowing to their average people to sustain full employment without substantial exports. In other words, United States consumers and other foreign consumers make up for the lack of adequate demand by China’s domestic consumers. The extreme wealth inequality in China and those European countries mean that the people in those countries cannot afford to buy back the value of the goods and services they are producing, but the wealth of those countries has gone to wealthy elites who are eager to invest their money in the United States financial markets. 

Even elites in poor, developing countries are often eager to invest their money in the New York financial markets instead of investing in industrial development in their own country. This phenomenon can be viewed as another form of colonial exploitation, with the development of poorer countries held back in favor of providing more wealth to the already wealthy by driving up prices in the U.S. stock market. The U.S. stock market, and stock markets in general, have become alternatives or substitutes for real investment in the productive capacity of economies throughout the world.  Simcha Barkai published a carefully researched paper that revealed that business revenues were going increasingly to profits (financial capital) as opposed to the cost of labor or real capital (e.g. physical or intellectual capital).

This distorted money flow has created a financial economy that is more and more separated from the real economy. Ironically, it has been restraining and undermining productivity and economic growth rather than supporting and encouraging it. Yes, money is cheap for businesses to borrow, but demand is chronically inadequate without extraordinary stimulus from governments. Businesses have no incentive to expand their operations, but instead they buy up or undercut smaller competitors to increase their market share and prices.

Another major reason for the strength of the U.S. dollar in foreign exchange markets is the role of the U.S. dollar as the world’s primary reserve currency. In order to avoid the instability and risk associated with fluctuations in the value of trading one country’s currency for another, some major entities purchase imports with U.S. dollars and sell exports denoted in U.S. dollars to avoid the ups and downs of the foreign exchange markets. Trade in crude oil and other major commodities is traditionally done in terms of U.S. dollars. Consequently, as international trade continues to increase over time, the demand for U.S. dollars increases to keep the U.S. dollar highly valued in foreign exchange markets. 

In other words, a country whose currency serves as a major reserve currency is in basically the same boat as a country that suffers from the natural resource curse, otherwise known as the Dutch Disease, a term coined by The Economist to refer specifically to how the value of the Dutch guilder was driven up when the Netherlands discovered massive amounts of natural gas within its territory, and generally to any country selling large quantities of a natural resource in high demand.  A reserve currency country and a country suffering from the natural resource curse have great difficulty selling their exports because of the high price of those exports in that country’s currency in the foreign exchange markets. In other words, under these circumstances the exports of the United States and the Netherlands would be basically priced out of international markets. The Dutch escaped the Dutch Disease by dropping the guilder and joining the Euro currency union where their natural gas exports were much less impactful with little effect on the strength of the Euro overall. As a reserve currency it is not only desirable, but necessary, for the country with the reserve currency to run a current account deficit to increase the amount of their currency in foreign exchange markets to keep from being completely priced out of the markets for its exports or see its exporting industries shrink as a result of its reserve currency status and the ever increasing demand for its currency in international markets.

On the other hand, the advantage of a strong currency are low prices for imports which save consumers money and helps make up for extreme income and wealth inequality within the United States. This is particularly helpful for retired elderly people who are on fixed incomes. In real terms the Chinese and other foreign producers are taking their natural resources and working hard to produce products for us, but instead of sending comparable products to them, we are sending them pieces of paper with George Washington’s picture on it (U.S. dollars). For the most part, tariffs on Chinese goods entering the United States are not paid by China. Walmart, in competition with other businesses around the world, buys goods in China and ships them to the United States. When those goods arrive in Long Beach, California, the Federal government requires that Walmart pay a tariff on those goods from China. Walmart can compensate itself to some extent by passing along the cost of the tariff to Walmart customers. Since many of the items Walmart buys from China are relatively inexpensive to begin with, the elasticity of demand for those items may be relatively high relative to the elasticity of supply so Walmart is able to get away with passing along most of the cost of the tariff to Walmart customers without suffering a significant drop in demand for those particular items. When the price of a great pair of Chinese memory foam sneakers rises from $9.98 to $12.48, it is still a great deal relative to alternatives.

The world works for us and we work for ourselves, yet we are told that we are being exploited by others by importing actual physical goods and services and paying for them with pieces of paper (U.S. dollars). The actual truth is the exact opposite of what those U.S. citizens who see themselves as “victims” tell us, the world is working hard and sacrificing their resources to keep us fat and happy!  In reality, we are the ones in the dominant and exploitative position in foreign trade. The absence of tariffs works to our advantage. The lumber and steel tariffs we placed on Canada only increased the cost of housing, automobiles and appliances in the United States. We need to remove those tariffs so we can get Canadian lumber and steel for less.

Yes, the overseas competition for the dollars of U.S. consumers means that the wages and jobs of U.S. workers are suppressed. Tariffs do not necessarily solve this problem since they would raise prices without guaranteeing that the money from the higher prices would go to workers in the form of higher wages and more jobs. Both the flow of dollars from abroad into U.S. financial markets in New York and the role of the U.S. dollar as a reserve currency in foreign trade have kept the value of the U.S. dollar strong in foreign exchange markets. The high value of the U.S. dollar makes U.S. exports expensive for people in other countries to purchase. A strong dollar means that we export less than we would otherwise and end up primarily producing our own goods and services for our own citizens.

The idea that there are a limited number of jobs in this world, and we must fight over them is what economists call The Lump of Labor Fallacy. The number and quality of jobs in the United States is not fixed. Fiscal and monetary policies can create as many jobs as we need. The current shortage of workers is in part due to stimulus policies that have been implemented in response to the COVID-19 pandemic. We should not raise prices in Walmart, Target, Amazon and many other low cost venues by imposing tariffs on imports coming from abroad. A better approach is to gain a tighter control over the number and quality of jobs here in the U.S. to keep our workers fully employed while still enjoying the low prices offered by imports from abroad.


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Lawrence C. Marsh (http://sites.nd.edu/lawrence-c-marsh/home/) is Professor Emeritus in Economics at the University of Notre Dame and author of the 2020 book: Optimal Money Flow: A New Vision on How a Dynamic-Growth Economy Can Work for Everyone (https://emeritipublishing.com/) .
You can donate the entire purchase price of the book to student scholarships by buying a hard-bound copy of the Optimal Money Flow book at the Avila University Press website at:  https://www.avila.edu/aupress/optimal-money-flow-by-lawrence-c-marsh
To sign up for this free monthly Money Flow Newsletter =>  click here. (https://emeritipublishing.us4.list-manage.com/subscribe?u=9f045b890bf0da60df9208ec5&id=c656af03b6)
For additional details see the Optimal Money Flow book website at:
http://optimal-money-flow.website (http://optimal-money-flow.website/)
or the 2018 "Money Flow in a Dynamic Economy" paper presented at 2019 American Economic Association conference in Atlanta, GA:
The full purchase price will go into the student scholarship fund when purchased through Avila University Press at the link:  https://www.avila.edu/aupress/optimal-money-flow-by-lawrence-c-marsh
Link to my Notre Dame webpage (http://sites.nd.edu/lawrence-c-marsh/home/)

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