We used to imprison people for thinking differently. Now we give them Nobel prizes.

Cave dwellers had no choice. You did what the big guy said.  As tribes got larger, the king, the pharaoh, the emperor or the czar had total authority over their domain.  You could not hunt deer in the forest or take fish from the stream without permission from the king.

Apparently there was little discussion or debate, and mental energy was in short supply.  A little progress was made with the invention of the wheel and the use of fire, but thousands of years went by with little progress.

In earlier times, the king and the church demanded obedience. The earth was the center of the universe, and any fool with any common sense saw the sun rise in the morning and set in the evening as the sun traveled obediently around the earth. 

But Copernicus disagreed.  He argued that it was the earth that traveled around the sun and not the other way around.  At first, Galileo agreed with Copernicus.  But then the authorities threatened to execute Galileo for deviation from established doctrine.  Galileo had to recant to save his skin.

But somehow, starting with the Greeks and later with the Magna Carta of 1215, cracks began to appear in the authoritarian foundation.  People began to live longer and acquire more mental energy.

Groups of people seeking greater independence of thought, including religious thought, had to get the permission of the king to organize and collect enough money to purchase a ship and enough provisions to make it across the Atlantic Ocean. Even after their colony was established, they were not really fully independent, as they were often at the mercy of the authority of a dominant military power. The New York City area was under the control of the Dutch military before the English military took control. Even within the “rebellious” group, a hierarchy of authority maintained power. Creative thinking was organized and formalized by the American colonial elite with the establishment of Harvard College in 1636. 

Until the American Revolution, land in the American colonies was allocated by King George and the colonial governors that he appointed. Only those considered to be descended from the British nobility were given land. George Washington, John Adams, Thomas Jefferson and the other founding fathers of America were not commoners. Only Caucasian male landowners could vote. The American revolution was not led by commoners, but by the very colonial aristocracy that King George had established.

But as the United States of America was being established in the late 1700s, an entirely different type of revolution was taking place across the Atlantic Ocean. The French Revolution was an attempt to completely overthrow the French aristocracy. Aristocratic heads were being chopped off in the guillotine. The American aristocracy got the message. They taught their children to avoid showing off their wealth or their superiority and to always be generous with commoners. But to maintain their dominance, they used legacy almost exclusively in all the leading colleges. This bond of legacy, in turn, led to positions of power in government and in industry. Initially, who you knew was more important than what you knew. But eventually cracks began to appear in the American aristocratic hierarchy with the introduction of SAT and ACT tests as a consideration in college admissions.

Gradually commoners who rose through the ranks began replacing the aristocracy with a meritocracy in American industry and governance. Unfortunately, the meritocrats tended to judge themselves on the basis of their wealth and often failed to follow the modesty and generosity mandates of the old American aristocracy. Many failed to share their wealth and, instead, built up huge fortunes. The greedy pig theory of economics set in with the maximization of shareholder value mandate.

As America developed and expanded, the original colonists were greatly augmented by immigrants from an ever widening array of countries. This gave America a rather extraordinary advantage in that immigrants are typically not random draws from their original country, but instead immigrants are people with more independence and determination than average. In their countries of origin, this is sometimes referred to as a “brain drain.”

More often than not, human progress has come about through the efforts of rebellious “troublemakers.”  Progress is made by people with enough mental energy to think independently and to refuse to blindly go along with the crowd. We have gradually come to realize the enormous benefits that come from encouraging people to think for themselves instead of blindly following “the dear leader.” Instead of imprisoning people who think differently, we now give them Nobel prizes.

A leader who wants to hang on to the past and demand obedience in following tradition to conserve mental energy needs “advisers” who are essentially “yes men” who go along with whatever the leader wants.  Their job is just to tell the leader how great he is and to not raise any issues or concerns.  Even today, people often conserve their mental energy by following a left-wing checklist or a right-wing checklist to decide where they stand on various issues and policies.  Thinking independently takes too much mental energy and may separate you from your tribe. 

Putin established such an authoritarian system in Russia, which led him to think that he could easily take over the Ukraine in a few days. No one dared challenge his judgement or question his authority. The result is not just a disaster for the Ukraine, but also a disaster for Russia itself with the loss of Russian lives and with many young Russian men leaving the country to avoid the “military incursion.” But Putin needed to warn of some external threat (NATO) to justify suppressing internal freedom. Ironically, before Putin’s “incursion” into the Ukraine, NATO was weakening, with few countries paying the full two percent of GDP for defense. Putin’s incursion has now greatly strengthened NATO with Finland and Sweden joining the alliance in response to Putin attacking the Ukraine, and now NATO members are significantly increasing their military expenditures.

Former President Trump now believes that he made the mistake in his first term of having advisers who offered advice, instead of offering unwavering praise and obedience. In a second term, he will make absolutely sure to avoid appointing any independent thinkers with too much mental energy for their own good.  In every instance, they must be absolutely committed to following their dear leader and not their own thinking or the rule of law.

Trump could not come up with a credible military threat from Canada or Mexico to get Americans to give up internal freedom to defend their external freedom, so the best he could come up with was the external threat of millions of rapists and murderers with poison blood pouring over our southern border. That story would allow Trump (under Supreme Court official immunity) to further suppress internal freedom to protect us from such a horrific external threat.

The 2024 election appears to be a choice between either replacing the rule of law with the rule of Trump under presidential immunity as granted by the Supreme Court, or continue following the rule of law and thinking carefully with as much mental energy as possible from all our citizens with presidential advisers who provide criticism and advice and not just praise and adulation. Under Trump, “troublemakers” may be arrested for “disrespecting” the presidency just as Vladimir Putin can now arrest Russians for using the word “war” in reference to his military incursion into the Ukraine.  If Republican politicians are afraid of offending Trump when he is not in power, imagine how obedient they will be if he regains the presidency. 

________________________________________________________

Get this monthly Money Flow Newsletter for free. =>  click here.

________________________________________________________

Is the Stock Market Suppressing Productivity and Economic Growth?

A Vermont janitor had $8 million dollars when he died in 2015.  His frugality and stock market investments, along with his longevity, paid off big time – but not his hard work as a janitor.

Actually, hard work does pay off – but not for the person doing the hard work. The worker’s hard work pays off for the shareholder. That is our system. Understanding our system and following the tough and demanding rules of compound interest can make you very rich.

Historically in America if you put $10,000 in the stock market when your baby was born, by age 80 he or she would be a multimillionaire just from that initial investment.

Don’t tell your child about it, just put $10,000 in a broad market index fund with a low expense fee in a Roth account, check the box that says reinvest dividends, put the stock fund in a trust account for your child. When you die, your child, who is then (hopefully) near or in retirement, might discover that they are well on their way to becoming very wealthy. At the close of the stock market yesterday (Sept. 30), over the past year the Dow Jones Industrial Average has grown over 26 percent while the NASDAQ has risen over 36 percent. For many years the stock market generally has increased on average over 10 percent a year with lots of ups and downs. But in recent years gross domestic product (GDP) has typically been growing at an annual rate of only about 3 percent or less! 

Many non-financial firms have discovered that investing in the stock market provides a much higher return than investing in their own businesses. Why invest in creating new products and services when you can on average get a much better return in the stock market? If you do the math of compound interest, you discover (using natural logarithms => ln) that the number of years needed to double your money is equal to ln(2)/ln(1.10) when your annual percentage yield (APY) is 10 percent. (Note: This is a precise calculation which is much better than “The Rule of 72” which is only approximately correct around an APY of 8 percent.)

Isn’t this wonderful. Your child may become a multimillionaire regardless of how much they worked or didn’t work, and regardless of how creative or unimaginative they may have been. You don’t even need to know the names of the companies you have invested in, much less have helped them in any way other than investing a little bit of money a long time ago. We like to say that America is the land of opportunity. And it is, if you have wealthy, well-educated parents. But less fortunate children with poor or middle class parents face a much tougher road to success. What if you finished your education with a high school diploma (i.e., no college debt), you relied on public transportation (i.e., no car), bought no house (i.e., no mortgage), and skipped marriage and raising children? You may over time be able to invest enough money into the stock market early enough to benefit from compound interest and become wealthy.

Is this what we want people to do? Frugality is great up to a point. But do we want everyone to engage in extreme frugality instead of getting a good education, raising a family while living paycheck-to-paycheck and building up mountains of debt?

Is our country better off by over-rewarding extreme frugality while under- rewarding hard work and creativity? Should we encourage passive investors or hard-working employees? How can we still encourage frugality (up to a point) but do a better job of providing work incentives and encouraging entrepreneurial creativity?

The fundamental problem is that so much money is being diverted from Main Street to Wall Street that the people on Main Street can’t buy back the value of the goods and services that they are creating at full employment.

Two thirds of Americans do not have a college degree. Over 40 percent are living paycheck-to-paycheck and are up to their eyeballs in debt. High levels of savings would provide an automatic stabilizer for the economy as a whole while high levels of debt create a very unstable system.

The objective is to raise the growth rate of our economy to better align with the return to passive investors in the stock market. Bringing down the artificially inflated average annual increase in the stock market could help stop the reverse money flow that has drained the real economy of funds needed to enhance productivity and economic growth. Less money flowed into new and better products suppressing productivity and economic growth. High levels of private debt had to be supplemented with high levels of public debt to keep the economy from sliding back into recession.

I have personally benefited greatly from the current system. But at some point I have to speak up against my own self interest in favor of the truth about what is in the best interest of our nation.

We need to stop over-rewarding passive investors like me and redirect more of the money flow to reward hard working employees and creative entrepreneurs. One way to move in that direction would be to restore the Security and Exchange Commission’s rule that existed before 1982 and designate stock share buybacks as insider trading and illegal.

Another step would be to follow Germany’s example and require employee representation on corporate boards. All too often corporate boards consist of the CEOs golf buddies, who only know what is going on within the company from reports that the CEO gives them about what a great job he or she is doing. Requiring some employee representation on corporate boards for all companies above a specified size could provide representation from product development, production, marketing, sales and product distribution. We should also provide companies with incentives such as tax benefits for starting employee stock ownership plans.

Burns and McDonnell in Kansas City started as a small construction company but grew to become a worldwide engineering company. All the company stock is owned by its employees. When retiring employees have to cash in their company stock. The secret to its success is employee ownership. As owners, workers are not only motivated to do their best for the company but also want their fellow employees (their teammates) to work hard to achieve great success for the company.

Hopefully, with these and other such reforms, instead of a stock market growing annually on average of over 10 percent while the real economy grows at less than 3 percent, we could create a better balance, stop the reverse money flow and bring them to both grow together at roughly 6 percent or more.

________________________________________________________

To sign up for this free monthly Money Flow Newsletter =>  click here.

________________________________________________________

Note:  This commentator is not a registered financial advisor. None of his commentary should be considered to be financial advice.  You could lose a great deal of money in the stock market.  Contact a professional financial advisor if you want appropriate and efficacious financial advice.

 
Check out the “Optimal Money Flow” website at:
http://optimal-money-flow.website/

The Greedy Pig Theory of Economics is Naïve and Often Counterproductive

Does Adam Smith’s invisible hand of competition, which supports the greed is good philosophy, justify minimizing the role of government in our economy?  

___________________________________________

Too often in teaching and talking about economics, we have a tendency to oversimplify economic problems and focus solely on how the individual, seeking only their own advantage, ends up helping the community by offering better products at lower prices. Government is often seen as just getting in the way of this amazing outcome. As President Reagan said in his inaugural address: “Government is not the solution to our problems. Government is the problem.” But was this actor who became our president oversimplifying economics and overreacting to the brutal, authoritarian communist governments suppressing human initiative and economic growth? Have advocates of the Greed is Good Theory of Economics gone too far?

Adam Smith actually posited two invisible hands, one explicitly and the other implicitly, although only the first one is widely known. The first invisible hand tells us that greed is good because working hard and creatively in the marketplace to beat the competition and maximize your profits will produce better quality products at lower prices for everyone. We are told not to worry, because when this invisible hand dominates, we will all be made better off. Advocates of this greed is good philosophy want us to act individually and not collectively. This invisible hand is called the invisible hand of competition.

But Adam Smith also alerted us to what might be called his second invisible hand when he told us: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” This is the invisible hand of collusion.

These two invisible hands are in constant conflict with one another. This puts us in a dilemma. On Sunday morning we are told that greed is bad, but on Monday morning we are told that greed is good. Should we be trying to help the “dear neighbor” or trying to run him off the road? 

What about the basketball player who has to decide whether to take the long shot (glory to me) or whether to pass to a teammate much closer to the basket (glory to the team)? If he follows the greed is good philosophy he will take the long shot. But if he is focused on working to make everyone better off and realizes that his teammate has a better chance of getting the ball in the basket, he will pass the ball to his teammate.

In caveman times, men who were bigger could look out for themselves, but women who were pregnant couldn’t run and they couldn’t fight so they looked to others (a strong male or a larger group) for protection. Even today, women tend to be more socially oriented than men. Elderly women are likely to have more social groups than their male counterparts. Are we better off acting individually under the greed is good philosophy or acting collectively?

We are constantly faced with this dilemma in life. Should we be helping ourselves or helping the community? Should we focus on our own needs or the needs of the community?

In the stock market, are we cheering for the good guys (normal profits from competition) or the bad guys (excessive profits from collusion)?  Warren Buffett has caught on. He invests in firms that have been able to create a barrier to entry. Are there economies of scale? Is there a first mover advantage? Are there network effects? Is there a natural monopoly? Are there government regulations that restrict entry (prescription drugs, copyrights, patent laws, et cetera)? Do we want to look for, invest in, and encour-age excess profits wherever they might be? Or are we going to restrict ourselves to socially responsible investing? We are often confronted with this sort of dilemma, where what is good for us as individuals may be bad for our community or the country as a whole.

Our industries are much more concentrated than we realize. Denise Hearn and Jonathan Tepper wrote the book: “The Myth of Capitalism,” which perhaps should have been named “The Myth of Competition,” because they show in industry after industry that competition has been minimized. 

Reading glasses cost just a few dollars, but prescription glasses, which are primarily supplied by two companies, cost hundreds of dollars even though they use about the same amount of plastic and glass as the reading glasses. Customization should raise the price a bit, but the prices charged are clearly taking advantage of the duopolistic nature of the business.

You may be surprised to learn that the beer industry is also dominated by just two companies, in spite of the many craft breweries.

What about the fossil fuel industry? Should the maximization of profits come first, and the overheating of our planet be ignored until the outside temperature reaches over 120 degrees Fahrenheit and you have to put on an air-conditioned space suit to take a walk outside? What about your dog collapsing from the heat when you try to take your dog for a walk? Cheap fossil fuels now are going to cost us much more later. Perhaps before too long, even older people will begin to have to pay the price of “cheap” fossil fuels, not to mention the burden put on our children and grandchildren. What seems good for us in the short run (cheap gasoline) is certainly going to be bad for all of us in the long run.

Traditional economics focuses so intensely on the interests and behavior of the individual that it ignores very important and productive aspects of our economy. Without interstate highways, air traffic control systems, free (taxpayer funded) vaccinations for highly contagious diseases, and the provision of elementary and secondary education, we would be a lot worse off than we are now.

We all have a limited amount of mental energy, so we naturally want to keep things as simple as possible. Our first economics course (“Principles of Economics”) is designed to do exactly that. We assume a level playing field, where we all have an equal chance in our “land of opportunity.” The most important decision you make in life is your choice of parents. You want to choose wealthy, well-educated parents. Of course, you do not get to choose your parents, which is why there is no naturally occurring level playing field.

To get a level playing field to give everyone an equal chance in life, in state after state and community after community, we voted and promoted the idea of education for all. We all take reading and writing for granted. Almost every one of us can read and write as well as carry out basic mathematics such as addition and subtraction. But who invested money in our education and made sure that we all got a basic education?  After all, education is a common property resource that we all benefit from.  And not just as individuals; I benefit from living in a country where everyone is well-educated. Education needs to be taxpayer funded, encouraged and supported by the government.

But how much education?  Every state in the United States of America has not only made elementary and secondary education available but has required it for all young children. Can you imagine making such a requirement today? The anti-government crowd would go ballistic! Yet state after state from Massachusetts (1865) to Mississippi (1918) required community funded education for all young children. This gave us an essential advantage in the development of our country’s economy over other countries which were slower to implement free education.

But now other countries such as Germany, Norway, Denmark and Finland also provide a free college education. Even offering two years of either college or a vocational education would be a step in the right direction. We cannot get ahead by falling behind in the transformation from physical work in manufacturing and mining (which is being taken over by automation) to higher-skilled careers for our citizens. If we really want America to be the land of opportunity, we need to make college or technical education available to all for free at taxpayer expense.


What about those government created state universities with their agricultural experiment stations? Government-funded agriculture experiments transformed America’s farms to make them the most efficient and most productive in the world!  Yes, our farmers worked very hard and very creatively, but the free rider problem, which is too often ignored, discouraged any one farmer from putting in all that time and money to carry out agricultural experiments that may or may not work out. But many of those government-funded agricultural experiments paid off big time in substantially improving American agriculture and making it the most productive in the world.

What about our amazing infrastructure with interstate highways crisscrossing the United States?  It was a Republican president who envisioned and promoted the Eisenhower expressways that crisscross America. Government enabled small businesses to grow larger by giving them a way to get their products much more widely distributed throughout the United States of America. Government is not the problem. More often than not, when presented with a common property resource problem, government can be the solution, especially with projects where the free rider problem prevents private businesses from making the necessary investments.

The fundamental problem is in our colleges and universities in our “Principles of Economics” courses where we have for too long been teaching and promoting the greedy pig theory of economics, which ignores community efforts to promote the common good. Ironically, we often get enormous benefits in our individual lives from government investments, especially in our health and wellbeing. The Department of Health and Human Resources and the Centers for Disease Control and Prevention have funded independent researchers whose primary motivation is to gain recognition by publishing their medical research results in professional journals and books as well as an award such as a Nobel prize in their area of specialization.

Devotees of the greedy pig theory of economics want to limit government to the enforcement of contracts and national defense. They consider Social Security and Medicare to be government overreach. To them, government is not the solution, but instead they see government as the problem. We will all be better off when our introductory economics courses do a better job of explaining the very important role that the government plays in making our economy more productive and more efficient.

For more, read the books by Mariana Mazzucato such as: “The Entrepreneurial State: Debunking Private vs. Public Myths” and my book: “Money Flow in a Dynamic Economy,” which introduces the new money flow paradigm, which explains economic inefficiency, instability, inequality, and the role of government.

__________________________________________

Inefficient and Ineffective Monetary Policy

Waste and inefficiency are not consistent with conservative values. In its limited role, government must always strive to get the most bang for the buck. Using a very inefficient system is not helpful in this regard. When excessive inflation has too much money chasing too few goods, Federal Reserve policy needs to efficiently and effectively decrease demand and increase supply. The Fed needs to encourage, not discourage, supply, and get the greatest reduction in demand for each dollar spent.

Many retail firms borrow money to operate throughout most of the year and, finally, in the holiday season at the end of the year, they cover their costs and make a profit. Without relatively inexpensive loans to see them through the less lucrative seasons, they would have to close down their operations. Farmers may have a number of marginal fields that are only worth cultivating if low-cost loans are available to see them through the cost of plowing, planting, fertilizing and watering until harvest time when they can sell their crops to cover costs and make a profit.

When the Federal Reserve faces excessive inflation and wants to slow the economy, it increases the cost of borrowing. Wealthy people do not have to borrow money to buy a car or buy a house. It is the poor and middle class people who have to adjust their spending from things that require a loan to less expensive things that don’t require a loan. Saving money is not a good option because money is rapidly losing value in real terms (i.e., purchasing power) in times of excessive inflation.

Unfortunately, when the Fed raises the cost of borrowing to stop excessive inflation, banks realize that the Fed is trying to slow the economy and start to worry about many possible loan defaults in the face of a slowing economy. At such times, banks cut back on loans and typically have excess reserves. Paying out additional interest on savings is just an unnecessary expense that banks don’t need and don’t want. They don’t want additional money because they are cutting back on loans. Consequently, most banks will not offer a savings rate sufficient to cover the excessive inflation, so any money you hold in savings will typically be losing value in real terms.

Without additional Congressional authorization, the Federal Reserve is stuck with a cost-of-borrowing tool that just transfers demand from things that require a loan to things that don’t require a loan. In other words, while it decreases demand for automobiles, houses, and students loans, it just transfers that demand to many other everyday items that people need. Overall demand is not reduced.

On the other hand, raising the cost of borrowing can discourage production and reduce supply, which is exactly the opposite of what is needed during excessive inflation when too much money is chasing too few goods. Retailers, farmers and other businesses that require loans to operate cut back on production, which means reducing worker hours and laying off some workers. Since workers cannot spend money they don’t have, the suppression of business activity ultimately results in an overall reduction in demand for goods and services. Excessive inflation is eventually eliminated, but only through a very slow and inefficient process.

The most important economic variable that is ignored in this process is the marginal propensity to consume. When people have more money than they need, their spending tends to flatten out since they can only wear one pair of shoes at a time, or drive one car at a time, and buying more that a couple of vacation homes or a lot more cars becomes a burden in maintenance and upkeep. Consequently, wealthy people tend to save and invest their money, especially if there are somewhat more risky investments that will cover inflation and offer a premium above the rate of inflation. Investors have to be able to ride out the ups and downs of the stock and bond markets to get sufficiently high returns on their savings.

The bottom line is that wealthy people have the lowest marginal propensity to consume because their needs are basically already met with their current spending patterns. If you are already going out to eat at expensive restaurants three times a day, it makes no sense to increase such eating to four or five times a day. What is left is to bid up the price of Picasso paintings or exclusive properties, but such increases in what economists call “rents” doesn’t directly increase the production of goods and services.

Whether one is trying to slow the economy to stop excessive inflation or stimulate the economy to get out of a recession, it makes much more sense to target the people with the highest marginal propensity to consume. The poor and the lower middle class people have by far the highest marginal propensity to consume. A high interest rate that provides a sufficiently high return on savings to not only cover inflation but offer a sufficiently high return above and beyond the rate of inflation is what is needed to get less well-to-do people to cut back on spending and save some money.

But the amount of savings that earns that high return must be limited to some relatively small amount (say, no more than $10,000) in order to avoid paying rich people for just moving their money around without cutting back on their demand for goods and services. Targeting the poor and lower middle class people, who are the ones with the highest marginal propensities to consume, provides the most bang for the buck in reducing the demand for goods and services to stop excessive inflation when too much money is chasing too few goods.

The Federal Reserve typically earns hundreds of billions of dollars each year from its operations and those of its twelve regional banks. It would not cost the tax payer a penny for the Federal Reserve to take responsibility for setting up and operating savings accounts at every post office. In times of excessive inflation the Fed’s postal savings accounts could offer a high savings rate to cover inflation and provide a premium above the inflation rate to attract as much money as possible from the people with the highest marginal propensity to consume (i.e., lower income people).

For example, a sign at the entrance of every post office offering 10 percent on savings could encourage people to save as much money as they could. Building up the savings of lower income people would not only help them when their hours were cut back or they lost their job, but would also provide an automatic stabilizer for the economy as a whole. The high savings rate would only apply to amounts up to a set amount, such as $10,000, so that more wealthy people would not bother moving large amounts of money around to take advantage of such a high interest rate on savings.

Conversely, in the event of a recession, the Federal Reserve could target the lower income people who are the ones with the highest marginal propensity to consume, instead of moving large amounts of money into the New York financial markets which primarily benefits the wealthy people, who are the ones with the lowest marginal propensity to consume. By sending money directly to each person with a Social Security number, the Federal Reserve would get a much greater bang for the buck than sending enormous amounts of money into the financial markets with the hope that some money would trickle down to bring about an increase in the demand for goods and services.

Congress needs to authorize the Federal Reserve to work directly with the people who have the highest marginal propensity to consume and stop wasting money in the financial markets to finally create a system that works efficiently, effectively and quickly to overcome excessive inflation or recessions. Post office savings accounts and direct Federal Reserve payments would greatly enhance our monetary policy system.

____________________________________________

To sign up for this free monthly Money Flow Newsletter =>  click here._____________________________________________

Will deporting illegal immigrants, higher tariffs and abortion restrictions make America great again?

After World War II the United States along with many other countries experienced a population explosion. With soldiers returning from war creating new families, birth rates shot up. By the 1960s, books were written claiming that the dangerous rate of increase in world population meant that we needed to start looking for another planet to populate, as earth would soon become overpopulated.

In recent decades the dramatic drop in birth rates in the United States and elsewhere has produced a Darwinian natural selection paradox. The species that has come to dominate the earth has suddenly dramatically reduced its rate of population growth to below the population replacement rate of 2.1 children for each woman in her reproductive years. The world population appears to have reached a maximum with many countries subsequently experiencing a persistent and precipitous drop in their populations.

In the United States, with the large number of baby boomers retiring, an even more dramatic potential reduction in the labor force would be occurring if it were not for the ability of America to attract large numbers of immigrants. Without a substantial number of immigrants, the work force in the United States would shrink. Without additional workers, the cost of everything would rise substantially.

Someone needs to go out in the hot California sun and pick the fruits and vegetables that we all need, or we will all end up paying a lot more for our basic groceries. I am too old to climb up on my roof to replace my rusting gutters and downspouts, so I am forever grateful to those two Spanish-speaking immigrants who did it for me. I also need them to pay the earning tax matched by their employer to finance my Social Security income. A smaller work force with fewer people working would mean less money for Social Security.

The reality is, from a purely economic point of view, we need immigrants now more than ever. Chaos at our borders is never welcome. Many undocumented immigrants need to be processed to become legal immigrants so that they can properly contribute to our economy and keep prices down. Statistically, immigrants in general have a lower crime rate and a higher rate of new business creation than the general population of Americans. We often get the best and the brightest people coming to America in what is often seen as a brain drain in their originating countries. We should feel blessed to have such wonderful people coming to America in what has been a long tradition that began in 1492 with the first “illegal” immigrant coming to the Americas, Christopher Columbus.

Economists call the idea that there is somehow a fixed number of jobs in this world, and we need to fight over them, the lump of labor fallacy. It may be cheaper to produce textiles in China than in the United States, but that does not mean that the United States cannot expand the economy to provide jobs with greater productivity and higher compensation in America than those menial jobs that we have off-loaded to China.

What about jobs in the steel industry? Shouldn’t politicians increase tariffs to protect jobs in the steel industry to gain the votes of the members of the United Steel Workers (USW)? When competition from abroad is blocked, it results in higher steel prices that suppress jobs in industries using steel as a factor input in the production of their products. Protecting steel industry jobs with tariffs just takes jobs away from the workers in the steel-using industries. Taxing Peter to pay Paul may work to deceive voters, but it does not improve overall employment or productivity in our economy and just raises prices for everyone.

When products for Walmart are unloaded at the dock at the port of Long Beach, California, a U.S. federal inspector and a broker representing Walmart arrange for Walmart to pay the tariff on that shipment. To keep its prices low, Walmart maintains a very low profit margin and relies more on volume to make its money. Since many of the products Walmart sells are low-price day-to-day necessities, Walmart can and generally does pass the cost of the tariffs on to its customers. The wonderful pair of memory foam sneakers from China that I bought at Walmart a few years ago for $9.98 are now selling for about $15 after the imposition of higher tariffs.

More tariffs will directly and immediately drive up prices. Some politicians seem to think that the exporting country has to pay for a tariff we place on the products we import from them. There is no way that the Chinese government is going to pay us for any tariff we place on Chinese exports. At best the Chinese could cheapen their currency to maintain their competitive position, but even that may be unlikely as they would like the Chinese yuan to replace the U.S. dollar as the world’s reserve currency.

Are we losing to China in the international trade battle? The Chinese people take their natural resources and make products for us that we import at exceptionally low prices. In return, instead of sending them our products, we send them pieces of paper with George Washington’s picture on it ( U.S. dollars ). Ordinarily, those U.S. dollars would go out to the foreign exchange markets and drive down the price of U.S. dollars and increase the price of the Chinese yuan (also known as the renminbi or people’s money). That would make our products cheaper for the Chinese to purchase and the Chinese products more expensive for Americans to purchase to create a more balanced trade between the USA and China.

But the Chinese government does not allow that to happen. The Chinese administration is facing a political problem. Many Chinese peasants are moving from the rural areas in China to the cities. The Chinese government needs to find work for these peasants to avoid the political unrest that would come with large numbers of unemployed Chinese peasants in the cities. But China does not yet have a large enough middle class to buy up all the products that these peasants can produce. Consequently, China is taking advantage of America’s much larger middle class to find the buyers it needs for all these products. To avoid a rise in the price of the Chinese yuan and a drop in the price of U.S. dollars, the Chinese government requires that the Chinese businesses turn in those dollars to the Chinese government in exchange for yuan. The Chinese government uses those dollars in its sovereign wealth funds to buy US Treasury securities in the New York financial markets.

Has China been taking advantage of America in this battle over international trade? Let’s see now, we get the Chinese products, but instead of sending them our products, we send them U.S. dollars and keep our products for ourselves. The Chinese government then loans us our money back to pay for our federal government deficit spending by buying trillions of dollars in US federal debt ( US Treasury securities). Who is getting ripped off here? Hint: It is not us.

Eventually China will build up a large enough middle class to not have to rely on America’s middle class to provide enough demand for Chinese products. At that point China will allow all the U.S. dollars it acquires to flow out into the foreign exchange markets to drive down the value of the U.S. dollar and increase the value of the Chinese yuan to produce a more balanced trade between China and the United States.

In addition, the U.S. dollar is the world reserve currency and is used widely in international trade. As international trade expands, the demand for U.S. dollars increases so the US is able to print more dollars out of thin air without taxation and without undermining the value of its currency. America is not getting ripped off. In fact, it is almost like some type of colonial exploitation.

Can stopping abortions make American great again? What are the demographic and economic consequences of abortion restrictions? Advocates for more restrictions on abortions may be in for a big surprise. America already has a less-than-replacement birth rate, and it has been falling steadily. But won’t stopping abortions mean more children and eventually a larger workforce? 

Banning abortions won’t result in more children. In fact, in response to abortion bans, more men are already getting vasectomies and a new form of male chemical contraceptive has just been invented. Women may cut back on sex and make much better use of contraceptives. Even marriage rates are falling.  The fear among women is that having a miscarriage may be interpreted as some form of illegal abortion so that the doctor and mother may be brought before a court for the judge and the jury to decide if the loss of the fetus was really a miscarriage or actually an abortion. Women may decide to avoid this risk by just not getting pregnant. Will having fewer children make America great again?

But won’t having fewer children reduce the demand for day care workers and free more women up for the workforce?  In theory and in the past, this may have worked.  But in reality, in recent years retired grandparents have more and more filled the day care role. Consequently, most young mothers are already working, so having fewer children will not lead to much increase in the workforce, either now or in the future.  

Baby boomers are retiring big time. A shrinking workforce means that fewer goods and services will be produced. But the baby boomers are not dying off that fast, and the demand for health services is growing. Supply of goods and services will drop, but demand will remain strong. Too much money will be chasing too few goods and services. If you are unhappy with our current rate of inflation, you haven’t seen anything yet. 

Deporting massive numbers of undocumented immigrants will shrink our workforce, suppress the supply of goods and services and drive up prices. Imposing tariffs will drive up prices even more. Abortion restrictions will ironically cause us to have fewer children and potentially shrink our work force, which, in turn, will reduce supply relative to demand and drive up prices.

These policies taken together will generate inflation levels only seen in recent years in Zimbabwe and Venezuela. If you think that deporting all undocumented immigrants, imposing more tariffs and imposing abortion restrictions are going to make America great again, you are going to be in for a big surprise as the American economy shrinks and inflation drives prices and the cost of living through the roof.

Modest money flow to aristocracy becomes extreme money flow to meritocracy

Modest money flow to aristocracy becomes extreme money flow to meritocracy

Prior to 1960 America’s large corporations were dominated by an aristocracy that in some ways resembled the old English nobility. In fact, prior to the American Revolution, the King of England granted land in America to certain elite families. Wealthy east coast families dominated in America for a lot longer than most people realize or are willing to admit. Legacy was the key to success.  It was legacy, not good grades, that got you accepted into elite colleges and universities. Before 1960 even an average grade of C in your prep school was not a problem in gaining admission to an elite university if your father, grandfather, uncle, or brother had attended.[1] 

( There is an old joke among economists that the most important decision you make in life is your choice of parents. You want to choose rich, well-educated parents. We like to think of America as the land of opportunity, but there is still a lot of work to do to create that level playing field. )

Graduating from Yale, Harvard, Princeton, or any of the other elite schools was sufficient for finding a reasonably well-paid executive job at a leading American corporation. The noblesse oblige rules among the early English settlers were simple: (1.) stay out of politics, (2.) keep your name out of the news (except for the social register), and (3.) don’t give yourself an oversized salary. When excessive wealth is not based on merit or hard work, memories of the French revolution can be poignant. We do not want to see the rope over the platform designed for the hanging of Vice-President Mike Pence on January 6 replaced by a guillotine. Most wealthy English settlers understood the need to avoid alienating the masses. 

Around 1960 Harvard James Bryant Conant led the way in introducing SAT and ACT scores into admission decisions. Scholarships were introduced to aid applicants to elite prep schools and colleges who were not from wealthy families.[2] Once ability and achievement potential became important and a geographical distribution preference was introduced to discriminate against certain high achieving non-WASP[3] ethnic and cultural groups from the New York City area and the Boston area, the entire nature of the ruling class changed. Discrimination was still present, but a new meritocracy of sorts was allowed to gradually take over. 

Business schools and law schools in general, and economics departments in particular, promoted the “greed is good” philosophy, where businesses competing with one another to produce better quality products at lower prices (Adam Smith’s invisible hand) was said to justify the single-minded pursuit of one’s own self-interest even if that ultimately led to resetting the rules (e.g., tax loopholes, etc.) to benefit the nouveau riche of the new meritocracy. In recent decades, increased efficiencies due to network effects and economies of scale have been used to justify the concentration of market power even when most of the gains have gone to profits.

Underpaid government lawyers were no match for the new business and legal elite whose ability and achievements resulted in an accumulation and concentration of wealth far greater than ever desired or achieved by the old aristocracy. Adam Smith’s left invisible hand has now been countered with increased economic power which serves as a right invisible hand to block entry and drive up profits, as competitive markets have been replaced by monopolistic and oligopolistic ones. Tariffs are used to block competition from abroad. Economies of scale, network effects, patient laws and first-mover advantage are among the many effective means of suppressing competition.

The new meritocratic elite re-rigged the rules in every sphere of life to their own advantage. Rather than lowering the bar for others to follow, they raised the bar to keep others out. This diverted the money flow away from most Americans and toward the top one percent wealthiest elite.[4] The new meritocracy worked in theory to raise all boats, but failed in practice, either because the new elite either didn’t understand the implications of their exclusionary tactics or chose to ignore them. Social mobility was suppressed, instead of enhanced, with fewer low socio-economic people able to break out of the middle-class trap. The new elite made sure to give their children the best possible education and the socio-economic connections needed to establish and maintain their comparative advantage.  Instead of improving upward socioeconomic mobility, the new meritocracy at best kept it from rising and at worst suppressed it even more than before. 

This money flow diversion was a very fundamental and a very important change in the US economy, starting around 1973.[5] Before 1973, labor productivity and wages were highly correlated. After 1973, labor productivity continued its rise, but real, inflation-adjusted, wages flattened out as rising revenues were siphoned off as profits. Such profits piled up in the financial markets as money flowed in a circular loop as stock buybacks, dividends, and interest payments, that the wealthy then just reinvested back into the financial markets where the accumulating pool of money drove interest rates ever lower. In this case, the velocity of money just meant the speed at which these dollars were traveling around and around in the financial markets as market speculators bought and sold new and exotic financial products at ever increasing rates. There has also been a dramatic drop in the number of publicly traded companies in recent decades that has dropped from around 7,000 firms to less than 4,000 firms today. This reduction in the supply of stocks has driven up their prices by the power of the law of supply and demand. See Petrou (2021) for more details on the widening wealth gap and its causes including the major role played by the Federal Reserve.[6] Also, see “The Lords of Easy Money” (Simon & Schuster 2022) by Christopher Leonard on how the Federal Reserve has undermined our economy by pumping too much money into the New York financial markets.

The changes in the money flow, that weakened aggregate demand were due in part to this change in the ruling class and part as a result of focusing on maximizing shareholder value (including profits from dividends and stock buybacks) by increasing financial capital (the value of stocks and bonds, etc.) at the expense of labor and real capital (physical and intellectual investments). For decades inflation ran rampant in the financial markets with little benefit in the real economy where productivity and real economic growth slowed.  For a deeper understanding of how over-rewarding passive investors is not justified either legally or operationally, read the book “The Shareholder Value Myth” (Berrett-Keehler Publishers, Inc. 2012) by Lynn Stout, the distinguished professor of corporate and business law at the Clarke Business Law Institute at Cornell Law School.

Simcha Barkai (2020)[7] calculated the capital costs for the US 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. Neither labor nor real capital were rewarded, as most of the money flowed to pure profits. As the wealthy grew wealthier, the rest got by with an ever-increasing private debt burden, reinforced with an ever-greater federal debt burden, both being enabled and encouraged by low interest rates.

In the absence of adequate aggregate demand to employ all available American workers, politicians called for tariffs to block low-priced imports that compete with American products and take jobs away from Americans. The politicians have fallen for what economics call The Lump of Labor Fallacy where somehow there is a fixed number of jobs for the world to fight over. However, proper fiscal and monetary policies can increase or decrease the number of available jobs while tariffs just block competition and raise prices for everyone including elderly living on limited Social Security payments. A better approach is to redirect the money flow from Wall Street back to Main Street so that there would be enough consumer demand on Main Street to employ both international workers making products for Americans as well as all Americans who are willing and able to work at good wages. Trade can be and should be a win-win situation where everyone is made better off. Getting high quality, low-priced products from abroad should not in any way prevent Americans from getting good jobs that pay well. Tariffs are just an excuse for not properly addressing the money flow diversion from Main Street to Wall Street within the United States.

Blocking overseas competition is associated with a dramatic increase in industrial concentration where one-by-one competitive industries have been turning into duopolies or monopolistic competition where one firm or a handful of firms controls the market. Keynesian and Austrian economists recognized the inevitability of economic downturns, but the Austrians saw such downturns as a cleansing process where weak and inefficient firms were driven out of the market in what Austrian economist Joseph Schumpeter called “creative” destruction, but with larger firms undercutting or buying up weaker ones should more accurately be called “competition” destruction. Firms that survive economic downturns are not necessarily more efficient, but just have more cash reserves to ride out a downturn. A popular and efficient local restaurant may not survive an economic downturn such as the one associated with the COVID-19 pandemic while a larger company with lots of cash on hand may be able to get away with running some aspects of its business inefficiently in both good times and bad. When Amazon started up, it ran in the red for an extended period without facing bankruptcy, because it had lots of cash on hand. Tepper and Hearn (2019) reveal the surprising number of noncompetitive industries and quasi-duopolies in the United States in their book The Myth of Capitalism which could have been more specifically titled The Myth of Competition.[8] 

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.”

Government is often dismissed as inefficient, partly because it may have goals other than profit maximization, and also because, unlike private businesses, the government’s operations are subject to close public scrutiny such as under the Freedom of Information Act and the Open Meetings Act. But large businesses can be and often are even more inefficient than government. For example, Saluto Pizza started as a small pizza place in St. Joseph, Michigan. Its pizzas were so popular it started freezing them to sell to people to take home to reheat for consumption later. The frozen Saluto Pizzas became so popular that a frozen pizza manufacturing plant was created to produce them to sell to grocery chains around the nearby region. Their popularity was such that another factory for making the frozen Saluto Pizzas was created in Birmingham, Alabama. Then General Mills bought out Saluto Pizza. But following the financialization strategy of cutting costs, the Saluto Pizzas were then made with cheaper ingredients which made them unpopular. Before long the Saluto Pizza brand was discontinued. Such cost cutting and removal of unpopular products is then described as enforcing efficiency in private business, in contrast to alleged government waste and inefficiency. The executives who cut costs and cut out unprofitable products were probably rewarded and promoted. By contrast, so-called government “bureaucrats” who serve the public are seen as unproductive and wasting the taxpayer’s money. 

America thrives when entrepreneurs such as Steve Jobs and Elon Musk focus on creating new products. But productivity and economic growth are suppressed when companies focus on financialization by excessive cost cutting and shareholder payouts, instead of investing in new products that capture the imagination and desires of both their existing customers and potential new customers. When business fails to generate sufficient economic growth to employ the available workforce, government has to step in and increase the national debt using tax cuts and expenditures to generate enough demand for goods and services to avoid recessions.

John Locke’s original conception of gaining ownership of land and other forms of capital through the sweat equity of labor quickly reverted back to ownership of capital by an elite class (i.e., the nobility). Labor saving technologies such as automated vehicle production and mountaintop removal in coal extraction have dominated over labor augmenting technological change provided by computers generating a need for computer programmers or Amazon’s need for delivery drivers (soon to be replaced by driverless vehicles). Future economic prospects remain bleak for unskilled and semi-skilled labor. However, it is important to note that real capital has not won. As Simcha Barkai (2020) has revealed, the ultimate winner is profits (especially profits in the form of financial capital in the stock and bond markets). The shares of labor and real capital have declined significantly while that of profits has increased substantially.   

Today the huge pile up of wealth at the top of the wealth pyramid has flooded the financial markets with money and has driven interest rates down toward zero.  But this money has not primarily gone into productive investment in real capital, but instead has driven up stock and bond prices as alternatives to investment in the real economy. Why invest in improvements in real productivity when you can make a lot more money in the financial economy?  Ultimately the financialization of our economy has become a drag on productivity and not a catalyst for it.


[1] Brooks, David. Bobos in Paradise. New York: Simon and Schuster, 2000.

[2] At prep school and college reunions, it is interesting to note that the scholarship students are more likely to show up driving expensive, prestigious vehicles than their former classmates from wealthier families, who were taught to hide their wealth to some degree, or at least not flaunt their wealth publicly.

[3] WASP = White Anglo-Saxon Protestant.

[4] Brill, Steven. Tailspin: The People and Forces Behind America’s Fifty-Year Fall — And Those Trying to Reverse It. New York: Alfred F. Knopf, 2018. 

[5] Data from Economic Policy Institute: https://www.epi.org/productivity-pay-gap/

[6] Petrou, Karen. Engine of Inequality: The Fed and the Future of Wealth in America. New York: John Wiley & Sons, 2021.

[7] Barkai, Simcha. “Declining Labor and Capital Shares,” Journal of Finance, 2020, vol. 75, issue 5, pp. 2421-2463.

[8] Tepper, Jonathan with Denise Hearn. The Myth of Capitalism: Monopolies and the Death of Competition. Hoboken, NJ: John Wiley & Sons, 2019. 

Should We Fear the Replacement of Cash with Digital Currency (CBDC)?

Most Americans believe in the rule of law. They assume that most of the time our laws will be enforced as written and applied in a fair and judicial manner. I don’t mind if the police spy on me, as long as I get to spy on the police (through police body cameras). But what about eliminating cash and making all the details of my transactions available to the government through the introduction of a central bank digital currency (CBDC)?

A while back, economists at The Bank of England asked me to present my paper on “A New Digital Currency (CBDC) Monetary Policy Tool to Stop Inflation Without Causing a Recession” in their session at the American Economic Association annual meeting.  Lately a lot of people have expressed concern about the privacy issue associated with the creation of a central bank digital currency (CBDC) and how to keep the government from misusing the account information.  In my paper I noted that it would be easy to keep the transactions information separate from the account ownership information, connected only through alpha-numeric codes as done for the cryptocurrencies such as Bitcoin, Litecoin, Ethereum, et cetera. A judge could decide whether suspicious ( illegal ) transaction activity (drug dealing, money laundering, etc.) in a particular account was sufficient to warrant allowing government officials access to the account’s ownership information.

Most people think that a bank just loans out the money that people deposit in that bank. This is a complete misconception of how our banking system works. The bank does not loan out the money you deposit, but instead uses that money to loan out as much as ten times the amount of money you deposited. Where does your bank get all that money? It just creates it out of thin air. The banks creates a loan by creating an account for the person or business that is to receive that loan and then typing in the amount of the loan as the account balance. That is it. The bank creates that loan money out of thin air! Your deposit just provides your bank with the authorization under our fractional reserve banking system to create and loan out ten times as much as you have deposited.

It is important to know that at least 90 percent of currency in the United States is already digital and has been created by the private banking system under our fractional reserve banking system.  Most money is in checking accounts, savings accounts and credit cards, which the private banking system monitors.  The Federal Reserve Bank can adjust the amount of money in our economy on the margin to fight inflation (raise interest rates and reduce available money) or to stimulate the economy (lower interest rates and increase available money). But most of the money in our economy has been created by private banks.

Wells Fargo took advantage of people by giving them features or accounts they didn’t ask for and charging them for those features or accounts.  The law eventually caught up with Well Fargo.  Several of its leaders were forced to resign and the bank was heavily fined.  The rule of law must be adhered to to prevent private banks and government autocrats (mainly politicians) from violating our rights under the law.

Many young people don’t even bother carrying cash now that even vending machines accept credit card payments.  I was in NYC at a Times Square hotel to present my paper at the Eastern Economics Association meeting when I noticed a sign in the hotel lobby near the hotel restaurant that said: “We do not accept cash.”  I thought that this was just the hotel, but I went to a nearby Starbucks and saw the same sign: “We do not accept cash.”  Eliminating cash avoids wasting time making change and the occasional robbery. The bus is going nowhere and the passengers all have to wait patiently while the bus driver is busy with cash transactions. Why bother with it. Some newer vending machines don’t accept cash. Some of the older vending machines accept cash in theory but not in practice. Sending workers around to all the vending machines to add or remove cash is such a waste of time. Credit card transactions can be sent electronically to the vendor. Cash is (becoming) trash! Well, actually you may want to hold on to some of these strange pieces of paper and coins to show your grandchildren and great grandchildren. In reality, money is going digital one way or another whether we like it or not.

The fear of government access to our transaction information by replacing cash with a Federal Reserve issued digital currency is part of a broader concern about the potential use of government power to violate our privacy to control and manipulate people. Politicians clearly have an interest in rewarding their followers and undermining their opponents in order to ensure their re-election. But why would so-called government “bureaucrats” have any interest in manipulating people? What would be their motivation?

Many of my students were willing to forgo making the big bucks on Wall Street to instead take a job as public servants with an oath to abide by the rule of law and the Constitution.  They have worked for the IRS, the CIA, and many other key agencies in the government. They are all good people serving our country by following the rule of law and the Constitution of the United States.  If you believe in the rule of law, you will want to keep decisions about arresting and prosecuting people out of the hands of the politicians and only in the hands of dedicated public servants including police officers, judges and juries who are committed to the fair and impartial application of the rule of law.

Politicians like Donald J. Trump hate my former students and call them the “The Deep State” because they refuse to violate the law in favor of acting to promote Donald J. Trump.  Don’t hate the government and the public servants who have dedicated their lives to serving us. Just stop the politicians who want us to violate the rule of law and the Constitution. It is not the dedicated government public servants who have served America over the years who are motivated to use our information to take advantage of us, but rather it is the politicians who want to gain access to our private information in order to manipulate us for political gain.

Instead of disparaging “The Deep State“, we should be celebrating them and thanking them for following the law and the Constitution instead of following some politician who wants to violate the law to promote themselves.  The transition from cash to a digital currency that lacked adequate privacy protection could enable a rogue politician such as Donald Trump to identify and abuse his or her opponents and their followers. Strengthening “The Deep State” is the best way to keep any president from abusing his or her power. We should be honoring, not disparaging, our friends and neighbors in “The Deep State.”

One would think that conservatives would want to correct any deviations from the rule of law and the Constitution. If the Biden or previous administrations have used government power inappropriately, you would expect conservatives to propose ways to re-establish the rule of law under our Constitution. But the Trump supporters at The Heritage Foundation are proposing the opposite strategy in their Project 2025 plan entitled “Mandate for Leadership: A Conservative Promise.” The Project 2025 plan calls for Trump to dismantle any and all barriers to a president who wishes to violate the law and the Constitution to turn the presidency into a means to promote the president’s agenda of personal gain for himself.

On December 18, 2020 Trump lawyer Sidney Powell met with Trump and several of his advisers to go over the draft executive order dated December 16, 2020 which would order the defense secretary to seize all the voting machines in an effort to overturn the November 2020 election results. Ultimately the draft executive order was never carried out with Attorney General Bill Barr resigning and many others in key positions in the Justice Department threatening to resign. The lies told on Fox News claiming voting machine fraud resulted in Fox News being sued and settling out of court with Dominion voting machines for $787.5 million dollars. Trump now understands that he must replace all senior Justice Department officials and military leaders with hard-core, dedicated Trump loyalists in order to follow President Putin’s example in adjusting election results to his liking.

Trump is running to permanently take control of the government and establish an authoritarian dictatorship that might make Putin’s regime in Russia look mild and timid in comparison. One of the first laws that Trump will have the Congress pass will be to protect the presidency for those who “love our country” and from “unpatriotic, anti-American, traitors” who disparage the presidency. As in Russia, anyone criticizing the president or the policies promoted by the president will be prosecuted.

Let’s face it.  Trump had no intention of leaving the presidency at the end of the four years in his first term.  He only failed because he failed to replace the top Justice Department officials, the top military commanders, the top Capitol police commanders, and the top Secret Service commanders with people who would do whatever he said regardless of having taken an oath to abide by the rule of law and the Constitution. But now Trump’s followers know that as president he will pardon them if they violate the law on his behalf.

Trump is not running for four-more-years. He will just follow Putin’s example and have Congress change the law.  Last time he attempted to stay in power regardless of the popular vote.  He urged his followers to stop the certification of the vote. He knew that that some had guns. They made their intentions clear when they chanted “Hang Mike Pence,” overpowered the police to push through the police barricades, and smashed windows to force their way into the Capitol building. Nine people died, several police were injured trying to defend the Capitol from the insurrectionists, and several million dollars of damage was done to our Capitol Building. Trump has made clear his intention to pardon many of these “patriots.”

Trump failed to stop the certification of the vote because he didn’t replace the Justice Department, military, police and Secret Service leaders with his own loyal surrogates.  He will not make that mistake again. Trump is not running for four more years as president. Trump clearly intends to replace the rule of law and adherence to the Constitution with his own permanent personal dictatorship.

If Donald J. Trump gets back into the White House and proceeds to correct his mistake in his first term of failing to replace the Justice Department officials, the military leaders, the Capitol police leaders, and the Secret Service leaders with his own sycophants and, thereby, eliminates the rule of law and the Constitution and replaces our democratic republic with a permanent Trump dictatorship, you will have to ask yourself:  “What could I have done a year ago to prevent this tragedy from happening?”   How much money would you have given?  How much time and effort would you have put in to prevent replacing the rule of law and adherence to the Constitution with the permanent Trump dictatorship?  Should I have posted more on Facebook? Should I have taken the time to talk with my neighbors, friends, and family members? Think about this now before it is too late. There is a lot more at stake here than the privacy of your digital transactions.

Money Flow Paradigm Reverses Say’s Law

Economics became widely known as what Thomas Carlyle called “the dismal science” when Thomas Malthus predicted that the population growth rate will always exceed the food supply growth rate. Therefore, there could never be too much food because the population growth would at least keep up with (subsistence) and at worst exceed (starvation) the available food supply.  Demand would always increase to consume whatever could be supplied.  This led to what has become known as Say’s Law: “Supply creates its own demand” and the basis for supply-side economics. Economic growth, according to the dismal science, was always a supply-side phenomenon. You could take demand for granted and just focus on trying to increase supply.

From population explosion to population implosion

For centuries humanity spread out across the continents and populated the far corners of the world. It seemed like humans would eventually overpopulate the planet. Eventually, we would need to find another planet to colonize to keep on growing. Population growth was a given, until it wasn’t. Almost out of the blue, the unexpected happened. As countries reached higher levels of economic development, their population growth rates dropped. You might call this a Darwinian Natural Selection Paradox where when a species becomes more dominant and powerful, instead of increasing birth rates, its has falling birth rates.

Early on a Monday morning, I was about to begin my lecture about the international income distribution to my economics class at Notre Dame. But my students were all excited. They were all talking with one another about the great football game on Saturday where Notre Dame won at the last minute with an amazing play.  I couldn’t get their attention. Finally, I said: “Today we are going to talk about birth control.” My students were shocked. “Birth control?” they exclaimed. “The professor is going to talk about birth control. This is a Catholic university. He can’t talk about birth control.” But I persisted. “What is the most effective birth control method in the world?”, I asked. The students continued murmuring in apprehension and concern. Finally, I said: “The most effective birth control method in the world is per capita income. When per capita income rises above $6,000 per capita, birth rates drop like a rock.”[1]

With rising per capita income, birth rates drop. In rich countries, they have dropped below the replacement rate of an average of 2.1 children for each woman in her reproductive years. According to data from the US Census Bureau, the population growth rate in the United States in 2021 was just one tenth of one percent, which was the slowest population growth rate since the nation’s founding in the eighteenth century. Without immigration our population would be declining.

World population declines

Japan is ahead of many other countries in the transition to an economy where an aging population is dramatically increasing the ratio of non-working elderly relative to a shrinking active workforce.   In the absence of much immigration, Japan must increase its productivity in terms of output per worker to make up for its shrinking number of workers. Japan’s population was at its maximum in 2010 with 128 million people, but shrunk to 125 million by 2021, and is expected to fall below 100 million before long. In 2022 Japan’s birth rate fell to its lowest level ever and its marriage rate fell to the lowest since World War II. Consequently, with older people living longer than ever, the elderly’s share of Japan’s population has grown substantially. The elderly generally demand fewer products and services except for health services than young families, but eventually need more personal medical services. Health costs rise while government revenues fall, and aggregate demand is sustained through massive deficit spending necessary to keep the workforce fully employed. 

Over 90 percent of the world’s countries currently have a birth rate below the population replacement rate with at least 20 countries expected to cut their native populations in half by 2100 including Japan, Italy, Spain, Portugal, Germany, Thailand, and South Korea, among others. Russia’s population peaked at around 147 million and is currently heading down toward 142 million because of an aging population, falling birth rates, relatively higher death rates including military deaths and suicides, and emigration (especially young people) exceeding immigration. China’s economy has recently reached a level of per capita income over $10,000 with its population reaching a peak and then declining significantly thereafter. Populations are increasing primarily in poor regions of Africa such as Nigeria and Ghana, where the natural resource curse[2] keeps most of the population in poverty with just over $2,000 income per capita. 

Around the turn of the millennium, millions of people in China were moving out of poverty into what for many would become what we would call a lower-middle-class lifestyle. This improvement in their economic well-being was quickly changing “the dismal science” into something not quite so dismal. As noted above, Japan had already gone through this transition and had a birth rate well below the 2.1 child per woman of child-bearing age known to be the replacement rate for maintaining a constant population. Japan, Germany, Italy, Russia, South Korea and many other developed economies already have shrinking populations. As a result of China’s historic one-child policy (which it dropped in 2016) and its rising per capita income, China’s population is reaching a peak and will start declining.

If it weren’t for immigration, the United States would have a falling population as well. To some extent American immigration has enabled the United States to offset its declining birth rate. For a given level of technology and, therefore, productivity, a declining workforce means a decline in gross domestic product (GDP) and less money from the earnings tax which funds the Social Security system. Consequently, elderly people who depend on Social Security have a vested interest in encouraging immigration, especially because they are retired and, therefore, no longer in the workforce to compete for jobs with immigrants. The elderly have a special interest in encouraging immigration or at least a guest worker program in farming such as in picking fruits and vegetables in California farms to keep the cost of food low, where food and medicine constitute a greater portion of the budgets of elderly people relative to younger people who have expanding families needing lots of basic products such as home furnishings, clothing, and cars and trucks. Of course, immigration could tend to keep wage rates low to the extent that they substitute for instead of complementing the current workforce. However, there is not a fixed number of jobs in this world to be fought over (what economists refer to as the “Lump of Labor Fallacy”). Rather, through infrastructure spending and other expenditures, governments can increase the demand for workers and, thereby, increase wage rates in addition to maintaining full employment as long as it is not so much as to cause excessive inflation.

Distorted money flow reverses Say’s Law to read: “Demand creates its own supply.”

Despite the rising deficit and health costs, and in the absence of sustained government stimulus spending over the long run, deflation with falling prices and wages threatens to dominate, rather than the widely feared and reviled inflation, as measured by the typical market basket of goods and services used to calculate the consumer price index (CPI), or, alternatively, measured as the personal consumption expenditures (PCE) index. As baby boomers die and the population declines, consumer demand shrinks, while technology expands and speeds up the global supply chain. More can be produced and moved through ever increasing automation and driverless vehicle technology. Say’s Law may have worked back in the day when populations were exploding and every crumb of supply was snatched up, but today the problem is a distorted money flow diverting money primarily to those with the lowest marginal propensities to consume (the wealthy) while leaving the poor and middle class up to their eyeballs in debt. In the United States to counter high levels of unemployment the Federal Reserve uses quantitative easing (QE) to pump money into the New York financial markets which drives up stock and bond prices to benefit the wealthy. But when inflation threatens, the Federal Reserve punishes the poor and middle class by raising the cost of borrowing, while the wealthy get a higher rate of return on their bonds and certificates of deposit. In either situation, one requiring economic expansion, or one requiring economic contraction, the Federal Reserve inadvertently acts to reward the rich and punish the poor. (See Karen Petrou’s book “The Engine of Inequality” and Christopher Leonard’s book “The Lords of Easy Money.”) The Federal Reserve is implicitly following Say’s Law and supply-side economics while ignoring the fundamental changes in globalization, productivity and population that have taken place to reverse Say’s Law to invoke demand-side economics as revealed by the money flow paradigm. Note that this is not the Federal Reserve’s fault. They have just not been given the correct set of tools by Congress to properly control the economy (as explained in my forthcoming book “Distorted Money Flow” and in earlier commentary at https://sites.nd.edu/lawrence-c-marsh/home/ ).

Workers are no longer paid the value of their marginal products

In the United States before 1976 worker compensation kept up with worker productivity, but after 1976 productivity continued increasing, but worker compensation flattened out in real terms. In other words, workers are no longer paid the value of their marginal products. Consequently, over the long run, in the face of an increasing money flow distortion where a larger and larger proportion of the quantity of money flows to the wealthiest people who have the lowest marginal propensities to consume, aggregate demand threatens to fall short of aggregate supply, because the bottom 90 percent of the population can no longer buy back the value of the goods and services they are producing unless government maintains and expands its flow of stimulus money to them, paid for through deficit spending or the pre-distribution (more money to Main Street before taxes) and/or redistribution (more money to Main Street and less to Wall Street after taxes).

Money flow paradigm reveals distorted money flow that has reversed Say’s Law

In conclusion, by following the flow of money and its effects on economies everywhere, the money flow paradigm has revealed the fundamental problem of the distorted money flow that has greatly restricted demand while providing excessive amounts of money for supply. This has reversed Say’s Law which said: “Supply creates its own demand” and replaced it in facing a reality very much the opposite where “Demand creates its own supply.” The money flow paradigm has shown that where supply-side economics made sense back in the day, it no longer applies to the world as we know it which is today better represented with demand-side economics.


[1] Historically, having a child was viewed by some people as an investment, especially after the advent of agriculture, and during the industrial revolution with the use of child labor in manufacturing. Eventually, this developed into a slave trade where the costs of raising a child were bypassed with the capture of fully grown slaves from Africa. Entrepreneurs in London could invest in the slave trade where the hard work of others provided a good return on investment. Hard work paid off, but not for the slaves. Their hard work paid off for the investors. This natural product of capitalism and free enterprise was abolished through government intervention when laws and regulations were passed banning child labor and slavery. Even today companies that follow the “I-win-you-lose” mindset treat their employees as just another factor input such as coal or fuel oil and not as team members. On the other hand, most successful companies follow the “win-win” strategy and recognize the dynamic creative potential (the agency) of their employees.

[2] Ironically, countries with large deposits of natural resources, which can cause an excessive demand for their currencies, are unable to produce and sell other products at competitive prices given the high value of their currency. This has been labeled the “Dutch disease” by The Economist magazine in reference to the high price of the Dutch guilder when Dutch natural gas and oil were in great demand before the Netherlands adopted the Euro as its official currency.

Shareholders vs. Customers: Who’s Winning?

The foundation of free enterprise is Adam Smith’s invisible hand, which asserts that competition drives prices down and quality up as profit-seeking behavior results in minimal profits for the profit-seekers and maximal benefits for society as a whole. This world of free enterprise where “greed is good” is said to benefit us all because the greedy don’t end up with that much because the money is diverted into making great products that sell at low prices. This tug-of-war between shareholders and consumers in the end is a zero-sum game once the workers in the aggregate are also recognized as the consumers. In a truly competitive free market system, the consumers win and the company just gets the standard run-of-the mill profits in spite of their enormous efforts to bring about a more profitable outcome. The workers are the consumers who must earn at least enough to buy back the value of the goods and services that they are creating (as explained by the money flow paradigm). Henry Ford recognized this in the early 1900s when he doubled his workers’ pay to retain his skilled workforce and to enable his workers to buy cars that they were making. This also motivated his workers to focus on producing high-quality cars. Ford defied the common property resource problem and free rider problem where employers would like other employers to pay workers more to generate more customers for their products, but not pay their own workers more. Nevertheless, some employers complained about the “bad” example Ford was making in raising his workers’ pay.

The absence of competition leads to the opposite result. Monopoly power results in maximum profits, high prices, reduced quantity and minimal quality. Barriers to entry can result from economies of scale, network effects, first-mover advantage, economies from experience, and natural monopolies. Even industries with many firms may maintain a follow-the-leader discipline as a large dominant firm sets prices for all to follow. Adam Smith’s first invisible hand of competition is often defeated by Adam Smith’s implicit second invisible hand of market power and collusion as Smith noted when he said: “People of the same trade seldom meet together, either for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

Ultimately, this translates into a conflict between the short-term interests of shareholders, who are focused on maximizing short-term profit margins and share price, and the long-term interests of the customers and the long-term viability of the company as a whole. This is especially true in modern times as technology constantly produces new products and services and improves economic efficiency and productivity. Money going into dividends and share buybacks is not going into product development and customer satisfaction. Cutting costs to improve profit margins often means cutting quality and restricting quantity. We have all seen inflation not only raise the price of our favorite treats but also shrink the quantity in the bag or box.

Asking whether the free enterprise system will correct these diversions and distortions is asking who is in charge and what are the effects of their decisions? In a true free enterprise economy where Adam Smith invisible hand of competition dominates, it is the customer who ultimately is in charge. But in the real world of imperfect competition, the CEOs and corporate boards call the shots. They can focus on the customer and constantly improve quality, quantity and productivity, while seeing prices fall in a truly competitive environment, or they can skip all that and focus on short-term share price with an expense minimization strategy that cuts costs often by sacrificing quality.

But what about Joseph Schumpeter’s creative destruction? Won’t the noncompetitive firms lose out in the long run and be replaced by truly competitive ones? As usual, we want the world to be simple and provide us with a story where we all live happily ever after. In reality, large companies can accumulate or draw upon large amounts of cash. When an economic slowdown comes about, the small, efficient, family-owned restaurant may go belly-up, while the somewhat inefficient, but well-financed, larger firm may have enough cash to ride it out and even buy up those competitors with less access to cash. Perhaps Schumpeter would have been more realistic by calling it competition destruction when firms go under in an economic downturn. Rather than strengthening Adam Smith’s first invisible hand of competition, recessions work to shift market power to Adam Smith’s second invisible hand of collusion.

But so far we have only been looking at industry level effects. What about the economy as a whole? Is money automatically flowing in a manner to maintain a well-balanced economy with maximum productivity and economic growth? Prices may be somewhat rigid when set by dominant firms, but don’t wages adjust automatically to move us back toward an economic equilibrium of full employment? This requires a great deal of mobility and substitutability. Perhaps you lost your job in New York, but your former college roommate tips you off to a great job fit for you in San Francisco. Oh, wait a minute. I forgot. Two-thirds of Americans don’t have a college degree. They don’t have a former college roommate or anyone else on the inside track elsewhere. Or what if you have a partner who has a job and needs to stay in the area? Perhaps you own a house or have relatives you want to keep close to. Labor mobility sounds nice in theory, but can be a lot harder to achieve in reality.

People want to get the best wage they can. But they have to compete with other people who may be willing to take the same job for a bit less pay. Competition among workers is alive and well in most venues. But what about jobs? In theory, jobs compete with one another for workers. If a worker gets a job offer, but finds a comparable job for a bit more, he or she is inclined to take the better paying job. The problem is that jobs often conspire with one another to form job blocks, just as workers can conspire with one another to form unions. Think of the coal mining town. There is only one major employer in town — the coal mine. The coal mining company forms job blocks where workers are all hired at a fixed wage. Take it or leave it. The resulting wage rate can be considerably less than the free market equilibrium wage. This can be corrected. Workers can form a union and demand the free market equilibrium wage. John Kenneth Galbraith in his 1952 book: “American Capitalism” refers to this as countervailing power. Economists understand this under their Theory of the Second Best, which says that when one factor is out of whack (e.g., monopsony) and cannot be fixed, the best solution is to have another out of whack factor (e.g., union) to counter it.

Workers often confront blocks of jobs that cheat the workers out of the free market wage. Almost every employer controls more than one job and fixes the compensation for the jobs under their control. In the decades after World War II, unions controlled as much as 35 percent of the workforce and this caused even nonunionized firms to pay the union wage to their workers. Today, unionization has dropped below 10 percent and, if you don’t count government employment, unionization has dropped to below 6 percent of the private workforce. Without a union, workers are unable to counter those ubiquitous blocks of jobs. For the economy as a whole, this means that significantly less money is flowing to workers than would be the case under a truly free market economy.

The fundamental problem is that the people on Main Street can no longer afford to buy back the value of the goods and services that they are producing. Oligopolies ( just a few sellers ) and oligopsonies ( job blocks ) dominate many of our major industries. Moreover, about 60 percent of Americans are living paycheck to paycheck. Private debt has skyrocketed. But even that is not enough to maintain full employment. Politicians love to complain about the national debt and how they intend to get rid of it or at least balance the budget. But Republicans pass unpaid for tax cuts and Democrats pass unpaid for expenditures increasing public debt in order to avoid having the economy slip into a recession and end up losing votes at election time.

Why wasn’t this problem fixed after the 2007-2009 Great Recession? Yes, the Federal Reserve did pour huge amounts of money into the New York financial markets. But very little of that money tricked down to the average Joe or Jane on Main Street. With 84 percent of the stock market owned by the 10 percent richest people, quantitative easing (QE) just drove up stock prices to make the wealthy people wealthier and drove down interest rates to facilitate the private debt of most everyday Americans while the government increased its public debt. This distorted money flow was a result of too much money flowing to passive investors (shareholders) and too little money going to workers (the consumers) and to creative entrepreneurs who produce new and better products and improve productivity.

To solve these problems we need to focus on the money flow paradigm which reveals the need for a more balanced money flow that does not require huge amounts of private and public debt and does not divert enormous amounts of money to passive investors (shareholders). We need to direct more money flow to creative entrepreneurs to create new and better products and services and to all our workers who are the consumers of those goods and services. Correcting our money flow involves a variety of fundamental governmental and corporate changes, but we must first more fully appreciate our money flow problem as revealed by the money flow paradigm.

MAGA Rebellion Against Elite’s Control of the American Economy

Sherwin Rosen, a former chair of the Economics Department at the University of Chicago, wrote an article in the American Economic Review in 1981 titled “Superstars.” It revealed the natural tendency for a few individuals to do extremely well in each recognized field as in entertainment, sports or other areas of social, financial or intellectual interest, and for all others to be left on the sidelines as “also-rans.” Economics involves more than money. Economic decisions can often require time, money, and mental energy. How many superstars can you keep in mind and constantly compare in each and every area of importance?

The top star gets an inordinate financial reward compared to the almost-as-good person in second place. Our limited time and mental energy may cause us to reward Taylor Swift with enormous compensation when a less well know but equally proficient singer and dancer may get little or no attention or compensation. This limitation plays an important role in inappropriately and inefficiently directing a large portions of economic rewards to the “winners” in what inevitably boils down to a “winner-take-all” economy and a severely distorted money flow away from Main Street (the losers), where most of the work is performed, and into Wall Street (the winners), where most of the rewards accumulate.

It is very important to recognize that the financial economy and the real economy are quite separate and very different from one another. The vast majority of the money in the financial economy is owned by institutions and wealthy people (the “winners”), which include most bankers, doctors, lawyers, and the upper management of America’s largest companies. Yes, there was that Vermont janitor, Robert Read, that died at age 93 with $8 million, demonstrating the enormous power of compound interest. However, he was the rare exception that defies the overwhelming statistical evidence that proves the rule: “In America, if you start poor, you stay poor.”

When financial media commentators refer to “the people,” they are usually not talking about the sixty-two percent of people who are living paycheck-to-paycheck or the two-thirds of Americans with no college degree. They are not talking about the MAGA crowd. They are talking about themselves and other wealthy people. The net worth of Treasury Secretary Janet Yellen is estimated to be $20 million while that of Federal Reserve chair Jerome Powell is around $55 million. Much of the stock in the New York stock exchange is owned by millionaires and billionaires. This can lead to a complete lack of understanding of the real day-to-day concerns of most Americans.

While the original land allocations made by King George for the American colonies held up for several centuries, the memory of the French Revolution gave the elite a strong sense of noblesse oblige and motivated them to avoid accumulating enormous wealth. Consequently, in the 1800s the elite encouraged westward expansion with phrases such as “forty acres and a mule” for frontier farmers and the government’s payoff of modest mortgages for widows of union soldiers in the Civil War who “bought the farm” in dying for their country.

This was in sharp contrast to Argentina, which allocated the land in its western expansion into its Pampas grasslands to the elite. The elite in Argentina employed the peasants to work the land but not gain ownership of that land. This severely suppressed the motivation of the peasants in Argentina to work hard and creatively. Consequently, productivity and economic growth in the United States far exceeded that of Argentina. This was further enhanced by government support in creating agricultural experiment stations in the United States.

In the United States, the Land of Opportunity paid off for those willing to work hard on the frontier until the late 1890s and the early 1900s when a distorted money flow set in to over-reward the wealthy elite such as Andrew Carnegie and John D. Rockefeller to bring about financial instability. Fortunately, our democratic institutions allowed the rebellion brought about by the Great Depression that began in 1929 to bring Franklin D. Roosevelt into the presidency to oversee a transition to a somewhat more equitable economy with better money flow for the 1930s MAGA crowd, which enabled America to avoid its own version of the French Revolution.

Beginning around 1960 and reaching a turning point in 1980, America made a transition from our old aristocracy based primarily on legacy to a new meritocracy. In recent years the decline of America’s aristocracy and its replacement with the new meritocracy made the superstar effect and the distorted money flow much worse. The new superstars felt no sense of noblesse oblige and no reason to hold back in accumulating huge amounts of wealth for themselves and their prodigy. While earlier generations of Americans recognized the importance of providing free and mandatory elementary and secondary education for each and every one of our children as essential to the overall growth of our wealth as a nation, in recent years vocational and college educational attainment has been restricted to those who can come up with enough money to cover the ever increasing cost of higher education, leaving behind two-thirds of Americans (the core of Trump’s MAGA crowd).

This distorted money flow, which moved money away from the real economy and into the financial economy, has been further aggravated by the Federal Reserve Bank due to its limited policy tools that are designed primarily to affect the financial markets on Wall Street, with only a rather limited and lagged effect on the real economy on Main Street. As early as the mid to late 1990s and then after the Great Recession of 2007-2009, the Federal Reserve exacerbated the distorted money flow by pumping too much money into America’s financial markets, which aggravated income and wealth inequality while encouraging an enormous increase in both private and public debt.

Just as Marie Antoinette was confused and caught off guard making her “let them eat cake” remark, many wealthy Americans have not caught on to the real significance of the “hang Mike Pence” and the attempt to kill Nancy Pelosi’s husband as the tip of the spear in a rebellion where the election of Donald Trump to serve as America’s first dictator may be just the beginning of our problems. Controlling and mitigating our distorted money flow and its resulting economic and political instability is essential if we are to avoid a catastrophe and potential blood bath. In spite of all of the warnings of the danger to our democracy of electing Donald Trump to a second term as president, the MAGA crowd continues to press for what boils down to essentially a Trump dictatorship as described in detail by his re-election team. Their willingness to throw away almost 250 years of democracy suggests an anger against the American elite that cannot and must not be ignored. Let’s hope that there are no guillotines set up on the steps of our nation’s capitol.

It is not just about money. Respect, or the lack thereof, is as important, or even more important, than the money. The big mistake of the Democrats occurred in the late 1970s when they started transitioning from a pre-distribution strategy to a redistribution strategy. Under pre-distribution, the Democrats followed the countervailing power approach promoted by Kenneth J. Galbraith in his book: “American Capitalism” in 1952. Where a few companies dominated an industry enabling abnormally high profits, Democrats supported unions to match and control the power of those companies. This mitigated and minimized the distorted money flow that would have otherwise gone almost entirely to the elite. Democrats also got strong minimum wage laws enacted during the 1950s and 1960s.

Unfortunately, the Democrats changed to a redistribution strategy by 1980 where they emphasized higher income and estate/inheritance taxes for the wealthy instead of continuing to support strong unions and higher minimum wages. This not only gave conservatives the opportunity to criticize the Democrats for reversing the “free market” economy’s allocation of rewards, but made working people get more money from welfare and other need-based programs that left them with less dignity and self-respect. Recently Democrats including President Biden are beginning to realize their mistake and return to a pre-distribution strategy with stronger support for unions, higher minimum wages and earned income tax credits. But this change in strategy may be too late for the 2024 election.

Will the MAGA crowd be satisfied with a Trump presidency that simply focuses on replacing the deep state’s commitment to the constitution with a commitment to Trump and arresting Trump’s opponents? What will be done to suppress CNN, MSNBC, The New York Times, The Washington Post and the rest of the “fake news” media? Would that be enough to satisfy the MAGA crowd? Will they want more and will they become disillusioned with Trump if he does not provide better jobs with better pay and more respect for their work? The revolution has begun. The key question is how far will it go?

Dr. Martin Luther King, Jr. emphasized that his civil rights movement was strictly nonviolent. He repeated this to his followers again and again. Otherwise, the 1960s might have been as bloody as the 1860s. Of course, Dr. King was murdered as well as President John F. Kennedy and presidential candidate Robert Kennedy. Hopefully, Donald Trump will emphasize the importance of nonviolence if he loses the 2024 presidential election. Trump will need to make it clear that he does not condone violence, and if he wins the 2024 presidential election, he will not pardon anyone who has committed violence.