Econ 101

I've been reading 'Capital in the Twenty-First Century' by Thomas Piketty, this follows The Big Short:Inside the Doomsday Machine by Michael Lewis, After-Shock by Robert Reich and Too Big to Fail by Andrew Sorkin, I also must add Elizabeth Warren's Fighting Chance to this list and these were all read in just the last 6 months. I've come to realize that there are too few of us who have even a rudimentary understanding of how our economy works so I'm going to try to explain it, clearly and concisely. Each of us needs to understand how our economy works in order to understand why the majority of our citizens have felt no economic relief in the last 5-6 yrs. The news media, print, cable, network, etc. is constantly reporting on the state of our economy but, without a simple understanding of economics, you have no way of knowing what the truth is behind the numbers. I'm hoping to help you.

A nation's economy is not healthy if the wealthy minority choose to save (hoard) a high percentage of the money in circulation and live either extremely frugally or have a saturation of homes, cars, clothing, jewelry, appliances, etc. A nation's economy is dependent on the amount of money that is flowing continuously throughout the system. In our current economic situation, the economy has the largest percentage of it's currency in the savings and investments of the top 5% of citizens and big corporations. While this is good for them it is unhealthy in our stagnant economy. In a healthy economy, while savings needs to be a component of a citizen's budget, the largest percentage of an individual's and corporation's income needs to be in circulation throughout the economy. When money is in circulation everyone benefits. As an example, if John Q. Public is earning a living wage he can pay for housing, food and medical coverage, put 7-10% of his income into a savings/investment account AND he can purchase clothing, appliances, automobiles, vacations, etc. as needed/ wanted. John Q. Is working, therefor, he is paying income taxes on his wages. John Q. has purchasing power which, in turn, equals more taxes being paid in the form of sales tax, more income taxes being paid by those whose job it is to produce what John Q. is purchasing. Because John Q. Is purchasing, our unemployment numbers are at low rates. Because John Q. is purchasing, he is enabling the producers of goods to become purchasers, as well. John Q.'s employer pays him a living wage instead of adding to the employer's savings and/or investment accounts and/or making John Q., essentially, an indentured servant. Money that is put into saving and/or investment is not flowing through the economic system therefor, it is not benefitting anyone but the employer and/or the wealthy. An employer who does not pay his employees a living wage, in many ways, is 'shooting himself in the foot' because John Q. does not have the funds to survive without stress. John Q. has no discretionary funds remaining for purchasing anything more than the bare essentials which, causes a slowing of production which, causes lower income and sales tax to be added to the economic system. Furthermore, if John Q.'s employer is in the service industry or the production business, he very well could be losing sales because John Q. and his fellow employees no longer have the purchasing power to buy their products. As you can see, the health of an economy is predicated on the financial health of all it's components from the employees to the producers, the producers to employmers and back to the employees. In order to get our current economy healthy, we need to start money flowing throughout the system. It really doesn't matter who that money is from, be it in the form of wages or stimulus funds for ALL our citizens, all will serve to put money into circulation. If everyone understands how the economic situation works, they can then do their part in making ours healthy again.

#economics #employment #money #unemployment #economy