There's Plenty of Money in the System, But...

An old friend and I were recently discussing the economy when late in the conversation he said, “You know Rick, there’s actually plenty of money in the system. The problem is that so much of that money is in the hands of such a small number of people, at the expense of everyone else.”
We shook hands, wished each other well and went our separate directions, but after that every time I’d hear about the government pumping more money into the system in order to stimulate the economy I’d start thinking about my wise old friend’s comment.

US Population Figures
Finally I went to Google in order to see how the US population figures today compared to the population figures a decade ago. I discovered that in ten years our population has grown from about 270 million to a little over 300 million people, approximately a 10%increase.

Dollars Per Capita in the System
Then I looked into how many dollars were floating around in the system in 1998 VS 2008 so I could come up with an average amount for every man, woman, and child in the nation and compare those two figures. If there was an equivalent 10% increase in dollars available, and the distribution among the population was the same, then today’s economy would be flying as high as it was in 1998. On the other hand, if the available dollars per capita had decreased then it would explain the economic downturn and justify pumping dollars into the system, like we’re doing.

The Money Explosion Over the Past Decade
So, what did I find in this regard? I discovered that between the Bush administration printing money to support their war like there was no tomorrow, and the banks increasing the pool of dollars in the market exponentially every time they consummated a loan on a house or a car that got bundled sold, and re-sold again*, there was no way of telling ho much more money there actually is in the system today than there was a decade ago. One thing for sure, it’s lots more than 10%.
In other words the average number of dollars per capita in the system is vastly higher today than it was ten years ago, yet here we sit with companies around the nation closing their doors, workers losing their jobs, and unemployment lines growing longer every day all due to a shortage of money!

My Old Friend Was Right
So here’s the question. If there is lots more money per capita in the system than ever before, why is our economy teetering on the brink of disaster? The answer is that the distribution pattern has changed dramatically. In the words of my old friend, all that money is in the hands of a few (less than 5%) while the many (95%) are sucking air.
Can anyone say imbalance? Can anyone say redistribution is necessary and fast? Can anyone say “Why didn’t we read our frickin’ history books and know that this has happened before?” It was totally predictable while we ignored all the signs.


*With no regard to a corresponding increase in productive assets which is the classic formula for runaway inflation which started in our case with the housing market.