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I Wanted to Understand the New Economy

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Like many of you I have been confused about what I thought was the sad state of the American and world economy. I really wanted to learn about what was going on with this new global economy.

So I talked to a big time economist at a major Ivy League university for a little more clarification. Unfortunately, he didn't give me permission to use his name, so I will just call him Dr. Reaganomics.

I knew Dr. Reaganomics could help me understand the American and global economy because he is often quoted by neocon politicians, ideologues, and talking heads.

So the first question I asked Dr. Reaganomics is how come so few people own most of the wealth in this country and in the world? Well, the good Doctor set me straight on this right away.

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"OK, what are you a communist or something?" he said.

He must know that no one likes to be called a communist, so I didn't say anything in response.

Then he continued, "You see, if only a few didn't own nearly all of the wealth in this country and around the world, then the poor wouldn't enjoy such a high standard of living."

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Well I thought about it a bit and then I asked him, "How can the poor be said to be living well?"

Dr. Reaganomics looked kind of funny at me and said, "Listen to me, the poor are doing so well because the wealthy own most of the wealth."

Now I was really getting confused because it seemed to me that if there was a better distribution of the wealth then the poor might not even be poor. But I could see that he was getting irritated with my question, so I tried to clarify my position.

"Look Professor, I am sorry to have to ask these questions, but I am just trying to see why the economy is the way it is," I explained.

He looked satisfied and then he continued, "The economy works the way it does because the rich are the only ones that know what to do with wealth. If you allowed the poor to have more of the wealth they help create then they will spend it on silly things like food, shelter, clothes, transportation, and energy. The rich, on the other hand, will invest it in things like financial instruments that help make them richer and thus everyone benefits."

"But Professor if the poor use the money to buy things like food, shelter, clothes, transportation, and energy wouldn't that create more jobs and more real wealth?" I asked.

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"Well you certainly don't understand a thing about today's economy," he scolded me.

"No, if the poor were able to buy those needed items it would not make the rich as rich as if they invested their money in modern financial instruments. If the rich were not as rich as they are now then the world would be in much worse shape. The rich need various investments to assure that they grow their wealth at much higher rates and everyone benefits. Also, you see, the new financial instruments that the rich invest in are much safer for them now."

Now I was really confused. How could these new ways of investing and financing be safer for the rich? After all, the largest financial institutions are going belly up and our government is taking nearly all of our taxpayer money to save them.

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