Basic economics views an economy like a cash flow circle.  Economies are doing good when a lot of money is being circulated.  When money stops flowing the economy goes down.  This is the basic idea of a consumer based economy.

For at least the past two years I’ve heard “experts” whine about consumers not spending.  Some even blame the average consumer for keeping the economy down.  But there’s good reason the average consumer isn’t spending; they don’t have the money (disposable income)!

According to the cash flow circle, people holding onto money put the brakes on a growing economy.  This is one reason why saving money was actually discouraged in the past, because money sitting in a bank is doing nothing for the consumer economy.  It does slowly get out, in the form of loans issued by the banks (yes, your money in your savings account is loaned out by the bank).

But there is a more dangerous form of holding onto money, it’s called money hoarding.  The average person doesn’t money hoard, the average person loves to spend money, it’s the elites that money hoard.  Why do you think the super rich get super rich?  You can’t get super rich by spending your money.

The latest numbers show that 90% of the money/wealth in the U.S. is being held by only 10% of the people.  In fact, according to Edward Wolff, the New York University economist, by the end of 2009 the top 1% (yes, that’s one percent!) of elites held 35.6% of the wealth!  Those people are the elites, the super rich, and the too big to fail corporations (corporations are legal entities or “persons”).  They are not spending that money!

By the way, studies have been done that show the average person in the U.S. is totally ignorant of the wealth inequality in their country.

90% of the people, have only 10% of the money/wealth in the U.S.  How can anyone expect the 90% of the population, with only 10% of the wealth, to spend enough money to save the economy?!?

Don’t think the bad economy is hurting the elites, it’s not.  Here’s some facts showing how the average person is making less money, and the elites are making more money:  By 2005, the Federal Minimum Wage, when adjusted for inflation, actually went negative; -9.3%.  The average “production” worker’s pay, when adjusted for inflation, has remained stagnant since 1990, seeing a piddly 4.3% increase by 2005.  Corporate profits soared 106.7% by 2005, adjusted for inflation.  The median salary for Chief Executive Officers exploded to 298.2%, from 1990 to 2005, and that’s adjusted for inflation.  Source:Executive Excess 2006, the 13th Annual CEO Compensation Survey from the Institute for Policy Studies and United for a Fair Economy

So, corporate execs get an almost 300% increase in pay, while the average worker gets a measly 4.3% increase (over 15 years!!!), and those on minimum wage are actually losing money by working!  Yet we average consumers are expected to save the economy?!?

Those stats prove that only a minority of U.S. citizens (10%) are actually “making” money.  The rest of us are going broke, are broke, or are digging a financial grave.

Here’s proof those 10% who’re making money are not spending it: General Electric (GE), ended the second quarter of 2011 with $91 billion in profits, but they’re not going to spend it: “Our main protection against something like that not going well, or having a rocky outcome, is to have a lot of liquidity.”-Keith Sharin, CFO

Liquidity means cash.  To “have a lot of liquidity” means you’re not going to spend any money, your going to hoard it.

Goldman Sachs announced second quarter profits up 57%.  JPMorgan profits up by 13%.  Citigroup reported a profit of 24%.  The list goes on an on. Yet corporate America is not only not spending those profits, they keep laying off employees.

Bank of New York Mellon will layoff 1,500 workers, despite making a $77 million profit.

Here’s a real doozey of an example: Navistar. They reported a profit of 72% for the second half of this year, yet they say they have to close two U.S. plants, and one Canadian plant.  Navistar said closing the factories will save them up to $30 million per year, yet it will cost up to $230 million to close all the factories (actually they’re calling it a charge off, so they can deduct it from the corporate taxes they try not to pay)!

The big drugmaker, Merck, reported more than $1 billion in profits, yet will layoff another 14% of their employees, on top of the thousands they’ve already laid off.

Again, the list goes on and on.

One reason corporate America is getting rid of good paying jobs is because they can hire cheap prison labor.  This has been going on since the late 1990s, thanks to the ALEC prison labor program, and it’s growing.  So far 37 U.S. states allow prisoners to be used for labor other than public works.  Even Toys R Us uses prison labor!

Several of the huge meat recalls in the U.S. have been connected to prison labor being used at the meat packing plants.  Add to that the fact that foreign exchange students are being exploited as cheap labor for corporate America.

The bottom line is that those elites running corporate are doing everything they can not to spend money.  Some officials say they’re hoarding cash because they don’t think the economy will get better.  No shit Sherlock, if you’re not going to spend the money on hiring more workers, who then can spend the money buying your products or service, as well as pay their taxes, then yeah, the economy is going to get worse!!!

Remember the economic cash flow circle?  It’s the elites/corporations that are putting the brakes on any economic recovery, by sucking money out of the cash flow.

Corporate icon, and pioneer of welfare capitalism, Henry Ford hired lots of people and paid them well ($5.00 per day in 1914, that’s $114 per day now!), because he wanted them to buy his Model T.  It worked!

Ford also has a warning for us average Joes: “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”