I wrote in my last article about Demand Shock. Because so much money has moved toward the top, toward the wealthiest among us, the inequality of income is starting to heal the wealthy and make everyone else a little sick. Economic growth in this recovery has been painfully slow. QE has done more to raise the cost of living for most, and to secure the wealthy a perpetual position in the economic chain. This is no different from what happened in the Great Depression, so that FDR could say this:

“…our basic trouble was not an insufficiency of capital. It was an insufficient distribution of buying power coupled with an over-sufficient speculation in production. While wages rose in many of our industries, they did not as a whole rise proportionately to the reward to capital, and at the same time the purchasing power of other great groups of our population was permitted to shrink. We accumulated such a superabundance of capital that our great bankers were vying with each other, some of them employing questionable methods, in their efforts to lend this capital at home and abroad. I believe that we are at the threshold of a fundamental change in our popular economic thought, that in the future we are going to think less about the producer and more about the consumer. Do what we may have to do to inject life into our ailing economic order, we cannot make it endure for long unless we can bring about a wiser, more equitable distribution of the national income.”  

 FDR, who was considered a great man and great president by the people who needed his help at the time, was determined to stop much of the speculation that led to the Great Depression, while giving the working poor something to accomplish at fair wages. Out of this time came Hoover Dam and ultimately the city of Las Vegas, Nevada, home to two million people. To say government is incapable of creating jobs and opportunity is a mistake, or maybe just propaganda.

Government cannot continually be creating all opportunity, or you have failures like in the old Soviet Union. But FDR was not a total failure at all. More money was distributed to people who could create demand, the regular men and women on the main street through his work programs. Families owed their very existences to Franklin Delano Roosevelt's vision to help in times of trouble. . 

The Fed and Wall Street have made income distribution worse. This has made bank weakness worse. The banks are not insolvent, but they are zombies. They are afraid to lend because the economy on the main street level is so weak. Things are better than before, but weakness is still an issue, with underemployment a big issue and low wage job creation being big issues going forward. FDR understood that the government has to step in and get the ball rolling if banks fear to create growth. Relying on the Fed and the Too Big to Fail Banks will not lead us to prosperity as a nation. 

When the Fed is afraid to raise interest rates 25 basis points, we are talking severe banking weakness. The government should not wait around for banks to get it together, because infrastructure needs fixing and growth needs to be resumed. As FDR said, we have to think more about the consumer. Without the consumer, and not through easy money borrowing making his life miserable, the economy will fail. The consumer though, must be granted wealth, and wages must be raised. The constant drone of arguments to the effect that it just won't work are never going to fix the problem of end demand. Even Henry Blodget, of Business Insider, made a common sense plea to business. He wrote about  Henry Ford, and his determination to raise wages.

Blodget pointed out that profits are at an all time high, and wages at an all time low. That was in 2012, but things have not changed much. Now businesses are afraid, like banks are, of investing into the economy, and they don't have the vision of Henry Ford. Austerity keeps them holding onto big profits, until the consumer is tapped out, and doesn't want to be treated like Greece. Greece as a nation, regardless of faults, is facing an austerity that doesn't work. Austerity at home, with social security increases stagnating, doesn't work.

Deflation is the outcome and surely the government doesn't want all this deflation. As FDR said, labor has to be treated better, to a bigger pot of the pie, or capital will spin its wheels, so to speak. That is exactly what is happening now. Capital got what it wanted, deregulation, easy money and economic dominance. But where does it leave us as a nation? Ultimately, only time will tell.

But before this could result in ruin, government can take action to get money into the hands of main street. If we as a nation are too poor to accomplish this, while robotics and self driving electric cars are certain to eliminate more jobs, we face a deflationary future. The asset inflation we see put upon main street by the wealthy actually can lead to more deflation for more people. Spending power is eroded, and people hunker down, and millennials live at home and dislike bankers.

And bankers wonder why millennials don't get their act together. Well, I hate to tell the capitalists, but millennials have their act together. If business cannot take risk to make main street better, like Henry Ford did, why should the millennials take risk? Capitalists, you need to think long and hard about this. And then you need to take action and raise wages and lobby for raising fixed income benefits. Otherwise, JapanRUs. A healthy labor force, with its accumulation of wealth, will ultimately help capital have a place to go, to main street, to the real economy for a change.