Unemployment is down, but that is just a tiny portion of what the economy needs.

Economic News: 2 Percent Good, 98 Percent Bad

Today the Labor Department announced that the U.S. unemployment rate fell to 5.1 percent, the lowest rate in 6 and one-half years. Why doesn’t that news make me happy? There are two reasons: First, the Fed had to pump $4 trillion into the economy to get that result, and most of that total first went into the stock, bond, and real estate holdings of the richest Americans. You know what happened in the financial markets. Stock prices alone went through the roof by about 150 percent. If a lot more of that money infusion had been directed into small businesses and to individuals, the unemployment rate would have come down to 5.1 percent in half the time.

Second, the Fed is now worrying about “wage inflation,” and they are using that excuse as the reason for wanting to raise short-term interest rates. I wonder whose wages they are worried about? The chart above prepared by the Labor Department shows that real wages (net of inflation) for workers have gone nowhere since 1970. In other words, workers have not gotten a real increase in 45 years! Notice that worker productivity has increased by more than 100 percent. During this same time period U.S. wealth has gone up more than $81 trillion dollars, and about $72 trillion of that went to the richest among us. I would show you the chart but AD limits us to just one graphic per posting. That chart is on this web page: https://research.stlouisfed.org/fred2/series/TNWBSHNO,

There is no nice way to say that our income and wealth flows in America are out of whack, that workers are getting screwed, that the rich love it that way, and so does the Federal Reserve Board. And let’s be honest: the conservative members of Congress are doing all they can to keep things just as they are.

I have made the case again and again on these pages that the political/economic system in America is rigged against the bottom 90 percent and in favor of the top 10 percent. This is another example. But I will not resort to the popular advice to get up, stick your head out of the window and yell: “I’m mad as hell and I’m not going to take this anymore!” No. Here is my solution:

In more or less their order of importance, here are changes that can and will correct many of the economic issues in America that need to be fixed. 1) A fully functioning economy depends on a literate population and a skilled workforce. To that end we need to make higher education (academic or trade) free for everyone. 2) Size restrictions must be placed on banks and on corporations (many need to be separated into smaller units while future mergers and acquisitions are greatly reduced) to recapture and retain competition, the essential ingredient of a free market. 3) We need real progressive tax schedules on income, inheritance caps, and new tax credits for the poor to begin the long task of reducing inequalities of wealth and income and for preventing perpetual family dynasties of the privileged from forming. 4) The Fed needs to work cooperatively with the Small Business Administration and with community banks and credit unions with the objective of directing a lot more money into loans to individuals for small business creations and for expansions of existing small businesses.