"Follow the money" is a catchphrase popularized by the 1976 docudrama film All the President's Men, which suggests political corruption can be brought to light by examining money transfers between parties. This technique is even more revealing when we expand our horizons and look at the money trail when the Federal Reserve orders new money to be printed and where it ends up. As you might suspect a huge portion of ends up in a small number of private accounts belonging to the very rich. Conversely, only an exceedingly small portion of it ends up in the pockets of all the rest of us. Believe it or not, if we could just reverse those two streams of money, we could begin to solve the massive inequality issue in America and eliminate most of the consequences that accompany poverty. This means that incomes, health care, education, and opportunities would increase while hunger, crime, illiteracy, drug usage, and incarcerations would fall. If you believe these are worthwhile pursuits, please read more. 

Let’s start with two definitions. M1 is money in circulation. It moves in a circular flow from employers to employees, to merchants, to the government, and back into the same flow—again and again. Each M1 dollar travels this loop 5.2 times in one year. M1 times its turnover rate (V1) equals GDP. Higher GDP means more jobs, higher profits, wages, and taxes, and everything that money can buy. M1 makes the economy go around and around. 

M2 is M1 plus money that goes into savings. Strip out the M1 portion, and we have (M2 – M1), or just savings. Only a small portion of savings finds its way into bank accounts. Most of it ends up in stocks, bonds, and real estate—aka as wealth--where it grows at an average annual rate of 7.2 percent. At that rate wealth doubles in value every 10 years. The wealthy (top 10 percent) hold 90 percent of it; the rest of us (bottom 90 percent) hold just 10 percent of it. That is a 100: 1 per capita ratio in favor of the rich. It is that way because the system is rigged; and it can only be changed by unrigging that same system.

Our Task: We outnumber the rich by 9 to 1 in numbers, and a lot more in brainpower. Are we smart enough and brassy enough to insist on our fair share of all that wealth that we produced? If you believe the answer is “yes,” climb aboard. This train is bound for glory. But it won’t be an easy destination to reach. That’s where the brass comes in. 

The rich love being rich, and they don’t want you or me in their private club. They also own the Republican party, the Senate, the White House, the Supreme Court, and a large number of state governments across the country. We know those groups as those who make and interpret the laws that favor the rich, and they block those proposed laws that don’t. There are two huge conduits that maintain the status quo: They are the zero-inheritance tax, and the conduit that lets 90 percent of all interest, rents, dividends, and capital gains flow to the present holders of 90 percent of the wealth. We need to break their stranglehold. 

How New Money Moves About:   The inheritance tax is almost certain to be reinstated with majority wins by the Democrats. They are also likely to restore the tax brackets to their pre-Trumpian rates. Changing the dollar flows will be much harder to achieve. Here’s why:

When the Fed orders new money, it is printed and sent to the 12 regional Federal Reserve banks. Those banks are not open for business to you or me. They are open only to the member banks. You know them by that tiny notice: Member Federal Reserve Banking System. That means the Fed’s money vaults are open to them, but not to you or me. There are approximately 3,000 member banks. Therein lies the heart of the problem.

When the Fed orders shipments of new money, they make it available to those 3,000 member banks at the lowest interest rate going. That is called the discount rate. Today that rate is 0.25 percent. It’ almost free money. The task of those banks is to lend it to individuals, to small businesses, and to large borrowers. But these bankers always arrive at the opposite lending order: First, they lend to the big borrowers; next comes small businesses, and last come the individuals.   Notice that the big borrowers are the large corporations (about 1000 in number), while individuals are last (about 100 million in number). That is 100,000 of us to each 1 of them.

The big borrowers tend to disburse those almost free dollars first to themselves in bonuses; then they buy back stocks thus driving up their value (also adding immensely to themselves who are huge stock owners); and then to small business (who employ nearly 70 percent of all individuals); and last they dole out what is left to those 100 million workers. This distribution system is appropriately called “trickle down.” If you have images of a few wealthy persons peeing while the other 90 percent are getting wet, you’ve got the right movie in mind. 

What is wrong with this picture? To answer this question, we need only follow the money. The banks and the large corporations are getting the lion’s share, the small business owners are getting too little, and the 90 percent are getting the shaft. It all takes place behind closed doors, so very little money is actually transferred. But balance sheets and net worth calculations for the wealthy keep rising (well over $100 trillion), while the rest of us are dining on a Big Mac.   

The Fix:  We need to reverse those dollar flows. Community banks and credit unions are not members of the Federal Reserve group of banks. We need to change all our banking to community banks and credit unions. Also, we need to think up creative ways to get a few million others to do the same. Smart and memorable YouTube videos come to mind. You can come up with other ways. Get your (Democrat and Independent) member of Congress behind legislation that directs all banks to change their lending practices to service individuals first with the most, small businesses second, and large corporations last with the least. Reduce this message down to sound bites and video clips. Keep them alive with petitions until the top 10 percent pee on themselves. Unfair laws need to be changed. 

The Fed tracks M1 and M2 dollar flows, and they keep their data updated on their FRED webpages. We need more money going into M1 and less into (M2 – M1). Always. Always. Always. We currently have $5 trillion in M1, and $19 trillion in M2. Those amounts need to be reversed. It cannot and will not happen overnight. It will take concerned residents years to get the job done. That is not a debate-able point. It must happen. Common sense demands it. Fairness demands it. Justice insists on it. Moreover, redirecting future dollar flows does NOT take from the rich and give to the poor. It will merely change the future to what ought to be. And what ought to be is guided by our values. Follow the money, and let’s change what ought to be to what is! 100,000 consumers for every large corporation means we have a lot more purchasing power than they have political power. We need to use it.  

It takes a lot more than concerned residents to form a movement. We must also be organized. We need leaders. Articulate leaders. Leaders with charisma. Leaders who are not afraid to confront bank presidents. Or corporate CEO’s. Or anyone else. Like Robert Reich at U of Cal at Berkeley. Or filmmaker Michael Moore. Or the Economic Policy Institute.  I write. I’m too old to lead movements. But anyone can follow the money to keep track of our progress. Here they are:

Addendum: If you are convinced of the urgency of this message, copy it, and forward it to 50 of your friends. Originate a petition. Call or write Jerome Powell, Chairman of the Federal Reserve. Call or write your Congress person. Doing nothing is not an option. Evil succeeds when men and women of good will do nothing. And, of course, the road to hell is paved with good intentions.   

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To Readers:  I am looking for comments that contain creative solutions, or ideas about how we can begin to implement the partial solution offered.  Now is the time to get serious about a subject that has morphed into a monster that is ripping us into little pieces of trash and left to dry up and blow away.