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Pitchfork Economics with Nick Hanauer
Back to Basics Series: The Velocity of Money (with Ann Pettifor)
00:42:30
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- [00:00]
A
Hey, Pitchfork listeners. Goldy here. We've been doing this podcast for a long time now, so we thought we'd take a little break this summer. But we don't want you to miss us too much. So we thought we'd revisit some of the most central episodes from early in our history with a Back to Basics summer series. Weirdly, one of the things often missing from theories about economics is cold, hard cash. Which is why we talked with Ann Pettifour about the velocity of money.
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B
How do you explain the velocity of money and why it matters?
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C
Well, the velocity of money is really about the rate of transactions taking place in the economy.
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A
Dollars used to change hands, on average, about 17 times a year. The same dollar would be spent 17 times. In today's economy, that same dollar is spent only about four times a year.
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B
Our dollars just aren't doing as much as they once did. From the home offices of Civic Ventures in downtown Seattle, this is Pitchfork Economics with Nick Hanauer.
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C
The best place to get the truth.
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B
About who gets what and why. I'm Nick Hanauer, founder of Civic Ventures.
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A
I'm David Goldstein, senior fellow at Civic Ventures. So, Nick, an interesting thing happened recently. Former Treasury Secretary Larry Summers published an op ed in the Wall Street Journal warning that the proposed $1.9 trillion Covid stimulus package is too big. It's too much money. If we spend all that money, it's just going to overheat the economy and we're going to end up with inflation.
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B
Exactly.
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A
And what's interesting about that is, one, he felt like he had to do an op ed at the Wall Street Journal, and two, the Biden administration, they just seemed to shrug their shoulders and go, oh, Larry will be Larry. Yes, I think that was actually a direct quote of somebody.
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B
Larry will be Larry.
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A
So that's Larry Summers, one of the most influential economists of the past couple decades.
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C
And.
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A
And I think the lesson that we learned from all this is that nobody seems to understand the economy and nobody seems to understand the role of money in the economy. And so, Nick, this has got us thinking in the office about how money actually works. And inspired by friend of the podcast, Bruce Bartlett, we started to focus on something esoteric sounding called the velocity of money, which basically is the rate at which money changes hands in the economy. For example, every two weeks, you pay me. So that's if you pay me a dollar, the dollar has changed hands once, and then I go and I spend that at the supermarket to buy some groceries. So that dollar has changed hands another time. And the Grocery store goes and pays their employees, so that dollar changes hands again.
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B
And their suppliers.
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A
And their suppliers. Right, right. And so then they go and they spend that money on whatever they need and so on and so forth. And what's interesting is that 20 years ago, dollars used to change hands, on average about 17 times a year. The same dollar would be spent 17 times. And in today's economy, that same dollar is spent only about four times a year. So all that money out there is not working as hard as it used to. And we think that a lot of the reason for that is basically rich people like you, Nick, have been hoarding dollars.
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B
That's right. And I think it cannot not be that. But there are two things happening, of course, is that the amount of money in the economy has gone up dramatically for a variety of reasons. Quantitative easing, but just the remarkable rise in the value of assets and so on and so forth, while inequality has also risen. Right. So you have both of these things happening at the same time. And as a consequence, our dollars just aren't doing as much as they once did, you know, not least of which because when you pay a billionaire another dollar, they're definitely not using that dollar for anything productive. It's for sure going into, you know, getting, getting. It just sort of coagulates, you know, an account somewhere. But today we get to talk to somebody who has a lot of thoughts about the role of money and where inflation comes from, a political economist and director of prime policy Research and macroeconomics. And.
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C
My name is Ann Pettifor and I'm the author of two books, One, the Production of Money and secondly the Case for the Green New Deal.
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B
And you were a political economist?
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C
I'm a political economist, yes. I work mainly on monetary theory and policy.
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B
So we've introduced the term velocity of money to our listeners, but we'd love to have them hear it from you. How do you explain the velocity of money and why it matters?
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C
Well, the velocity of money is really about the rate of transactions taking place in the economy. And we probably need to go back a little bit to talk about that. It's really the rate at which we exchange and money moves around in the economy. And that depends very much on economic activity. That depends when economic activity is low, when we're in a depression, when things are bad, money doesn't move around quite as fast as that. And when we're hyper euphoric, excited, confident, the velocity of money increases. But the really big question behind the velocity question is where does it come from? Where does money come from. And money comes from individuals applying for loans. In the first instance, all money originates as credit. And so when we're feeling confident, we take risks. And we apply for loans in order to undertake entrepreneurial activities or to invest in buying a house, or to improve the asset that we own already. When we feel less confident, we don't take out loans, we don't take risks, we withdraw, if you like, we contract our activity and we stay safe for a while. And so those are really the two important distinctions to discuss.
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A
So you've raised, I think, a really important point because most people probably think that money is created by the government and in fact, most of the money is created by private banks.
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C
No, not even that. I would go further than that. Money is created by you and me. We need a bank to help us do that. And we need the currency which the government or the central banks helps to value. We need, if you like, a currency in which to undertake our transactions. But we are the ones that create the money supply. Now, this is not an idea that is well understood. And most monetarists, or what I would call neoclassical economists or conventional orthodox economists, Milton Friedman, for example, was convinced that the central bank issues pound or dollars, and we all pick up those dollars somehow and we spend them. It doesn't work that way at all. Central bank issuance of credit is a tiny proportion of the amount of credit or money that there is in the economy. We increase the money supply every time we apply for a loan. And we do that through the banking system, because the banking system is necessary. In a way, it helps us to sign a contract to come to an agreement to repay that loan. It helps us manage where we put that we deposit that money and how we can move it around within the banking system. But if we don't apply for loans, if we don't have the confidence to apply for money for new credit in order to embark on a new venture, the money supply contracts. When we are super confident. At the moment, we have a sort of euphoria on the stock market at the moment where people believe that the economy and that this Federal Reserve and life's going to continue being wonderful forever and stock prices are going to rise forever, that then we take risks and we borrow more money and we inject that into the monetary system. Right now, for example, on the stock market, people are borrowing crazy money. It's called borrowing on the margin in order to speculate on, for example, GameStop.
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B
Right. But using a more prosaic example, if I'm going to let's say I want to build an addition on my house.
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C
Yeah.
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B
Right. And I don't have all of the cap. Let's say the, the addition will cost $100,000, but I only have $10,000 in capital.
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C
Yeah.
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B
I can apply the $10,000 in capital to the addition, but then borrow $90,000 from a bank and the contractor gets that $100,000.
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C
Yeah.
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B
Which has effectively created $90,000 more money in the economy, which in turn will be turned into an asset theoretically worth an additional hundred thousand dollars in the economy in the form of the addition on my house, to make a very simple example.
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C
Yes. So you've created, you've borrowed some money, quite a lot of money to create or to improve on an existing asset, to improve the value of that asset. And that asset should rise in price as a result of that improvement. Sometimes, of course, it doesn't if you make the wrong judgment. But the fact of the matter is that if we weren't able, you know, if a business wasn't able to borrow money to, say, expand the business when things were going well, employ more people and so on, then economic activity would stay static forever. And in countries where there are very rigid rules about borrowing, or where there isn't a banking system and there isn't a monetary system and money is always part of a system that's really important to understand. Money never occurs. It doesn't appear or it doesn't exist just on its own. It's part of a bigger system, the monetary system, the banking system, the accounting system for managing assets and liabilities, the criminal justice system for signing contracts. When you borrow that money, you sign a contract promising to repay in the future. And so there are these institutions that make a money system work, and you need to have those. And then there's probably, you may well be able to put down $10,000 to get 100,000, but you may also have to put down collateral. You may have to say, look, I have an existing property. You, the bank can have a stake in this property. Should I not repay my debt in the future. So all of this is part of the arrangement that enables new money to be created and for us then to do things that we weren't able to do before that.
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A
So I want to get back to a question I have about velocity for a moment. We've seen a pretty massive expansion of the money supply over the past few decades, especially since the Great Recession with quantitative easing and everything that's going on with the financialization in the private sector. And as the money supply has expanded, the velocity of money has dropped. It's near record lows right now. What is different about this economy? I mean, you say that the money supply expands when people get excited and confident, and yet money seems to be changing hands at a slower and slower pace.
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C
Yes, right now we are not confident. Right now we have a very weak economy globally. I'm speaking about here, we've never fully recovered from the great financial crisis. And you're quite right about a huge amount of liquidity has been injected into the system as debt. And we now have an overhang of debt on the global economy of something like 360% of GDP, 360% of the world's annual income. In fact, we're going through a period, or we've been through a period since the GFC of really very muted economic activity and not quite a depression. We never quite got there, but it's been very, very subdued. And there have been high levels, high real levels of unemployment and there've been very low levels of investment. Right. And that's because we've never quite recovered our confidence post crisis. And the reason for that is that the crisis created, if you like, this massive crater of destroyed economic activity in the economy. You know, it blew up a huge chunk of the economy. And the effect of that was to frighten everybody, to cause the private sector in particular to lose confidence. Now, the reason, the way we can understand that is to look at interest rates. Interest rates are very low, not because there's too much money, and they're very low because they're an indication of how fearful people are. So we find, for example, that people, people with large sums of money, big corporations, are not investing their surplus, their savings in creating jobs and new assets. They are lending money, for example, to the U.S. treasury or to the German central bank. And the most phenomenal thing is that quite often they're lending money at negative rates of interest to big institutions that can be trusted not to fail. You know, this is a bizarre development in the economy. It's sort of unheard of. And lots of people are thinking that it's because the central bank has lowered rates. Well, yes, the central bank has tried to keep rates low, but only the bank rate. And if you're an entrepreneur, you don't use the bank rate. You use the rate that your bank, your commercial bank charges you. And if you're taking on a risky project, you can be sure that your commercial bank is charging you a very hard sum of money. So this, this state we're in of negative Interest rates is a fear barometer. It shows that people with huge surpluses, with savings are so frightened of where to put those savings. They're paying the German government to lend the German government money. Now, that's historically unprecedented. At times. They were paying the American treasury to lend the American treasury, you know, when treasury yields were very, very low and almost negative. They're going up at the moment, but they were very, very low. This is an indication of fear of lack of confidence, of lack of investment into the real economy, but of finding places to put money just for safety. So, you know, the fact of the matter. And we've had unemployment, we have had very low levels of investment. And this means. This is because we've never fully recovered from that crisis. Now, in a crisis such as the gfc, when the private sector is massively damaged by a crisis, that is the moment for government to step in, the state to step in and say, you are too frightened to invest. We will invest because we don't have that fear. Right. We're big and strong and what we had in Europe and definitely in my country, in Britain, and not that much in the United States, but here, our government said, no, we're not going to invest. We're going to pull up the drawbridge, we're going to tighten, we are going to cut spending, we're going to cut investment. And this was done across Europe. And that shrank economic activity even more than then. The crisis had shrunk it.
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B
Yeah, that was the opposite of what they should have done.
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C
It was exactly the opposite of what they should. And while Obama and Larry Summers also injected a stimulus, they were terribly nervous, as we're all talking about right now. And it wasn't sufficient to fill this crater, this hole that had been created by the gfc. And as a result, we've had this prolonged period of sort of not quite a depression, but just very muted economic activity. And that's what the answer is to your velocity question.
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A
And be clear, this was prior to the COVID 19 pandemic.
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C
Absolutely. Yes.
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B
But as a capitalist.
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C
Yeah.
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B
The thing about capitalists, us capitalists, is that we only do what we have to do. You know, and the only reason that a capitalist will make investments is that the demand from their customers requires it. You know, the only reason we pay people more for is because we have to. And either we will be put in jail for paying people less than a federal standard or because all of the people who work for us will leave and go someplace else if we do not. Yeah, right.
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C
Like we.
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B
We are driven by the requirements either of laws, policies or demand. And to me, I may be massively oversimplifying this and I just want to caveat this statement by underscoring how provincial it is because we mostly focus on the American economy. But it just seems obviously true to me that the main problem with the velocity of money has been the massive transfer of income, annual income, wages, from the bottom 90% of Americans to the top 1% of Americans. And we have, you know, we have documented that transfer and it's in the range of $2.5 trillion per year. And again, at the risk of oversimplifying, if you divide that $2.5 trillion by the median income for a full time worker in America, which is $50,000, it's 50 million jobs. 50 million jobs on an economy with 150 million jobs. So if the median worker had simply maintained their same share of GDP since 1975, one of two things would be true. Either the median worker would earn $100,000 a year, not 50, or they'd earn 50, but we'd have 50 million more jobs. Like in any case, you would have a transformationally different economy because every company that made things for people would be required to make a lot more of it.
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C
Yes.
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B
So you would just have way more transactions and way more velocity. And isn't that the core of it?
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C
Rising inequality is a consequence of the way we've structured the economy, both the American economy, but also the global economy. We've designed or we've redesigned it to, for example, say that trade, export trade is more important than domestic investment, for example. We've re engineered it so that you're quite right, wealth has shifted from the majority to the 1%. And the 1% are not inclined to spend as much of as big a share of their income as are the rest of us. Basically.
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B
Well, it's not possible to do it.
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C
It's not impossible to do it. So they hoard it. Trust me, they hoard it. And they, but mainly they hoard it and it's of very little. And then they use it for speculation, gambling on whether or not game stop will go up or down.
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B
As we say, rubbing money together to make more money.
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C
Yes, sometimes to lose more money. I watched Elon Musk today investing $1.5 billion in Bitcoin and I thought, wow, he's so much money, he doesn't know what to do with it. And that's not productive. But you're absolutely right. It comes down to the fact that the way we've Re engineered the global economy is to say free trade and trade is more important than investment in the domestic economy. So there's a wonderful book out by Michael Pettis and his colleague Matthew Klein, and it's called Trade wars are Class Wars. And their argument is that because we have inequality, because the 1% prefer to take their money and invest it in China where they can make bigger capital gains than they can in the United States, because in the United States they've got pay decent salaries or decent wages. As a result of that, we have rising inequality inside the United States that causes tensions and that results in the election of Donald Trump. And then you get the demand for protectionism and for hostility towards China when actually China is doing what the United States wanted her to do basically was to produce, or as you say, what the capitalists wanted her to do, which to produce as many goods as possible as cheaply as possible with as low wage costs as possible.
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B
That's right. So the margins go up.
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C
So the margins go up. And having satisfied those demands, the Chinese are now being blamed for the fact that the Americans don't make those goods themselves. And I think what's beginning to happen, and I'm so thankful for this, is we learned the lesson from that. We learned that if you do that for too long, you get the rise of nationalism and authoritarianism and that'll screw up your economy in a big way or you'll get protectionism, which is what Donald Trump was threatening. And so we need a reorientation away from, if you like, globalization and towards the American worker, American demand, American economic activity, and the same here at home in Britain and in Europe. Whether or not our leaders are wise enough to see that, I don't know. But for example, the Chinese are understanding that they embarked on this globalization project. They decided to make cheap goods for the Americans and they're now being battered and hammered for it. And they are turning their attention back to their domestic economy and thinking, let's invest in this and grow our domestic economy. And that, I think is a good thing for China. It needs to happen everywhere.
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B
Yeah. So let's connect all of this to policy. Policy and tax, for instance, tax. An approach to taxes.
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C
Yes. Right.
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A
We've been taught that people like Nick are the job creators. And so we should cut taxes on Nick so that he can invest in creating good jobs for everybody else.
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C
Right.
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A
What would happen if we actually raised taxes on Nick?
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C
So the point about taxation is that taxation contracts the economy. What the government does when it taxes us is to take money out of our pockets and put it in the government's pockets. Now we need to have a taxation system because when the government does what the Federal Reserve is doing now, which is to inject money into the system to help to revive the economy, it's borrowing, and it's borrowing quite a lot of money. And at some point that money has to be repaid. I'm not a modern monetary theorist. I don't believe you can just print the money and say goodbye to it. The fact of the matter is we're promising to repay in the future. We're investing a huge amount to make up for the private sector weakness. And so at some point we have to tax in order to gain the revenues we need to pay back our expenditure. But the best way to raise tax revenues is by creating jobs, decent, well paid jobs. If you're going to just simply use tax as a punitive measure to punish entrepreneurs or to punish. I mean, I'm in favor of punishing the rich, frankly. But you know, if you want to, people who accumulate too much money should pay tax, in my view, especially big corporations like Apple and Amazon and so on. So I'm clear about that. But for me, the worry is that for Nick to get going, he doesn't need to be taxed. Really, what he needs is to have, as I think you mentioned before, Goldie demand. He wants to have a thriving economy so that the risk that he's taking can actually produce results, can produce gains for him. And that'll only happen if there are buyers for his goods or services. And we'll only have buyers if people have decent incomes to spend. When we shrink their incomes, we shrink Nick's income, but we also shrink the government's income tax revenues. So you don't fix that by taxing people. You fix that by creating the conditions in which more economic activity can take place and in particular where there's more employment. And we come back to your earlier point, which is that decent wages are very good for Nick as well as for the economy because people with decent wages are able to spend.
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B
Yeah, I think we're in violent agreement with you, but with a couple of caveats. The first is that good jobs and decent wages are not a spontaneous byproduct of a free market economy. They are a product of a democratically managed construct that requires people like me to pay people decently. And raising wages for folks is the best way to generate economic vitality. But if you tax them a little bit too, I think that's not a problem. I mean, you know, like if you, if you raise somebody's wages 20%, that makes a huge difference. If you tax that increase in income a little bit, in my opinion, it doesn't matter that much. I think what you say is true, that when the government taxes people, it does decrease economic dynamism if the government is taxing mostly middle class people. But the truth is if you tax very, very wealthy people, you aren't contracting the economy because the vast majority of the income that goes to very, very rich people isn't applied to the economy in a productive way.
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A
As you, you know, it's, it's, it's not being spent and it's not being invested. It's being speculated or it's risk seeking.
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B
Well, it's like, it's like elon Musk putting $1.5 billion into Bitcoin. Yeah, like, okay, the, I mean that is good for the speculators of bitcoin, but nothing productive, right. Has happened as a consequence of that. Nothing was built, nothing was created, no innovation took place, nothing.
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A
So. So Ann, you would argue for, let's say, taxing capital gains at the same rate as, as ordinary income.
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C
Yes, I'm, I'm deeply hostile to rent seeking essentially because it's very passive activity. And our economy globally has become a rent seeking economy. So investors with loads of Money, I'm thinking BlackRock, I'm thinking Big private equity firms, they're not interested in creating new assets. They're interested in investing in existing assets, like London property or like government debt. Even anything that generates a rent is good for them. And so they're not interested in investing into the creation of new assets because that's very risky. That takes courage, actually, and it takes good judgment and so on and so forth. And new risky investments can pay off and do very well, but they can also fail. And that, as far as I understand, is free market ideology. That's what the free market is all about. If I take risks and I make capital gains or profits, that is a reward for risk taking. If I take a risk and I make losses, I'm disciplined for making those losses. And I learn my lesson and I'm more careful in the future. But the way things are at the moment, capitalism doesn't want to take risks and risk losses. It wants to only go into safe existing assets, which it can then milk, if you like, for rent. And our economy has been, the global economy has been shifted too dramatically in that direction.
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B
And the business models that dominate these, these fields are a one way, ratchet upward indeed. Right. Like you get paid a shit ton of money when things go well.
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C
Yeah.
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B
And you get paid a shit ton of money when things don't go well.
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C
Exactly, exactly. So. So I like to use the example of Manchester United Football Club. Now, that's a football club that was in existence. So there's a big. I can't remember who he's called, Florida businessman and his family, they borrow a load of money and they dump it on Manchester Football Club. And they say to the supporters, those young boys and girls and men and women who support the club, will you go and buy more T shirts and will you buy more tickets? Because that is going to be used to repay this debt that I've dumped on top of you. So Manchester Football Club is drowned in debt and has to squeeze every supporter and has to, I don't know, make more T shirts or sell more footballs or whatever they sell in order to get a bit of prices to repay. This investor sitting on his butt somewhere just collecting the rent from that now. So they like to invest in institutions that already create rent, and they like to burden those institutions with debt, which means, you know, Manchester Football Club gets a load of money at the beginning, borrowed money with which to buy new players and that sort of thing. But they're burdened by this debt because, of course, there's interest on the debt. They have to sell more tickets in order to be able to repay the interest on the debt. And the interest compounds and grows over time. That means you've got to extract more from your supporters and your sources of income than you were before. It's an exhausting process. In the meantime, you've forgotten to concentrate on getting decent players, good players, training them up, and playing really good football that everybody wants to watch.
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A
So we have a final question we'd like to ask all of our guests, which is, why do you do what you do?
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C
Well, I'm passionate about my subject because, mainly because I'm a woman and because women don't engage with monetary theory and policy, they think that it's something for those chaps on Wall street in pinstripe suits. And actually, monetary policy and theory has a massive impact on our lives. Our mortgages, the interest rates on our mortgages, our jobs, everything really is heavily affected by it. And yet it's a field that is deemed to be very complicated, and it isn't. And beyond the capacity of most women or most ordinary people. And most ordinary people don't realize that those guys in Wall street are doing really very well, mainly because they're using A public institution, the Federal Reserve, backed by your taxes, to access cheap money. And what we as taxpayers ought to understand, that's our power. That power that the Federal Reserve has, that Jerome Powell has, is entirely down to the fact that behind Jerome Powell or something like, I don't know how many million taxpayers are there in the United States who regularly pay their taxes, who regularly give the treasury sums of money, which give the treasury, if you like, the collateral it needs in order for the Federal Reserve to be able to inject liquidity into the system. And when we understand that's our power, we'd be able to do something about it. So that's what drives me.
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B
Well, Anne, thank you so much for taking the time to call in from merry old England.
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C
Thank you.
- [34:33]
B
Where things are gray in the same way they are in Seattle, Washington.
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C
Well, it's lovely talking to you guys. I love talking to Americans. You're all such wonderful people. It's true.
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A
Some of us.
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B
Yeah. For rubes. Yeah.
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C
Yeah, yeah.
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A
Well, thank you. We really enjoyed the conversation.
- [34:53]
C
Pleasure.
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B
Thank you.
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A
So I think one of the big takeaways from our conversation with Anne, Nick, is that there are good football club owners and bad football club owners. True. And your brother, your brother Adrian is. Is one of the good ones, right?
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B
He is. He is. For listeners who don't know, my younger brother Adrian owns and is the CEO of Seattle's major League Soccer franchise, the Seattle Sounders, which is a. An enterprise he created from scratch. Right. One day there was no professional soccer team in Seattle, and the next day there was because of the work my brother and some other people did. And today it's a pretty large enterprise, and in non pandemic times, it attracts 40 or 50,000 fans per game and pays a lot of people and generates a lot of economic activity. You know, in. In a world where there was literally none before, that's an example of productive economic activity, which is pretty easy to distinguish from what that family did in England.
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C
Right.
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A
Big difference between investing your money in creating a new franchise and founding a new company and creating all these new jobs. That's very different from borrowing a shit ton of money to buy Manchester United and then raising prices to pay off your leveraged debt.
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B
Yeah, exactly. And making the actual enterprise worse off.
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A
Right, right. So, like, this is a difference and this is. This is a subtlety that a lot of people miss. There's a difference between investing and rent seeking or speculating. And part of our argument here is that much of the money that's being hoarded by the top, but really 0.1%, 0.01%. That money is not being invested. That buying an existing asset, leveraging your dollars to buy an existing asset, and then making money off of that asset, that's not an investment. That is rent seeking up shares on the stock market, which bizarrely has happened over this past year in the midst of this devastating pandemic and this economic crisis. That's not investment. That is speculation, pure and simple. That is gambling, parking your money in money markets or government bonds. Again, that isn't investing. That's rent seeking. You are essentially renting out the money. You have to get a return on it. And so when we talk about how taxing the rich does not kill jobs, what we're basically pointing out is that most of the money that the wealthy have isn't being used productively to create jobs, to build factories, but buy capital equipment, create real assets.
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B
That's right.
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A
It's paper money that's being used to make more money.
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B
And the degree to which the government fairly taxes that wealth and then uses that money on productive things, from paying teachers to investing in infrastructure, to whatever, you know, dealing with the healthcare crisis that the pandemic has wrought, all of those are productive uses of money. Elon Musk, taking a billion and a half dollars and buying.
- [38:37]
A
Bitcoin.
- [38:38]
B
Bitcoin.
- [38:40]
A
We agree with Ann. We don't think you actually need to tax the wealthy to pay for this $1.9 trillion stimulus package.
- [38:50]
B
We think it doesn't hurt.
- [38:51]
A
Right? It doesn't hurt, right. But we don't think that's necessary. We think there's plenty of fiscal space in the economy to spend that money right now without causing inflation. But we are making a very different argument when we talk about taxing the rich. We actually believe that in the current economy, taxing the rich is pro growth.
- [39:10]
B
That's right.
- [39:11]
A
That it will create jobs, that it will create investment, largely because almost anything the government does with that money, if it spends it, if it all is pay down debt, forget it. But if it's spending that money, if it's investing in infrastructure and in the American people and it's creating jobs, everything it does is more productive than just the wealthy hoarding wealth.
- [39:35]
B
That's right. And to be clear, Elon Musk is one of the few truly rich people in America who actually is doing productive things mostly with his money. You know, like Tesla is a fine thing. And a lot of the things that Elon does with his money are legitimate, important investments, both in innovation and, you know, genuine Prosperity creation. But even Elon would benefit from an economy where more people have more money to spend. Because it is definitely the case that a country in which every American can afford a Tesla is a very, very good one for Elon Musk.
- [40:18]
A
Right.
- [40:19]
B
And even if, even if there will be some near term pain in having to pay a little bit more tax, so, or, or, or being required to pay his workers a little bit more.
- [40:27]
A
Essentially, in an economy, Nick, where 70% of the economy is consumer spending, we simply believe that putting money back in the hands of working people, back in the hands of the middle class is how you grow the economy. It's how you create the demand that actually incentivizes people like you to invest in, in real capital, in expanding production, hiring people, creating jobs. And one way to get money back into the hands of consumers is to reverse this upward redistribution of wealth to the top 1% that we've had over the past 40 years.
- [41:08]
B
Yeah, and so, you know, again, it's, it's not that complicated. At the end of the day, a person who makes a thousand times the median wage can't buy a thousand times as many pairs of pants and can't buy a thousand times as many dishwashers and can't buy a thousand times as many automobiles as an ordinary American. And so, you know, anything we can do to increase the wages and consumption of typical Americans will be, you know, and thereby increasing the velocity of money will be a good thing for the economy overall.
- [41:53]
D
Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to follow, rate and review us. We'll wherever you get your podcasts, find us on other platforms like Twitter, Facebook, Instagram and threads. Itchforceconomics. Nick's on Twitter and Facebook as well. Ickhanhower for more content from us, you can subscribe to our weekly newsletter, the Pitch over on Substack. And for links to everything we just mentioned, plus transcripts and more, visit our website, Pitchfork economics.com as always from our team at Civic Ventures, thanks for listening. See you next week.