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Eye opener for October 03, 2023

Consider two economies that have one hundred people in each of them for a total of two hundred people. In one of those economies (economy A), one person has a majority of the money in that economic system. In the other economy (economy B), a majority of the people have a majority of the money. Which economic system will function better?

In economy A, the one rich person (who has most of the money) can only wear one outfit at a time, so those who make shoes only see him when he wears out a single pair of shoes. The tailors in this economy only see him when he needs a new pair of pants or a new shirt. Thelose who build cars will only see the rich guy when he needs to buy a new car. In this economy, the majority will have long periods of time in which they don't see a dime and are therefore will experience book and bust cycles all the time

In economy B, the money is dispersed more equitably to a majority of the people, so a more people are buying shoes, pants, shirts and cars. There is a much greater ebb and flow of the money in this economy as there are more consumers within this system.

In economy A, one could argue that the rich individual might be able to afford a more expensive car, which is true. The problem then is that the person building that more expensive car is now in control of a bigger portion of the money in that economy, but the rest of the people are still poor. Now add the following to economy A. The same guy who has a majority of the money is also the same person who prints the money it controls the printer somehow. When buying his expensive car, that money printer could simply print more money (let's say he doubles the amount of money in the economy and keeps the new money for himself) and buy the car with these freshly minted dollars. Now, he's bought the car, had more money then before, but has devalued the currency by half. This is similar to the economy in America, but instead of one person, it would be the one percent (actually less than one percent) that have a majority of the money and get all of the new money when it is printed like the 5 trillion dollars printed in America during COVID-19.

In economy B, the 5 trillion printed during COVID-19 would have been dispersed to the majority and though inflation would have still been increased, it's impact would have been offset by the fact that everyone's personal wealth also increased. More people could afford the more expensive shoes, shorts, pants and cars, so more people benefit in economy B.

Even if the money eventually makes it into the hands of the few in economy B, it will at least circulate through the economy before doing so. In economy A, it all goes directly into the pockets of the rich who don't need to spend it because they already can afford everything they need. They can already buy their one pair of shoes, their one pair of pants, their one shirt and the only car that they can drive at any given time.

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