As I write this, the stock market is hovering around record highs. The Federal Reserve is keeping interest rates low to stimulate borrowing and investment. Corporate profits are generally high and many companies are sitting on record amounts of cash. This should be the sign of a booming economy that is creating lots of jobs. In reality, the economy is stagnant and unemployment is stubbornly high. So what is the problem?
The problem is demand. The people who would buy the products that these companies make don’t have the money to purchase them. It’s fairly simple. There are two parts of a consumer economy: Producers and consumers. If there’s no demand for the products, companies are not going to invest in more capacity and jobs. In this economy, it’s the consumers who are missing. While the wealthy certainly consume, there’s a limit to how much stuff they can buy that will stimulate the core economy.