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JUST RELEASED: June 14, 2021: A seven page essay explains the Fundamental Monetary Constraint which is the important foundation for the main, long essay on this site “A New Macroeconomics to Explain Wealth Inequality.”  It is a shorter explanation that covers just this topic, which is also covered in the main essay.

 

May 2, 2021: A two page essay that cracks the mystery of what precise events in the economy determine Monetary Velocity which has baffled many bloggers.

 

Social Security: There is also an earlier four page essay explaining how Social Security works.  Why, for very good economic reasons, your money isn’t put into a lockbox for 50 years until you need it.

 

To access these: On this web page go to the left column under Other Shorter Essays and click on Additional Current Essays Here.

 

I’ve been thinking about macroeconomic topics since high school in 1958, when I wrote a paper on the 1929 stock market crash and 1930’s depression. I was disappointed that there was no agreed upon explanation for what caused the depression. Later in college I took one economics course which didn’t really help explain it either.

My college degree was mathematics, but I was critical of the way math was used in economics. Rather than just criticize others, I regard this site as a challenge to provide explanations that are more satisfying, clear, and convincing, and for which context can provide some insight into the 1930’s depression, the Japanese malaise beginning in the 1990s, and also similar wage stagnation and rapid increase in wealth inequality in the US economy beginning in the 1980’s.

My writing ambition gradually increased with the result that it has evolved to become a different way to approach macroeconomics that would show how easily a money economy can develop wealth inequality, and how great wealth inequality can eventually wreck an economy. This analysis does not see income inequality as nearly as serious a problem, except for the obvious fact that income inequality over time can cause wealth inequality. 

The first insight was to discover an important “Fundamental Monetary Constraint” that causes  fundamental difficulties to an economy when some in an economy attempt to “save” money–meaning spending their money a long time after earning it.  The essay turned out to be monetary based, but unlike Milton Friedman’s approach it regards monetary velocity as a very important parameter to consider to properly understand how our economy works, and how wealth inequality can easily develop.   Monetary velocity becomes a more precise tool for understanding how wealth inequality develops rather than the commonly used concept of marginal propensity to consume (MPC).

Though I am critical of some aspects of how our economy works, the main intention if this essay is to describe the economy as it now is, rather than what it ought to be.  I strongly believe that proposed improvements for improving an economy  must rely first on a convincing and accurate description of how it presently works. That is what I hope this essay does better than  present macroeconomics. This analysis helped me to understand economics much better than I previously did. I hope this will also be your experience.  I also believe it has highlighted some obvious weaknesses, but not ones for which I have yet proposed a better alternative.  Successful improvements are most likely to occur after a clear understanding has developed for how it presently works–along with present problems.

I strongly invite comments from readers. At the bottom left of this page you can send emails to improve or criticize content or clarity. If I modify the essay based on your suggestions I’ll credit them to you, unless you request that you wish to remain anonymous.

The main focus of this web site is to present the macroeconomic analysis: “A New Macroeconomics to Explain Wealth Inequality.” This can be accessed to the left at the top box “Main Essay on Macroeconomics.” There is a two page introduction, along with the longer essay which is over sixty pages, and is still being written and edited.  The first two sections  through page 23 form the important  logical basis for the rest of the essay.  Section 1 describes “the fundamental monetary constraint” which is a most important basis, and which I haven’t seen clearly described anywhere else, though there have been past historical references which have been occasionally suggested, but largely rejected by most mainstream economists.  Section 2 defines and describes monetary velocity, and why it is has important recent economic consequence.

To the left on this web page under “Other Shorter Essays” is now a four page essay that describes how  Social Security actually works: “Debunking the claim of Sudden Future Death of Social Security.”  Because how it works has  often been misunderstood, it has been  criticized for the wrong reasons. The essay explains the more realistic critical issue, as well as the commonly made wrong critique that claims that we must save more immediately or Social Security will be doomed some years in the future.  I expect later to add other shorter essays related to the main essay.

In one of the boxes at the left  is a list of references to other websites and books on economic topics which I have found particularly helpful, along with descriptions of each.

To read more about what has motivated this site, select “About us” at the top of this page.  The main essay is accessible at the top left of this page.

Ralph Hiesey
Boulder Creek, CA.