According to the Wall Street Journal, the biggest problem with our economy is that there is too much of it : The global economy is awash as never before in commodities like oil, cotton and iron ore, but also with capital and labor—a glut that presents several challenges as policy makers struggle to stoke demand. “What we’re looking at is a low-growth, low-inflation, low-rate environment,” said Megan Greene, chief economist of John Hancock Asset Management, who added that the global economy could spend the next decade “working this off.” … “The classic notion is that you cannot have a condition of oversupply,” said Daniel Alpert,an investment banker and author of a book, “The Age of Oversupply,” on what all this abundance means. “The science of economics is all based on shortages.” Uh-huh. Of course, there are two obvious flaws in this classic notion: 1) The science of economics is not all based on shortages; and 2) Economics is not a science (at least, not a hard science like physics or biology). The big problem with our economy is not that we have too much stuff, but that we have too little demand. And the main reason we have too little demand is because the one thing the WSJ crowd insists we can’t have enough of is profits. And record profits have come at the expense of wages. Which means most people have less money to buy stuff. Which means less demand. Our economy is out of balance because we chosen to unbalance it. We have chosen to cut taxes on billionaires and to deregulate the financial industry. We have chosen to starve our schools and to saddle our children with more than $1.2 trillion worth of student debt. We have chosen to erode the minimum wage and the overtime threshold and the bargaining power of labor. None of this was an accident. And … Continue reading The One Thing That’s in Short Supply Is Demand