The letter is not the cause. Author: S&P 500 up over 90% in three years; top 10% of earners near half of consumer spending. Moody’s, Morgan Stanley, NY Fed: a K—assets up, wages vs rent and groceries down. Peter Atwater coined the label in covid; Mark Zandi calls it structural. Top 40% of households ~85% of wealth. Naming it, he says (via Mark Thornton), is not explaining it.

Cantillon’s spigot. New money is not a bathtub that fills evenly (1755). First drawers—banks, big firms, the Treasury—spend at old prices; wages catch prices late. Cheap rates lift stocks, bonds, houses; big debtors repay in thinner dollars. Under commodity money, Thornton says, wages and wealth move together. The K, for this school, is central banking, not “capitalism.”

Wrong cures, hard ones. Tax cuts, rate cuts, controls, tariffs, checks rerun the same injection. Treasury saying the K is “over” does not shut the tap. Author’s list: spending cuts, market rates, sound money—and a bust that liquidates the boom. Mises’s second job: make that story palatable so anger hits the printer, not the neighbor. His brief, not a forecast.

Open the financial pages and a strange creature stares back at you. The S&P 500 has climbed over 90 percent in three years. The top 10 percent of earners now account for nearly half of all consumer spending. Moody’s, Morgan Stanley, and the New York Fed agree on the shape of the thing: the economy has split in two. Asset-holders ride the upper arm of the “K” upward while wage earners slide down the lower one, watching groceries, rent, and insurance devour paychecks that no longer stretch.

The commentators have responded the way they respond to everything: with a label. Call it “K-shaped” often enough in the news and the naming starts to feel like an explanation. It is not. As Mark Thornton has observed, journalists and mainstream economists love to place simple labels on things they do not understand to cover for their ignorance. The label tells us what is happening. It tells us nothing about why.

Mises described the stakes exactly in Human Action: 

The flowering of human society depends on two factors: the intellectual power of outstanding men to conceive sound social and economic theories, and the ability of these or other men to make these ideologies palatable to the majority.

The flowering of human society depends on two factors: the intellectual power of outstanding men to conceive sound social and economic theories, and the ability of these or other men to make these ideologies palatable to the majority.

The first factor was supplied long ago: Cantillon conceived the theory in 1755—a century before the Austrian School was born—and Mises, Hazlitt, and Rothbard spent their careers refining it. The second factor’s failure is the world we live in,........

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