Posts Tagged ‘Bank Failures’

Income inequality and reckless lending

September 13, 2013

inequality.financialdisaster

Correlation does not prove causation, but David A. Moss of Harvard Business School sees a connection between reckless lending and income inequality.

The logic is this:  The top 10 percent of income earners are unable to spend all of their increasing share of U.S. wealth.  They have to invest it, and, in the era of financial deregulation, they can get a high return by investing in banks that engage in reckless lending and financial speculation.  The mass of the public gets to maintain its spending power, by means of easy credit, and the economic elite gets to increase its share of the national income.

This works out for everyone, until the bubble bursts.  Then it becomes a question of who gets bailed out and who isn’t.  It’s a neat theory, and, for me, a plausible one.

Click on Inequality and its Perils for a discussion of this issue by Jonathan Rauch for the National Journal.

Click on Class Is Seen Dividing Harvard Business School for a report on the privileged and underprivileged at Harvard Business School itself.