"A recent report from the IMF looked at the causes of the two major U.S. economic crises over the past 100 years—the Great Depression of 1929 and the Great Recession of 2007. There are two remarkable similarities in the eras that preceded these crises: both saw a sharp increase in income inequality and household-debt-to-income ratios. In each case, as the poor and middle classes were squeezed, they tried to cope by borrowing to maintain their standard of living. The rich, in turn, got richer by lending and looked for more places to invest, bidding up securities that eventually exploded in everyone's face.
In both eras, financial deregulation and loose monetary policy played roles in creating the bubble. But inequality itself—and the political pressure not to reverse it but to hide it—was a crucial factor in the meltdown. The shrinking middle isn't a symptom of the downturn. It's the source of it. How we deal with it may become the most crucial factor in whether we can hope for a lasting recovery."
—Rana Foroohar (The Curious Capitalist) TIME august 15 issue.