inequality paper

7/31/2019 Inequality Paper

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Rising income inequality: the true cause of the current crisis?

Juraj Briskar

Abstract

This essay argues that the main cause of the Great Depression and the Great Recessionof 2008-09 was extreme income inequality. Inequality expressed as income share of thetop 1 percent peaked at 23.5% just before each of the crises. Stagnant real wages of

overwhelming majority of American households meant that the only way how growth inconsumption and aggregate demand could be sustained was through borrowing. Hugewealth was accumulated at the top, but because rich households were not able to spendall of their income and there were not enough investment opportunities in the realeconomy money flew into financial speculation and into loans for middle and low incomehouseholds. This led to explosion of private debt, real estate bubbles and over-leveragingof the banking sector. This was further exacerbated by the development of huge globalimbalances which meant that the USA was borrowing substantial amounts from thesurplus countries, notably China. However, the fundamental cause of the current economiccrisis seems to be rising income inequality.


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1. Extreme inequality and depressions: historical overview

When we look at the data for the USA we can see a link between income inequality and

deep once in a lifetime recessions. As you can see on Figure 1 income share of the top 1Percent was quickly rising in 1920s until it reached a peak in 1928. This was followed by1929 Wall Street Crash and the Great Depression. Income inequality was falling in 1930sand 40s and then it stayed constant in 1950s and 60s. However, from 1980s it started torise again until it reached a peak in 2007 just before the current crisis. If we look at incomeshare of top 10% shown on Figure 2 or income share of top 0.01% on Figure 3 we getessentially the same picture. It seems that if the income inequality is allowed to rise abovea certain level you end up with a serious recession that takes a long time to overcome.The Great Depression lasted in it's full form from 1929 to 1933, but the US economy didn'treally recover until after the Second World War. Similarly policymakers today are failing tofind ways to overcome the current crisis and a consensus is forming about there being alost decade.

It is fascinating to observe that income inequality peaked at the same level just beforeeach of the crises. The share of total income going to the richest one percent reached 23%in 1928 and 2007. The income share of top 10% of households peaked at approximately50% in both 1928 and 2007.

We can infer from the graph that we don't need perfectly equal society to avoid hugeeconomic fluctuations. There were large differences in income and wealth in the USA in1950s and 60s, but there was no depression. It is therefore a matter of the extent ofinequality. This essay argues that the current level is too high and that we should try to goback to 1950s levels.

Figure 1: Decomposing the Top Decile US Income Share into 3 Groups, 1913-2007Source: Piketty and Saez (2003), series updated to 2007


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Figure 2: The Top Decile Income Share in the United States, 1917-2007Source: Piketty and Saez (2003), series updated to 2007

Figure 3: The Top 0.01% Income Share, 1913-2007Source: Piketty and Saez (2003), series updated to 2007


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2. How did rising income inequality cause the current crisis?

According to the Congressional Budget Office report on distribution of income in the USAhouseholds with average and low incomes saw very little growth in real income in the last30 years, almost all of the gains were in the top 10%, especially in the top 1% (2011).

Furthermore, real average hourly earnings were constant over this period and those smallincreases in income of bottom 90% of households were achieved by increasing number ofworked hours. At the same time bargaining power of trade unions and workers in generalbecame much weaker and wage income as share of GDP fell in most advancedeconomies. Although most households saw no increase in their real income theycontinued to consume more every year. This made the economy going, it meant thatconsumption and aggregate demand in general kept pace with increases in aggregateproduction. Hence GDP was growing and the economy seemed dynamic.

Figure 4

Figure 5


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However, economic expansion was based on debt, as the gap between real income ofhouseholds and their consumption had to be filled by borrowing money. Who did theyborrow the money from? Obviously they borrowed the money from banks, but financialsector is just an intermediary between savers and borrowers. If we assume for a moment

that there was no borrowing from abroad (more on this issue in the section on globalimbalances) then the amount borrowed by US citizens had to be the same as amount ofmoney saved by another group of US citizens.

Who are the savers in this model? It's the top 10%, and to even large extent it's the top1%. These are the individuals who saw massive growth in their real incomes in the last 30years. However, they were not able to spend all of their increases in income. Instead theysaved substantial part of it. There are simply limits to how much a person can spend, ifyou are really rich you can buy lots of jewellery, expansive cars, private yachts and jetsand still you are left with a great deal of unspent income. Christopher Carroll (2000) arguesthat beyond a certain level of wealth it becomes difficult to imagine how one could spendeven the earnings on one's wealth on nondurable goods and services for personalenjoyment. For example, recent press accounts have estimated Bill Gates's networth at $40 billion. Assuming a ten percent annual rate of return, Gates would have tospend $4 billion a year, or over $10 million a day, on nondurable goods and servicessimply to avoid further accumulation.

The situation at the bottom of the income distribution is exactly opposite. Many poorhouseholds find it very difficult to save, because their income only covers expenditure onnecessity goods. Studies of Karen Dynan (2004) and Carroll (2000) clearly show thatmarginal propensity to save of high income individuals is much greater than in the case oflower income individuals. Therefore large share of the increase in income in 1980-2007period was saved and the financial system then used these spare funds for loans to lowincome households which had large marginal propensity to consume. This way the

economy could continue to grow despite the fact that individuals that received largestincreases in income were unable to spend it all and thus return it to the circular flow ofincome.

Bertrand and Morse (2012) also argue that rising income inequality in a geographicmarket translates into more demand for credit by middle income households. Theyexplain this using a new concept of trickle down consumption and find strong empiricalevidence using Consumer Expenditure Survey. Essentially non-rich households living inareas with high and rising income inequality have tried to keep up with the pace of risingconsumption and living standards of rich households. They achieved this by saving lessand by going into debt. Because of resulting growth in bad credit Bertrand and Morsesuggest that rising income inequality may have been a critical component in the recent

financial crisis.You can see strong correlation between rise in inequality and increase in indebtedness ofUS households on Figure 6. Both income share of the top 1% and household debt as apercentage of GDP approximately doubled between 1980 and 2007.


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Figure 6, Growth of Household Debt vs Rise in Inequality, data is shown in index numbers,1980 is the base year, Source: Federal Reserve (2010) and The World Top IncomesDatabase

However, the consequence of such model is that it leads to growing indebtedness ofmiddle and low income households on one side and accumulation of financial assets bythe high income households on the other. Loan is a liability to the borrower, but an assetfor the lender. There comes a point when the burden of debt is so great that low incomehouseholds simply cannot continue to service the loans and therefore they startdefaulting . The result of that are foreclosures and bursting of the real estate bubble, falling

prices of houses lead to big losses for banks, deterioration in consumer and businessconfidence and eventually a recession. That is exactly what happened in 2007-2009. Thisconclusion is also supported by work of Daron Acemoglu (2011).

You may be asking why didn't the same problems develop in 1950s and 1960s wheninequality was much lower than in 1928 or 2007, but there was still certain level of it. In1950s there were lots of rich people who could not spend all of their income and hencethey saved large part of it. However, these savings did not go predominantly into loans forpoorer households or into speculation, but into investments in the real economy. As theincome inequality rapidly increased in 1980s, 1990s and 2000s the amount of unspentincome at the top was so enormous that it could not be all used for productiveinvestments. There is only certain amount of money that can be effectively and profitably

used as investment into new factories or capital goods at any given time. Investments inthe real economy offered low returns and therefore rich households turned to financialsector which offered much higher returns. That is why huge amounts of money ended upbeing used for financial speculation and for loans to average and low income householdsthat kept consumption growing and fuelled real estate bubble.

This explanation of the current economic crisis is supported by an IMF research paperwritten by Michael Kumhof and Romain Rancire (2010). In their model they divide UShouseholds into investors (top 5% of income distribution) and workers (other 95%) andsuggest that bargaining position of workers fell relative to investors which led to rise ininequality. They argue that "The key mechanism is that investors use part of theirincreased income to purchase additional financial assets backed by loans to workers. Bydoing so, they allow workers to limit their drop in consumption following their loss of

income, but the large and highly persistent rise of workers debt-to-income ratiosgenerates financial fragility which eventually can lead to a financial crisis."


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It is fascinating that exactly the same process was also behind the Great Depression.Marriner Eccles was a successful businessmen, strong supporter of fiscal stimulus longtime before Keynes wrote his General Theory and the Chairman of the Federal ReserveBoard from November 1934 until April 1948. After he retired from the Fed he wrote a bookwhere he analysed the causes of the Great Depression. He identified accumulation ofwealth and income in the hands of a small number of richest Americans as the main cause

of the crisis. He argued that by taking purchasing power out of the hands of massconsumers, the savers denied to themselves the kind of effective demand for theirproducts that would justify a reinvestment of their capital accumulations in new plants. Inconsequence, as in a poker game where the chips were concentrated in fewer and fewerhands, the other fellows could stay in the game only by borrowing. When their credit ranout, the game stopped.

This model also explains rapid accumulation of private debt in the USA and otheradvanced economies during the last 30 years. You can see the levels of public debt andtotal debt (public and private) as a percentage of GDP in the USA on Figure 6. One canobserve that while changes in the level of public debt were quite small there was a

massive increase in the level of private debt. The same explosion of private debt also tookplace in the decade leading to the Great Depression. According to Robert Reich (2010)Between 1913 and 1928, the ratio of private credit to the total national economy nearlydoubled. Total mortgage debt was almost three times higher in 1929 than in 1920..

Figure 7, US Public and Total Debt as % of GDP, Source:Federal Reserve (2010)


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3. The Role of Banks

The media has recently been full of criticism of living beyond our means, people are toldthat the party is over and now as a consequence we face a decade of austerity. Somecommentators even interpret the current crisis as a moral problem, they say that living ondebt was a sin and that now people deserve punishment in the form of austerity. That is of

course ridiculous, rising indebtedness of the majority of households was a necessaryfeature of this system.

It is also wrong to blame just banks, because financial sector was just an intermediary, itfacilitated the necessary transfer of income from the richest households to the rest, so thatthe economy could continue to grow. Banking sector was simply keeping fundamentallyunbalanced economy growing and in the process it created lots of private debt and alsogreatly enriched it's top executives.

Private loans effectively did the same job as government transfers of income from the richto the poor. Banks would lend money to the poor households, then they would packagethese loans into CDO's and sell them to investors. Some of these investors were pension

funds that were managing savings of ordinary households, but most of them wereinvestment funds taking care of savings of the top 1%. By buying these securities therichest households in the country were effectively lending the money to low incomehouseholds.

Kumhof and Rancire (2010) support this argument, they argue that "Saving andborrowing patterns of both groups (workers and investors) create an increased need forfinancial services and intermediation. As a consequence the size of the financial sector, asmeasured by the ratio of banks liabilities to GDP, increases."

Robert Reich (2010) also suggests that the true cause of the current economic crisis wasrising income inequality and not just deregulation of the banking sector. He argues that'Had the share going to the middle class not fallen, middle-class consumers would nothave needed to go as deeply into debt in order to sustain their middle-class lifestyle. Hadthe rich received a smaller share, they would not have bid up the prices of speculativeassets so high.' To blame the crisis just on the real estate bubble and financial speculationis describing the symptoms of the problem and not getting to it's core.

Another conclusion that we can make is that capitalism is still based on selling consumerproducts to broad middle classes. In the words of Eccles mass production has to beaccompanied by mass consumption.

Let's imagine for a moment that there would be a country where the top earners were ableto spend all of their income and hence return it to the circulation. In such a country you

could have the top 1% of households having even 50% of total income and it would causeno problems from a purely economic perspective, as the economy would just adjust toproducing luxury goods for the rich. Of course country like this would probably be anoligarchy and not a democracy, as the super rich elite would be able to buy political powerand would probably keep strong army to maintain this unequal distribution of income. It isencouraging to know that the USA did not transform itself into an economy based onproducing luxury goods for the rich elite. It means that rich individuals still depend on theability of the rest of the population to buy most of the goods that are produced.


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4. Global Imbalances

A recent study from the Institute for Public Policy Research also suggests that the currentcrisis was caused by extreme inequality, the authors link rising inequality with unregulatedglobalisation and development of huge global imbalances (2012, The Third Wave of

Globalisation). They suggest that Because of stagnating growth in median wages in theUS, many citizens chose to use the cheap and abundant credit to pay for mortgages andthe purchase of (primarily foreign) consumer goods. I agree that globalisation was one ofthe main drivers of rising inequality, as offshoring of manufacturing jobs to China and othercheap labour countries weakened the bargaining position of workers in advancedeconomies. At the same time globalisation enabled growth in corporate profits and inrewards for individuals at the top of these institutions.

However, the global imbalances alone cannot fully explain the origins of the current crisis.It is true that the USA, UK and other advanced economies were running significant currentaccount deficits in the decade prior to the crisis while other countries, notably China andGermany, were running huge current account surpluses. You can see massive increase inUS current account deficit on Figure 8. This meant that China was effectively lendingmoney to the USA, so that American consumers could buy goods from China. Thiscertainly contributed towards boom in consumption and borrowing in the USA. Cheapimports from China drove down inflation which enabled Federal Reserve to keep interestrates very low for prolonged time.

Figure 8, Development of US CurrentAccount Deficit, Source: OECDStatExtracts

On the other hand, debt to foreigners represents only a small share of the total debt in theUSA. There has been a lot of talk in the media about how much USA owes to China ,Japan and other surplus countries. The fact is that in January 2011 foreigners held 32% ofthe US public debt (Wikipedia, data from Federal Reserve). However, public debt isrelatively small part of the overall US debt. You can see the composition of US total debton Figure 9.


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Figure 9, Composition of Total US Debt in 2010, Source: Federal Reserve (2010)

According to the flow of funds report of the Federal Reserve (2010) the total debt in theUSA was 350% of GDP in 2010 Q1, that consists of public debt which was at 75% of GDPand private debt that stood at staggering 275% of GDP. Federal Reserve data tells us thatactually only 15.2% of US total debt is owned by foreigners. Therefore the explosion ofdebt in the last 30 years was mostly the result of lending between American citizens.

The reason why global imbalances alone are not a satisfactory explanation is that thecurrent crisis and the Great Depression could happen even if the USA was a completelyclosed economy. The story explained in this essay would still be relevant. Massive rise inincome of the richest households who are unable to spend all of it results in accumulationof savings which are lend to households with lower incomes and higher marginalpropensity to consume. If we add Chinase surpluses into the story then the 'savings glut'

will simply increase, but nothing fundamental will change. Only a small part of total USdebt is held by foreigners and therefore global imbalances alone cannot explain massivegrowth in credit in decades prior to the crisis. Furthermore, USA ran current accountsurpluses in the 1920s, so global imbalances cannot explain the Great Depression.Therefore the global imbalances are only a part of the answer, we need to look at seriousimbalances within countries to understand the roots of the current crisis.

5. Opposing Views

There are those who question the link between extreme inequality and depressions. M.Bordo and C. M. Meissner did a study (2012) where they looked at data for 14 countriesfor the period 1920-2008 and tried to find a link between rising income inequality andfinancial crises. They did cross-country regressions relating changes in income inequalityto credit growth and found very weak link between these two variables. They argue that asthere is very weak correlation in the data between credit growth and inequality there is alsono link between inequality and financial crises.

However, their evidence does not disprove my argument which is that Great Depressionand Great Recession of 2008-09 were caused by an enormous build up of inequality in theprior decades. I am not arguing that all recessions are caused by extreme inequality orthat rising inequality always leads to growth in credit. Most countries in their sample are


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small and open economies. Such economies can continue to grow despite risinginequality, because they do not depend on domestic demand. Firms in very openeconomies can simply sell their goods abroad, they depend on external demand, not ondemand of households in the country. Wages in such a country could theoretically be zeroand firms would still have no problem with finding customers for their goods.

However, the USA is a large economy where exports represent quite a small part of GDP,

in 2010 it was only 13%. Therefore economic growth in the USA cannot be led by exports,the country depends on consumption of it's own households. If income of 90% of thosehouseholds stagnates then it means that the economy suffers from a lack of aggregatedemand. This problem can be temporarily solved by growth in credit, but eventually therewill be a huge economic crisis like the Great Depression and the Great Recession. This ishugely important, because a serious financial crisis in the USA is capable of plunging theentire world economy into a recession.

According to a simple linear regresion there is very strong link between income inequalityand household indebtedness in the USA. Using the data for period 1980-2010 and modelhousehold debt as % of GDP = a + b * the top 1% income share we find adjusted Rsquare of 0.82274. The coefficient is 4.5164 and it is statistically significant. According tothis model if share of the top 1 percent increases by 1% then household debt as share ofGDP will increase by 4.52%. We get similar result when doing a simple correlationcalculation, Pearson correlation coefficient is in this case 0.9103.

Finally, in this essay I am not making a moral case against income inequality. Instead Ifocus purely on the economic consequences of extreme inequality, specifically on the thefact that it seems to lead to depressions. There is a wide body of literature analysing ingreat detail other negative economic consequences of inequality. Joseph Stiglitz brilliantlysummarises all of these in his article 'Of the 1%, by the 1%, for the 1%', specifically theerosion of democracy due to wealth concentration and a fall in social mobility.


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6. Solutions to the crisis

The conclusion of this analysis is that the real cause of enormous growth of private debt in

the last 30 years and the current economic crisis was rapid rise in inequality. Therefore theonly way how this crisis can be solved is by reducing income inequality. There are twoways how this can happen.

A) Austerity and defaults

The first way how income inequality and the debt problem can be resolved is via defaults.This is where the policy of austerity leads us. Currently the main supporter of thisapproach is Germany, it's not clear whether it's leaders are fully aware of all theconsequences. In this situation governments all around the world join households andfirms in cutting spending and de-leveraging. Suddenly everyone is trying to pay back debtat the same time. This is of course impossible. If the private sector is de-leveraging andthe public sector refuses to accept higher fiscal deficits and instead it adoptscontractionary fiscal policy to achieve a balanced budget then GDP will simply fall. This willlead to a rise in unemployment and to a wave of defaults, households will default on theirmortgages, firms and banks will go under, even sovereigns will announce that they cannothonour their obligations.

Defaults are really bad for everybody because of all the economic chaos that they cause,but they represent a direct loss of wealth for the richest individuals who hold a great dealof financial assets, such as bonds and shares and have substantial savings in the banks.This is exactly what happened in the Great Depression when the stock market wasallowed to dramatically fall, hundreds of banks were allowed to fail and huge number offirms ended up in bankruptcy. To put it simply, defaults would reduce income inequality by

making the rich poorer. However, in the process they would cause so much economicdestruction that they would also make everyone else poorer. History tells us that the roadof defaults can also seriously undermine democracy and lead to totalitarian regimes.

B) The Social-Democratic Way

The alternative approach to reducing income inequality could be called the social-democratic way. It basically consists of immediate Keynesian stimulus which shouldinclude increase in government spending aimed at job creation and cuts in income taxesfor workers with average and low income, as those have much higher marginal propensityto consume than individuals with higher incomes. The reasons why fiscal stimulus shouldbe effective in the liquidity trap or balance sheet recession situation that we arecurrently in are very well described in the work of Paul Krugman (2010) and Richard Koo(2011). The effectiveness of fiscal policy in expanding output was also empiricallyconfirmed in the study of Christina Romer (2011).

The overall structure of taxation should be made more progressive with much higher topincome tax rates. As you can see on Figure 7 between 1950 and 1980 the top rate ofincome tax in the USA was above 70%, right now it is 35%.


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Figure 10: Top marginal income tax rates in the USA 1913-2011

We should also move towards higher taxation of capital income, as currently income fromdividends and capital gains is taxed at much lower rate than wages. This is exactly whatWarren Buffett (2011) was talking about when he said that his secretary has to pay highertax rate than him. The richest one percent of households get most of their income fromcapital and hence that's the source of income that has to be taxed more.

Ian Ayres and Aaron Edlin came up with a very smart way how to automatically adjust taxsystem in order to offset rises in income inequality that are generated by the private sector(2011). Under their plan tax rates and tax brackets would be recalculated each year inorder to keep the average income of those in top 1% equal to 36 times the medianhousehold income. This would be done by the Internal Revenue Service without the needfor any action from the Congress or any other institution. Therefore inequality would be

capped at the current level and would not be allowed to rise. High earners could still seetheir incomes rise as long as they pulled everyone with them, median income would alsohave to rise. As the authors of this policy say 'The sky is the limit for the rich as long as therising tide lifts all the boats'. This would give strong incentive for the managers of bigcorporations to make sure that incomes of all of their employees are rising when thecompany is profitable. Their proposal is quite conservative, because it does not attempt toreverse the rise in inequality that happened in the last 30 years, it merely tries to stabiliseinequality at the current level.

However, these changes in the tax system have no impact on the pre-tax incomedistribution where the rise in inequality was enormous. Therefore we have to look at thelabour markets and the relative strength of workers and employers. The fundamental

cause of current problems was the fact that real hourly wages of workers did not grow overthe last 30 years. The only way out of this crisis is for the real wages to start growing veryquickly. Government should use all possible policies to increase bargaining position ofworkers, that includes making trade unions more powerful, more employment protection,active labour market policies, expansionary fiscal and monetary policy aimed at keepingunemployment low and perhaps even partial reversal of globalisation and possible tradewar with China.

It seems that globalisation and offshoring of manufacturing jobs from North America andEurope to China in the last 30 years is responsible for lower bargaining position ofworkers, problems with high unemployment and lack of growth in real wages in theadvanced economies. Therefore if globalisation is to continue it has to be modified in away to increase the bargaining position of workers in the advanced countries. If theprocess of globalisation is not reformed into one that benefits all households in developedcountries, not just those at the top of the income distribution, there will be strong pressureon politicians to introduce protectionist measures.


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So far the USA and other advanced economies have failed to make progress in reducinginequality. During 2010 recovery shocking 93% of gains in national income went to the top1% (Emmanuel Saez, 2012). Income of the top 0.01% rose by 21.5% while the income ofbottom 90% actually fell by 0.4%. This kind of economic growth is unsustainable and canonly exist because of government's special measures to support the economy, such asloose monetary and fiscal policy. Another conclusion than we can draw from this data is

that aggregate economic indicators, such as growth of GDP can't tell us anything about thestate of finances of a typical American household. Still it's these households that areexpected to drive the recovery via their consumption. We have to look at composition ofincome to get the real picture.

It is also very interesting to compare the current unbalanced recovery with the one underPresident Roosvelt when gains from economic growth were much more equally shared. In1934 the income of bottom 90% rose by 8.8% and income of the top 0.01% fell by 3.4%.Critics of President Obama argue that this sharp difference is because he presides over aWall Street government. While Roosvelt surrounded himself with trustbusters, reformersand even an expert at Wall Street manipulations to implement policies benefiting the vastmajority, crucial members of Obama's economic team have strong ties with theinvestment banks (David Cay Johnston, 2012). On the other hand, it seems that PresidentObama now recognizes extreme income inequality as not just an ethical issue, but aserious economic problem (Robert Reich, 2011).


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Conclusion

The argument that income inequality caused the Great Depression and the currenteconomic crisis is supported empirically by the US income distribution. We can see that

income inequality was rapidly increasing in the decades prior to the crises and it peaked atthe same level just before each of the crises. Furthermore, we now have a model that canexplain how extreme income inequality caused explosion of private debt, real estatebubbles and over-leveraging of the banking sector that were the immediate causes of bothcrises. Real wages of majority of households did not grow which meant that they couldsustain increases in consumption only by borrowing. Most of the gains from productivityimprovements and economic growth in 1980-2007 period went to the top 1 percent.However, these households were not able to spend all of their income and there were notenough productive and profitable investment opportunities in the real economy. Hencemoney flew into the financial system which offered much higher returns and ended upbeing used for financial speculation and loans to median and low income households.The crucial factor driving all of these changes was rising income inequality.

If we accept the notion that these huge once in a lifetime recessions are caused byextreme income inequality then we know how to solve the current crisis and also how toavoid similar crises in the future. If the economy is not growing, because extreme incomeinequality sucked all of the demand from the system, then logically the way we can getback to growth is by reducing the inequality. We can also avoid crises of this type in thefuture simply by making sure that income inequality does not reach 1928 or 2007 levels. Ifeconomists and policymakers learned this lesson from the 1930s then they would havebeen able to predict the 2008-09 crisis.


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References

Acemoglu D. (2011). 'Thoughts on Inequality and the Financial Crisis'

Ayres I. Edlin A. (2011). 'Don't Tax the Rich. Tax Inequality Itself', The New York Times,

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Bertrand M. Morse A. (2012). 'Trickle-Down Consumption'

Bordo M. Meissner C. M. (2012). 'Does inequality lead to a financial crisis?', NBERWorking Papers 17896, National Bureau of Economic Research

Buffet W. E. (2011). 'Stop Coddling the Super-Rich', The New York Times, August 14 Issue

Carroll C. D. (2000). "Why Do the Rich Save So Much?"

Congressional Budget Office (2011). Trends in the Distribution of Household Income

Between 1979 and 2007Dynan K. Skinner J. Zeldes S. (2004). "Do the Rich Save More?", Journal of PoliticalEconomy, 112(2):397-444.

Eccles M. S. (1951). 'Beckoning Frontiers'

Federal Reserve (2010). 'Flow of Funds Accounts of the United States', June 10

Glennie A. Straw W. (2012). 'The Third Wave of Globalisation', Institute for Public PolicyResearch

Johnston D. C. (2012). 'The richest get richer', http://blogs.reuters.com/david-cay-johnston/2012/03/15/the-richest-get-richer/

Koo R. C. (2011). 'The world in balance sheet recession: causes, cure, and politics',Nomura Research Institute

Krugman P. EggertssonG. B. (2010). 'Debt, Deleveraging, and the Liquidity Trap: AFisher-Minsky-Koo approach'

Kumhof M. Rancire R. (2010). 'Inequality, Leverage and Crises ', IMF Working Paper

Reich R. T. (2010). 'The Great Recession, The Great Recession, and What's Ahead'

Reich R. T. (2011). 'The Most Important Economic Speech of His Presidency',http://robertreich.org/post/13852130536

Romer C. D. (2011). 'What do we know about the effects of fiscal policy'

Saez E. (2009). 'Striking it Richer: The Evolution of Top Incomes in the United States',Working Paper Series, Institute for Research on Labor and Employment, UC Berkeley

Saez E. (2012). 'Striking it Richer: The Evolution of Top Incomes in the United States(Updated with 2009 and 2010 estimates)', March 2

Stiglitz J. E. (2011). 'Of the 1%, by the 1%, for the 1%'

The World Top Incomes Database, http://g-mond.parisschoolofeconomics.eu/topincomes/


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Wikipedia, Real Average Hourly Earnings from 1964 to 2004http://en.wikipedia.org/wiki/Real_wage

Wikipidia, United States Public Debthttp://en.wikipedia.org/wiki/United_States_public_debt#Ownership_of_debt

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