When the gap reaches a critical width
Oct. 22nd, 2012 09:36 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
fridihttp://www.imf.org/external/pubs/ft/wp/2010/wp10268.pdf
In their paper about the relationship between inequality and crises, the economists Michael Kumhof and Romain Rancière try to go beyond the simplistic notion that economic crises are merely a result of personal incompetence plus greed plus bad loans. They look at one of the less researched aspects of the US market, which otherwise is closely related to bank failures - namely, the level of financial disparity between the various segments of society. They analyzed the data for the last century, particularly the periods of the greatest crises, 1929 and 2008. In both cases they've found that the gap between wealthy and poor had opened beyond a certain critical level. Their conclusion: there's a pattern showing that whenever the top 5% possess 34% of the total wealth or more, the level of private loans would tend to double within a short period of time.
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In their paper about the relationship between inequality and crises, the economists Michael Kumhof and Romain Rancière try to go beyond the simplistic notion that economic crises are merely a result of personal incompetence plus greed plus bad loans. They look at one of the less researched aspects of the US market, which otherwise is closely related to bank failures - namely, the level of financial disparity between the various segments of society. They analyzed the data for the last century, particularly the periods of the greatest crises, 1929 and 2008. In both cases they've found that the gap between wealthy and poor had opened beyond a certain critical level. Their conclusion: there's a pattern showing that whenever the top 5% possess 34% of the total wealth or more, the level of private loans would tend to double within a short period of time.
More...
