Our Broken Economy, in One Simple Chart

Our Broken Economy, in One Simple Chart
nytimes.com

There's a cause and effect connection too. All that wealth at the top increasingly has nowhere to go. Stagnant wages result in what economists call a "demand constrained economy," which basically means nobody has any money to buy anything. This makes it harder to build businesses (no customers!) and therefore makes investments perform worse. Worse performing investments leads money to seek safe havens like... real estate. This causes asset inflation which soaks up yet more middle class wealth and worsens the problem. Repeat cycle. It also inflates bubbles. This is why we've had a serial bubble economy since the late 1990s.

Historically demand constrained economies result in depressions. We've avoided a technical depression through monetary policy (QE, etc.) but at the cost of monstrous asset inflation and bubbles. (My personal opinion is that we have been in a weird kind of stealth depression since roughly 2008, or maybe even since 2001. It's a depression masked by force-pumped asset inflation and bubbles.)

This is in part why you hear some venture capitalists advocating for redistribution methods like universal basic income. VC depends on the ability to build businesses which depends on customers. If there are no customers VC backed companies fail and VC funds under-perform.

Edit: just since this is interesting:

The opposite of a demand constrained economy is a supply constrained economy. This is where you have lots of money in consumers' hands but no capital available for business. This is what we had in the 1970s and it resulted in "stagflation," which is inflation due to consumer demand bidding up constrained supply. Supply side economics such as what the Reagan administration introduced in the 1980s may have been the right answer then. Today we have the opposite problem and probably need something more like FDR's New Deal. Unfortunately we have a generation that grew up in the 70s that is now in power and is fighting the last war. This is the same problem we had in the 70s-- the 30s-40s generation was in power and was fighting the last war.

Everyone with a job makes it possible.