Asset Bubbles and Income Inequality

Interesting post from Justin Fox via Mark Thoma

Well now, after looking at the data about the country's 400 highest earners and reading the comments by pneogy and shepherdwong, I am ready to offer an important new theory (well, not entirely new): The rise in income inequality over the past 30 years has to a significant extent been the product of a series of asset-price bubbles. Whenever the market (be it the market in stocks, junk bonds, real estate, whatever) booms, the share of income going to those at the very top increases. When the boom goes bust, that share drops somewhat, but then it comes roaring back even higher with the next asset bubble. It's not the same people raking it in every time—there's lots of turnover in the top 400—but skimming the top off of asset bubbles appears to have become the leading way to get rich in these United States in the past three decades. ...

Also, from Fortune Magazine just before the election about the HENRYs ("High earners, not rich yet"):

Most of all, the HENRYs face daunting choices. "They can become wealthy, but they must starve themselves of luxuries to get there," says advisor Tysk. "These people save only because they go without." Most HENRYs view achieving a comfortable retirement as a long and difficult climb.

The dream still lives for the HENRYs, but it's elusive. It's a dream that enriches us all, and that America would do well to nurture.

Another nuance to the tax debate. I don't think it's as much a sob story as the authors try to make it out to be, but it does present another side.