Some thoughts from interview with @M_C_Klein, related to research with @AtifRMian and @ludwigstraub:
central point: Covid recession will further damage already weak economy unless we significantly change course.
central point: Covid recession will further damage already weak economy unless we significantly change course.
The indebted demand framework makes the case that rising inequality fuels a saving glut of the rich, putting downward pressure on interest rates and ultimately economic output.
Covid is likely to exacerbate this trend: the rich will spend less for the foreseeable future, and the non-rich are experiencing the largest income losses (so further rise inequality)
Trying to solve this problem by encouraging non-rich households to borrow more and more is counter-productive. It will help in the short-run, but only further diminish economy in medium run.
We have to tackle the structural factors leading to inequality, and we need government policy that helps achieve sustained solid income growth for those outside the top 1%/top 10% of the income distribution.
