Instead, they played the stock market, fueling a rapid run-up in stock prices. Lower and middle income households, on the other hand, lacked wealth enough to meet their needs and were forced to borrow heavily. Many historians believe that this combination of growing personal debt and a widening wealth gap destabilized the economy and precipitated the Great Depression. A similar fault line underlies today s economy. While the media trumpets rising economic growth and soaring Dow Jones, signs are emerging that the current boom, like that of the 1920s, is founded on vast inequities of wealth and is financed by growing consumer debt.
Conventional wisdom has it that everyone benefits from a rising market.
After all, nearly half the population now owns some stocks, a much higher proportion than two decades ago. However, very few have sizable stock holdings. Wealth in the United States is now as maldistributed as it was in 1929. Consequently, when the stock market climbs, a relatively few wealthy households reap most of the gains. For others, the boom has been a bust.