In recent decades, the productivity gains generated by both labor and capital have gone disproportionately to the owners of capital. Wages in the US have not kept pace with gains in productivity...

In fact, the very success of the owners of capital in securing the elephant’s share productivity gains and ensuring low effective taxes, lies at the very heart of the credit crisis.

Briefly, even if crudely, the decoupling of men’s wages from productivity made both possible and necessary wider participation of women in the work force. This too proved insufficient to procure the “American Dream” — a car, a home, a decent education.

Transfer payments also proved insufficient. Credit filled the gap and bought social peace, which meant no fighting over distribution of the social pie. The end of the credit cycle threatened this arrangement. The extraordinary government action in response to the crisis was largely intended to restart this circuit of capital. The large and persistent gap between deposits and loans at large financial institutions indicates that the transmission mechanism is still broken.