In the article We’re in a Recession Because the Rich Are Raking in an Absurd Portion of the Wealth Robert Reich explains why growing income inequality is the fundamental problem driving all of our other economic ills.

… when earnings accumulate at the top, people at the top invest their wealth in whatever assets seem most likely to attract other big investors. This causes the prices of certain assets—commodities, stocks, dot-coms or real estate—to become wildly inflated. Such speculative bubbles eventually burst, leaving behind mountains of near-worthless collateral.

In other words, above a certain level of wealth, there is nothing useful left for the wealthy to invest in.

This is another version of the story  Emphasis on Growth Is Called Misguided, which I posted on September 24, 2009. In that post, I mentioned that

This story resonates with what I recently read in the book The Economic Naturalist’s Field Guide: Common Sense Principles for Troubled Times by Robert H. Frank.