An excellent post by Jesse explains why real median incomes are important to a nation’s well-being and how financial engineering has ruined the welfare of the U.S.
From Jesse's Cafe:
The housing bubble did nothing for real median incomes in the US but it did wonders for the insiders in the financial sector.
This is why the average Joe in the States went into debt to continue to maintain their consumption.
Until this situation is addressed, there will be no sustained economic recovery in the US. The US Census Bureau only goes to 2007, but it is highly likely that the median income has taken another serious downturn in the latest financial crisis.
Why care? For several reasons.
First, the median wage is the bulwark of general consumption and savings, and the prosperity of a nation. It must match the character of the social fabric, or place a severe strain on the contract between classes and peoples. A nation cannot survive both slave and free without necessarily resorting to repression.
Second, in any relatively free society, the reversion to the mean in the distribution wealth and justice is never pleasant, and often bloody and indiscriminate.
Why doesn't 'greed is good' work? Because rather than work harder, a certain portion of the population, not necessarily the most productive and intelligent, will immediately seek rents and income obtained by unnatural advantages, by gaming the system, by cheating and coercion, by the subversion of the rule of law, which will sap the vitality of the greater portion of the population which does in fact work harder, until they can no longer sustain themselves.
What will take the place of these modern economic myths? Time will tell, and it will vary from nation to nation. But the wind of change is going to be blowing a hurricane.
http://jessescrossroadscafe.blogspot.com/2010/02/failure-of-bubble-nomics.html
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