Did Increased Income Disparity Help Cause the Depression?

Yves Smith ponders whether Did Increased Income Disparity Help Cause the Depression?:

I've been meaning to discuss how increased income disparity is bad for economic growth, because in the end you wind up with insufficient labor income to fund consumption (note that America's high consumption rate has been achieved by lowering its already low savings rate to zero) and too much capital chasing too few investment opportunities (even a sound bet will produce a bad return if you pay too much for it).

It turns out I was beaten to the punch by nearly 50 years, as Robert Reich tells us in his latest post, invoking former Fed chairman Marriner Eccles . Insufficient consumption is one theory of the roots of the Depression (the monetarist version has gained ascendance), but Eccles links the consumption shortfall directly to a shift in wealth towards the top. And some of the other patterns of the Twenties, such as debt-fueled growth, are worryingly familiar.

The capitalists forget that people need to earn money before they spend it (unless some shyster offers them cheap loans). When there is no money, there is no consumption, there is no economic activity, no matter how cheap the goods are.