Excellent article. Agree with most of the points in that cited article. I do however take an exception to the often repeated mechanism about the rich having lower marginal rate of consumption therefore income inequality led to demand short fall. Our recent experience clearly showed that any "under-consumption" description would be quite counter-factual. A close examination of the go-go 20's would also dispell any "under-consumption" theory that came about in the 1930's in order to jusify Keynesian government spending.
What really happened was that the central banks' liquidity injection led to erroneous signals about opportunity cost of capital. Both current consumption (on borrowed credit) and investment (on borrowed capital) went up. The line between consumption vs. investment is not a clear one: a car or truck bought for business is investment but if the business folds before the vehicle is paid off, it's effectively consumption; a building is normally investment, but the same building not being able to find tennant and having to be torn down is a consumption of building material; a college education is often thought of as an investment but a college graduate with a mortgage-sized student loan but unable to find a job can only chalk the educational expense as consumption, as in four-years of partying. All these investment/consumption decisions have to be made on individual basis. The government interventions on interest rates, subsidies and etc. just throw a bunch of monkey ranches into the market price mechanism and adversely affect sound individual decision making.
The polarization of income under a central banking regime is easy to understand: banks are given the privilege to create money out of thin air and lend out for interest due to the supposed risk that they take on making the loans. i.e. Risk assessment is the bankers' job. When central banking provide safety blankets like "Greenspan put" or "Bejamin Strong put" (Strong was the Fed chairman from 1914 to 1928), the privileged bankers face no real risks. We end up with an incestious cabal of bankers, government officials, warfare-welfare industries, and their mouthpieces in the academia and the media reaping all the benefits of technological progress, while the rest of the population is essentially enslaved by a plantation scrip system.
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