The most cogent explanation of why wealth inequality harms the economy I've yet seen.

This mal-distribution of wealth does not bode well for a society based on the buying and selling of goods.  Our super-rich plutocrats, after all, do not need more than five or ten automobiles or five or ten homes each.  This top one percent—3 million people—certainly cannot purchase all the goods that the poorest 180 million Americans would be capable of purchasing had our society a more equal distribution of wealth. 

And so debt has had to sustain our market economy:  the more skewed the distribution of wealth has grown over time, the more frantically has the economy been forced to create a growing array of consumer debt mechanisms—subprime mortgages, payday loans, more and more intricately structured credit card debt—in order simply to maintain its functioning.

When a critical mass of poor and working class Americans could no longer pay their fabulously expensive subprime mortgages and usurious credit card bills, this house of cards collapsed.  A number of the financial institutions built on this consumer debt foundered and the remainder required unprecedented injections of federal funds to remain afloat.  The housing market and new residential construction, the market for consumer goods—automobiles, appliances, electronics—all crumbled, taking down with them the jobs of retirement savings of millions of Americans.

The Crash, in short, was not an episode of mass hysteria or panic; it represented a structural crisis in part rooted in the grossly unequal distribution of wealth in this society.  When millions of Americans could no longer buy goods, industry had to stomp on the brakes.