Down and down into the toilet bowl you go...
Bush really screwed you up as a country, didn't he?
Maybe you'll learn a lesson about rampant military spending and reckless
(if not retarded) foreign policy. But probably - you won't.
Americans saw wealth plummet 40 percent from 2007 to 2010, Federal
The recent recession wiped out nearly two decades of Americans’ wealth,
according to government data released Monday, with middle-class
families bearing the brunt of the decline.
The Federal Reserve said the median net worth of families plunged by 39
percent in just three years, from $126,400 in 2007 to $77,300 in 2010.
That puts Americans roughly on par with where they were in 1992.
The data represent one of the most detailed looks at how the economic
downturn altered the landscape of family finance. Over a span of three
years, Americans watched progress that took almost a generation to
accumulate evaporate. The promise of retirement built on the inevitable
rise of the stock market proved illusory for most. Homeownership, once
heralded as a pathway to wealth, became an albatross.
The findings underscore the depth of the wounds of the financial crisis
and how far many families remain from healing. If the recession set
Americans back 20 years, economists say, the road forward is sure to be
a long one. And so far, the country has seen only a halting recovery.
“It’s hard to overstate how serious the collapse in the economy was,”
said Mark Zandi, chief economist for Moody’s Analytics. “We were in free
The recession caused the greatest upheaval among the middle class. Only
roughly half of middle-class Americans remained on the same economic
rung during the downturn, the Fed found. Their median net worth — the
value of assets such as homes, automobiles and stocks minus any debt —
suffered the biggest drops. By contrast, the wealthiest families’ median
net worth rose slightly.
Americans have tried to rebalance the family budget but have found it
difficult to reverse the damage.
The survey showed that fewer families are carrying credit card balances,
and those who do have less debt. The median balance dropped 16 percent,
from $3,100 in 2007 to $2,600 in 2010. The Fed also found that the
percentage of Americans who have no debt rose to a quarter of families.
But that progress was undermined by other factors, leaving the median
level of family debt unchanged. The report said more families reported
taking out education loans. Nearly 11 percent said they were at least 60
days late paying a bill, up from 7 percent in 2007. And the percentage
of families saddled with debts greater than 40 percent of their income
stayed the same.
Not only were Americans still facing significant debts, but they were
making less money. Median income fell nearly 8 percent, to $45,800, in
2010. The median value of stock-market-based retirement accounts
declined 7 percent, to $44,000.
But it was the implosion of the housing market that inflicted much of
the pain. The median value of Americans’ stake in their homes fell by 42
percent between 2007 and 2010, to $55,000, according to the Fed.
The poorest families suffered the biggest loss of wealth from the drop
in real estate prices. But middle-class Americans rely on housing for a
larger part of their net worth. For some, it accounts for just more than
half of their assets. That means every step downward is felt more
Rakesh Kochhar, associate director of research at the Pew Hispanic
Center, calls this phenomenon the “reverse wealth effect.” As consumers
watched the value of their homes rise during the boom, they felt more
confident spending money, even if they did not actually cash in on the
gains. Now, the moribund housing market has made many Americans wary of
spending, even if their losses are just on paper.
According to the Fed survey, that paper wealth — or what is officially
called unrealized capital gains — shrank 11 percentage points, to about
a quarter of Americans’ assets.
The findings track research Kochhar released last year that showed a
dramatic drop in household wealth during the recession, particularly
among minorities. That study found record-high disparities between
whites’ wealth and that of blacks and Hispanics.
“It was turning the clock back quite a bit,” Kochhar said.
The Fed’s survey is conducted every three years. Although there have
been some signs that the recovery has picked up — housing prices have
begun to stabilize and unemployment has fallen — Fed economists said
those improvements largely do not change the survey results.
“Recovery from the so-called Great Recession has also been particularly
slow,” the report said.