Fed: Household wealth plummets 23% in two years

This is one of the more alarming reports of the week.

NEW YORK (CNNMoney) -- The average American family's household net worth declined 23% between 2007 and 2009, the Federal Reserve said Thursday.

A rare survey of U.S. households, first performed in 2007 but repeated in 2009 in order to gauge the effects of the recession, reveals the median net worth of households fell from $125,000 in 2007 to $96,000 in 2009....

Federal Reserve officials said Thursday the new report offers a look at exactly how hard the recession hit families, and how they reacted.

The numbers paint a stark picture.

Families that owned stock saw their portfolios drop by more than a third to $12,000 from $18,500, on average. The value of primary real estate holdings decreased by an average of $18,700.

And families took on more debt, pushing median total debt levels to $75,600 from $70,300. They also made less money. Media household income dropped to $49,800 from $50,100.

High unemployment, rising food and medical costs, tanking stock portfolios and complete loss of equity make for a world of hurt for American families. Which makes the single-minded focus in DC on the deficit and austerity all the more inexplicable. And frightening for our future. Krugman:

[J]obs now, deficits later was and is the right strategy. Unfortunately, it?s a strategy that has been abandoned in the face of phantom risks and delusional hopes. On one side, we?re constantly told that if we don?t slash spending immediately we?ll end up just like Greece, unable to borrow except at exorbitant interest rates. On the other, we?re told not to worry about the impact of spending cuts on jobs because fiscal austerity will actually create jobs by raising confidence.

How?s that story working out so far?

Not so great, if the Fed and its report is to be believed. Yes, the report's data is a year old, but while stock prices have rebounded, unemployment is still unsustainable, housing prices continue to fall, and food and medical costs continue to rise.

Source: http://feeds.dailykos.com/~r/dailykos/index/~3/hMgydd0hUjo/-Fed:-Household-wealth-plummets-23-in-two-years

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