From the Huffington Post/Reuters:

WASHINGTON, June 11 (Reuters) – Americans suffered a record decline in wealth between 2007 and 2010 as home values tumbled, according to a Federal Reserve report on Monday that underscored the severity of the recent recession.

The median family’s net worth dropped 38.8 percent during the three-year period, the Fed said in its latest report on changes in U.S. Family Finances, derived from a survey of consumer finances. Fed economists told reporters that this was the biggest drop in net worth since the survey started in 1989.

The median net worth, which is the value of assets minus debt, plunged to $77.3 trillion in 2010 from $126.4 trillion in 2007. Net worth in 2010 was at levels last seen in 1992.

From the New York Times:

The new data comes from the Fed’s much-anticipated release on Monday of its Survey of Consumer Finances, a report issued every three years that is one of the broadest and deepest sources of information about the financial health of American families.

While the numbers are already 18 months old, the survey illuminates problems that continue to slow the pace of the economic recovery. The Fed found that middle-class families had sustained the largest percentage losses in both wealth and income during the crisis, limiting their ability and willingness to spend.

From the Federal Reserve Bulletin:

Econ 101 teaches us that with such a massive collapse of the aggregate demand engine of the American economy — the wealth and income of middle class families — the government must be the spender of last resort.

At a time when the government’s ability to borrow at incredibly low interest rates (effectively below zero after adjusting for inflation), it should be a no-brainer to increase deficit spending and invest in the sort of infrastructure projects that would lay the foundation for future economic growth while creating jobs now.

Unfortunately, however, we are living in the Global Age of  Economic Illiteracy, the chief pathological indicator of which is the ruling belief that austerity will lead to renewed economic growth.

On the contrary, austerity will further dampen growth and exacerbate deficits and unemployment.

But, on the bright side (for bankers) austerity will shift the burden to the working classes (the 99.9%) while safeguarding the interests of the financial sector (the 0.1%) … in the short run.