The wealth effect of the housing/equity bust is best analyzed from the standpoint of the top 20% of the workforce, especially people between ages of 50 and 70.

As far as Average Joe is concerned, the big issue is the long term solvency of the Social Security system – specifically, the ability of the federal government to finance the draw-down of the trust fund in the capital markets. Multi-trillion dollar bailouts of Wall Street, banks, the UAW, public sector unions and foreign investors combined with long-term growth in discretionary government consumption masked as stimulus will make this very difficult. Average Joe may get the Social Security check he expects but he and his children will pay for it through much higher taxes.

By 2009, credit card debt, as a ratio of total debt, should increase to historic levels since households will need to pay off their speculative debt using unsecured instruments. The insolvent banks have no recourse but to offer unfavorable terms such as 25% interest rate on those loans, putting further burden on households.

http://www.thedailyshow.com/video/index.jhtml?videoId=215942&title=Final-Message-From-the-White-House

I think you mean “taken in 2007″ when you write “taking in 2007″.

I don’t think I have anything very original to add to the comments above. Teotac wrote:

“Every 60 to 70 years, our country goes through a financial tsunami like what we are experiencing… I beleive it correlates to the generation that last experienced the pain (my depression-era parents) coming out of power, and their why-bother-saving-when-you-can-borrow children living beyond our means.”

Some time ago, I remember reading (no idea where) that the world travels through two matching 60 year cycles, with inflation and debt spawned crises spaced out by 30 years – it takes a couple of generations for the fear of screwing up due to debt or inflation to die out. Come 2040 or thereabouts, my daughter will look at her $10 billion monthly paycheck and think “this isn’t buying as much as it used to…”

Dave at 9:02am has it just right, “the wolf is at the door.” For families who have lived in the Warrens’ “two income trap,” the moment of truth is at hand. The median American analyzed by Professor Kwak sustained their lifestyle with a second income, credit cards and mortgage equity withdrawal. Calculated Risk rang the tocsin on MEW, a form of dis-saving. With that source of “income” switched off for decades, and unemployment biting, lots of people are going under.

As for whether you should consult this website or another, that is personal preference. No one is trying to sell you anything, but I suggest that when you try to express an opinion on the Fed’s website they will tell you to buzz off.