And what happens to the money they use to pay debts with? Just it just disappear?

This statement only makes sense if you acknowledge that high-income and high-wealth households have a lower marginal propensity to consume, if you even count assets (debt ownership) being converted into cash as “income”. If you don’t, well… it means that a property bubble which increases household wealth is not the proper way to increase economic growth, because it does not actually raise the income of people who own those assets nor their long-term consumption.

In other words, the housing bubble is irrelevant to solving the US’s economic problems.

Job creation without government spending, inflation, or trade barriers: http://jobcreationplan.blogspot.com/

the number of families represented by the SCF is 117.6 million, the median net worth was $77,300, and the mean net worth is $498,800.

The fact that, on average, every American has one breast and one testicle, tells us virtually nothing about what America looks like. So it is now with wealth in the U.S. So little of it resides in the “middle 50%” that looking at that group is little more than a diversion that keeps us from looking at the real picture. So now were blinded by reams of data that probably does more to obscure what’s going on than elucidate it when presented as it is.

Maybe its buried in there somewhere but I couldn’t find an answer to this question: what’s the impact of all of this on the Nation’s Gini coefficient for wealth and what are the implications of that?

On a personal note: 2004 purchased a house @ 189K. 80/20 finance.

Last year, my neighbor sold their house for 92k (not distressed) but prices being held back by distressed properties. (Note they had agreed to a sales price 15-20k higher but the bank wouldn’t finance it)

Thus stuck, my 20% loan which is a 10 year balloon, there’s no path but to default or pay it down faster. We’ve paid it down but that’s $35k that would have found it’s way back into the economy in some manner or another. We’re still underwater, too!

Multiply that by the number of people in the middle class and this is going to be a long road out and that’s been apparent to me for years. Why not so for our politicians?