The next shoe to drop will be jobs. You have wisely touched on this before. People look at jobs losses and think in linear terms but what is understated is the multiplier effect. One person losing a job affects everyone in his/her supply/service chain causing a feedback loop. The effects of losing 3 million well paying manufacturing jobs was forestalled by cheap labor (illegal immigrant and offshore), cheap goods, credit cards and housing price inflation (Housing ATM).

But American taxpayers are fed up with illegal immigration. Wal-Mart says customers are struggling to afford their everyday low prices. Cheap goods from China have come at the cost of dead pets and poisoned children. Banks are getting stingy with credit (my sister-in-law tells me that BofA will not reissue credit cards to people with a 620 FICO score which contrasts with not too long ago giving away credit to illegal immigrants with no credit score) and the Housing ATM is effectively out of cash.

Judging from the savings rate, for most, there is simply no way to prepare for what will come. No savings, stagnant wages, negative cashflow and a ton of debt, what will they do? I remember an incident where I overheard a classmate of mine, somewhat apprehensive about what was to come, ask one of our instructors how to prepare for Hell Week. The instructor quietly asked him how would he prepare for a kick in the groin. They locked eyes for a long moment, the student gave an almost imperceptible nod of understanding and walked away.