Household Net Worth Hits A Record $89 Trillion… There Is Just One Catch

Tyler Durden's picture

As part of its quarterly Flow of Funds update, earlier today the Fed released snapshot of the US “household” sector as of June 30. What it revealed is that with $103.8 trillion in assets and a modest $14.7 trillion in liabilities, the net worth of the average US household rose to a new all time high of $89.1 trillion, up $1.1 trillion as a result of an estimated $474 billion increase in real estate values, and mostly $750 billion increase in various stock-market linked financial assets like corporate equities, mutual and pension funds.

Household borrowing rose at a 4.4% annual rate, with total household liabilities grew growing by $200 billion from $14.5 trillion to $14.7 trillion, the bulk of which was $9.6 trillion in home mortgages.

The breakdown of the total household balance sheet as of Q2 is shown below.

 

And while it would be great news if wealth across America had indeed risen as much as the chart above shows, the reality is that there is a big catch: as shown previously, virtually all of the net worth, and associated increase thereof, has only benefited a handful of the wealthiest Americans.

As a reminder, from the CBO’s latest Trends in Family Wealth analysis, here is a breakdown of the above chart by wealth group, which sadly shows how the “average” American wealth is anything but.

While the breakdown has not caught up with the latest data, it provides an indicative snapshot of who benefits. Here is how the CBO recently explained the wealth is distributed:

  • In 2013, families in the top 10 percent of the wealth distribution held 76 percent of all family wealth, families in the 51st to the 90th percentiles held 23 percent, and those in the bottom half of the distribution held 1 percent.
  • Average wealth was about $4 million for families in the top 10 percent of the wealth distribution, $316,000 for families in the 51st to 90th percentiles, and $36,000 for families in the 26th to 50th percentiles. On average, families at or below the 25th percentile were $13,000 in debt.

Even worse, when looking at how wealth distribution changed from 1989 to 2013, a clear picture emerges. Over the period from 1989 through 2013, family wealth grew at significantly different rates for different segments of the U.S. population. In 2013, for example:The wealth of families at the 90th percentile of the distribution was 54 percent greater than the wealth at the 90th percentile in 1989, after adjusting for changes in prices.

  • The wealth of those at the median was 4 percent greater than the wealth of their counterparts in 1989.
  • The wealth of families at the 25th percentile was 6 percent less than that of their counterparts in 1989.
  • As the chart below shows, nobody has experienced the same cumulative growth in after-tax income as the “Top 1%”

 

The above is particularly topical in a week when the Census Bureau released data that real median household incomes somehow rose by over 5% (which we refuted in a recent post). To be sure, marxists of the world may want to avoid the following section from the CBO, as they may suffer permanent injury:

The distribution of wealth among the nation’s families was more unequal in 2013 than it had been in 1989. For instance, the difference in wealth held by families at the 90th percentile and the wealth of those in the middle widened from $532,000 to $861,000 over the period (in 2013 dollars). The share of wealth held by families in the top 10 percent of the wealth distribution increased from 67 percent to 76 percent, whereas the share of wealth held by families in the bottom half of the distribution declined from 3 percent to 1 percent.

Finally, when Obama touts the US “income recovery” he may have forgotten about
half of America, but one entity remembers well: loan collectors. As the
chart below shows, America’s poor families have never been more in debt.

The share of families in debt (those whose total debt
exceeded their total assets) remained almost unchanged between 1989 and
2007 and then increased by 50 percent between 2007 and 2013. In 2013,
those families were more in debt than their counterparts had been either
in 1989 or in 2007.
For instance, 8 percent of families were in debt in 2007 and, on average, their debt exceeded their assets by $20,000. By
2013, in the aftermath of the recession of 2007 to 2009, 12 percent of
families were in debt and, on average, their debt exceeded their assets
by $32,000
.

 

The increase in average indebtedness between 2007 and 2013 for families in debt was mainly the result of falling home equity and rising student loan balances. In 2007, 3 percent of families in debt had negative home equity: They
owed, on average, $16,000 more than their homes were worth. In 2013,
that share was 19 percent of families in debt, and they owed, on
average, $45,000 more than their homes were worth.
The share of families in debt that had outstanding student debt rose from 56 percent in 2007 to 64 percent in 2013, and the average amount of their loan balances increased from $29,000 to $41,000.

And there is your recovery: the wealthy have never been wealthier, while half of America, some 50% of households, now own just 1% of the country’s wealth, down from 3% in 1989, while America’s poor have never been more in debt.

 


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IndenturedServant

There’s another catch actually……..it’s FIAT wealth!

Heh! “Fiat wealth” is one of those oxymoroons like “govt. intelligence”.

Homer
Homer

IndenturedServant–You are one smart cookie! Of course it is the nominal value of paper assets. It’s mostly not wealth, but a wealth coupon. Soon, actually it has already started, those who hold wealth coupons will start redeeming those coupons and grab as much real wealth as they can.

Gasoline will be $25 a gallon before the common man catches on to it. Then it will be fear. Then it will be a rush to goods. Then currency will go ‘no bid’. Then it will be martial law and rationing. Gee! Where have I seen this before? OH! YA! Venezuela.

Homer
Homer

Look Tyler, we banter about the word ‘wealth’ as if we know what were talking about. That somehow we all understand what each other means in using that term. What in the hell is wealth?

It is one of those vague words that we all think we understand the meaning of. I’m not so sure.

I went to Dictionary.com and looked it up. This is what was said:
In Economics–
a) all things that have a monetary or exchange value.
b) anything that has utility and is capable of being appropriated or exchanged.

This implies a real tangible good. Are Paper assets wealth? I would like to see some stats on the ownership of real tangible goods. Who has them and how much is owned.

With the massive asset buying programs of central banks and the government’s PPT it seems that they are the biggest holders of paper wealth paid for with paper currency printed out of thin air. What a DEAL.

Boat Guy
Boat Guy

Again the late George Carlin was correct :”The Game Is Rigged , It’s A Big Club And You and I Are Not In It” also “They Don’t Give A Fuck About You At All” and The American System Of Government Threw Average Americans Overboard 30 now 40 Fucking Years Ago”
Get used to it once you accept the fate of our country relax and cushion the blows any way you can because there will be blood on this run , you can bet on it !

MuckAbout

It makes me feel so proud not to have paid income taxes for over half my working career..

(I worked overseas and the asshole PTB needed that loophole to get skilled engineers and scientists to go overseas and get the work done!)

If you can’t fight the rules, then drill a hole in them and fall through the loophole!

Muck

IndenturedServant

Like you, I worked overseas for a number of years and paid no federal income tax.

You know I don’t actually mind paying some taxes. I like clean water, sewer and garbage service and decent roads. Hydro power is cool too. It’s all the excess and corruption I object to.

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