Friday, September 23, 2011

Household Net Worth at 1989 Levels (In Gold)

Last week, the Fed released its flow of funds report, which provides the most comprehensive view of asset and debt holdings within the US economy.  One of the more important tables included is the one which details the balance sheet of the aggregate US consumer, presented below.

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The data shows net worth fell in 2Q11 from $58.6T to $58.4T.  Considering that US consumers hold about 32% of their net worth in the equity markets, it looks like Q3 will show a further contraction in net worth.  Below is a chart showing the evolution of consumer net worth since 1995.  Consumers are not back to the peak realized in 2007, but according to the data the US consumer is wealthier today than he or she was at the turn of the century.

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The Fed presents this data in nominal terms though.  Adjusted for inflation using CPI, household net worth tells a slightly different story.  By this measure, American consumers are no wealthier than than they were in 1999.

However using a less mainstream measure of inflation (gold), the American consumer is actually much poorer today than he or she was in 1999.  Measured in ounces of gold, the US consumer has the same net worth as he or she did in 1989.

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