Americans Net Worth Increases 5% Quarter Over Quarter

It has cost a few trillions of subsidies, handouts, money printing and additional debt on our children, but victory has been achieved – net worth increased for a 2nd straight quarter, up by 5% over quarter 2, 2009.

Americans got wealthier for a second straight quarter in the fall, as the economic recovery again boosted home values and investments. Net worth — the value of assets such as homes, bank accounts and investments, minus debts like mortgages and credit cards — rose 5 percent from the second quarter to $53.4 trillion, the Federal Reserve said Thursday.

Even with the gain, Americans’ net worth remains far below the peak of $65.3 trillion reached before the recession began, underscoring the vast loss of wealth over the past two years. Their net worth would need to rise an additional 22 percent just to return to its pre-recession peak. (is that a dare? Ben Bernanke can get us there – not to worry)

Of course wealth is distributed in a very skewed way in America, and those who hold assets (being inflated furiously by the central bank) are the ones who have benefited disproportionately. So while the dogma is “Main Street = Wall Street” as all those folks with $1800 in their IRA or $3200 in their 401k are considered “stock holders”, we true concentration of equity holdings amongst the population paints not quite the rosy picture.

Investments provided the biggest boost in the July-September period. The value of corporate equities jumped $1.04 trillion, slightly less than the previous quarter’s rise. (not too shabby, $2 trillion gained in 6 months)

Home equity gains (or losses), on the other hand, are far more widely shared across the economic strata:

Home equity is recovering after reaching a record low in the first quarter. Owners’ equity as a share of their total real-estate holdings increased to 37.6 percent last quarter from 35.8 percent in the second quarter, today’s Fed report showed.

Ah those revisions… how can these figures be THIS far off? So even as we celebrate today’s data… the reality that they are accurate is nil… we’ll know better in about a year.

The Fed revised the first-quarter’s record low down to 33.5 percent from the 41.9 percent previously reported.


In an actual green shoot, household debt did fall for the 5th quarter in a row… however, please note as so many Americans walk away from their debts, *poof*, their debt declines ;)

The U.S. Federal Reserve Board today announced household debt had its biggest ever decline, in the third quarter, down 2.5% on an annualized basis, with mortgage debt falling 3.5% and credit card debt falling 3.25% even as other forms of debt rose.

It was the fifth consecutive quarterly decline in U.S. household debt, the Fed notes.

Businesses also cut back debt….

Business debt excluding financial institutions also fell at a 2.5% annual rate

But in our new paradigm economy where production and saving is penalized and “shopping” is the end all, be all…. to keep an economy 70% dependent on “spending” going, someone has to make up for those consumers who are finally attempting to reduce their massive debts.

Government? Even more in debt, of course. State and local governments’ debts picked up steam in the third quarter, with the annualized 5% increase higher than the 3.5% increase in the second quarter. (that’s pretty amazing considering so many states are in the hole, not only is debt spending increasing but it ACCELERATED in Q3 over Q2 – thankfully stimulus #18 passed in the spring helped to give them a backdoor bailout so they can continue to spend/borrow, and we have another one coming any week now to help them deficit spend in 2010 – just don’t call it a stimulus, it’s a “job creation plan”)

Federal debt rose at an annualized 21%, the fifth consecutive quarter in which debt rose more than 20%. (20% a quarter? 5 quarters in a row? Very impressive work – Greece would be proud)

And around, and around we go… when the creditor stops the music… none of us know.

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About Mark Hanna 543 Articles

Affiliation: Hanna Capital, LLC

Mark Hanna is President and Owner of Hanna Capital, LLC, a registered investment advisory firm. Mark has been a follower of markets since the late 80s, with a focus on individual equities since the mid 90s. He has been a well known commentator in the financial blogosphere for the past 5 years, following a career in corpoporate finance and accounting. Mark attended the University of Michigan where he graduated with a degree in Economics.

As an avid reader, Market Montage is the personal blogging site for Mark to share his views on economics, markets, and the like. Occasional cynicism and wit shall be deployed in his postings.

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