Richer Than Ever

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About: ProShares Inflation Expectations ETF (RINF)
by: Calafia Beach Pundit

Last Friday the Fed released its Q3/16 estimate of the balance sheets of U.S. households. Collectively, our net worth reached a new high in nominal, real, and per capita terms. We are living in the weakest recovery ever, and things could and should be a lot better, but it is still the case that today we are better off than ever before.

As of September 30, 2016, the net worth of U.S. households (including that of Non-Profit Organizations, which exist for the benefit of all) reached a staggering $90.2 trillion. To put that in perspective, it's about one third more than the value of all global equity markets, which were worth $66 trillion at the end of September, according to Bloomberg.

I note that household liabilities have increased by only $300 billion since their 2008 peak; the value of real estate holdings is up about 5% from that of the "bubble" high of 2006 (10 years ago!); and financial asset holdings have soared since pre-crash levels, thanks to significant gains in savings deposits, bonds, and equities.

In real terms, household net worth has grown at a 3.6% annualized rate for the past 65 years.

On a real per capita basis (i.e., after adjusting for inflation and population growth), the net worth of the average person living in the U.S. has reached a new all-time high of $278K, up from $62K in 1950. This measure of wealth has been rising, on average, about 2.4% per year since records were first kept beginning in 1951. By this metric, life in the U.S. has been getting better and better for generations.

The ongoing accumulation of wealth is not a house of cards built on a bulging debt bubble either, regardless of what you might hear from the scaremongers. As the chart above shows, the typical household has cut its leverage by over 30% (from 22% to 15%) since early 2009. Households have been prudently and impressively strengthening their balance sheets over the past seven years by saving and investing more and by sharply reducing the use of debt financing.