America: Still $5 Trillion Poorer


Spare a copper, m'lady?

"For some time now I have been tracking the question of how much value the private sector has lost since the peak. The interesting thing is that since the trough of household net worth in the first quarter of 2009 ($17 trillion off the peak), we have not come close to returning to pre-recession levels of wealth. In fact, the thumbnail that we're now $5 or $8 trillion off the peak recurs in quarter after quarter. It's like one of Zeno's paradoxes or a going-out-of-business sale at an Oriental rug store. We're always $5 to $8 trillion away from the return of the good times."

That was this author six months ago, noting the way the household net worth figure reported in the Federal Reserve's Flow of Funds report shows a curious constancy over time. 

The Flow of Funds report [pdf] for the second quarter is out, and that means I've got my "date" for the weekend! It also means that net worth in these here United States is….

$5.8 trillion below the peak of $64.3 trillion set in the third quarter of 2007. 

That 2007 figure is adjusted not only for inflation but for subsequent data collection. At $58.5 trillion, the current household net worth figure is only $100 billion lower than the $58.6 trillion the Fed actually reported [pdf] in 2007. 

Note that trillions of dollars have been created in an effort to get that inflation, and that through all the difficulties of the past four years you have not once been allowed to enjoy declining prices on anything other than real estate. Additional hundreds of billions have been expended to prevent real estate prices from reaching market-clearing levels.

Nevertheless, Calculated Risk points out that real estate assets have deflated by $6.6 trillion since the peak. That's a small step, but at least it's in the right direction.