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Household Net Worth Plunges By Most Since Q4 2008, As Government Borrowing Surges
Arguably the most useful report to come out each quarter out of the Federal Reserve is the Z.1, or the Flow of Funds report, which was released minutes ago. And it's a doozy: household net worth (assets less liabilities) in Q2 2010 plunged by $1.5 trillion, almost exclusively due to a plunge in Corporate Equities ($0.9 trillion) and Pension Fund holdings ($0.7 trillion). In other words, the net wealth of the US household continues to track the performance of the stock market tick for tick. And one wonders why the Fed, per Alan Greenspan's admission, is only focused on ramping stocks up to all time highs. Total household financial assets declined by $1.7 trillion to $43.7 trillion, which was the biggest swing factor, as the tangible assets, or housing, was kept flat at $23.7 trillion. Incidentally, to assume that Real Estate value increased in Q2 from $18.7 trillion to $18.8 trillion in Q2, is one of the dumbest things to ever come out of the Fed: we expect that this number will plunge soon after it is realized that the double dip in housing is here, forcing another major contraction in household net worth. On the other side of the balance sheet, liabilities were also flat at $13.9 trillion sequentially. And possibly the most important data point: the change in borrowings, confirmed that everyone is deleveraging except for the government... whose borrowing surged at a 24.4% SAAR, the second highest ever, after the 28.9% surge in Q2 2009. In other words, Keynesianism is alive an well in the US, and any talk of austerity in the US is nothing less than not that funny stand up comedy.
Chart showing total financial asset breakdown: at $43.7 trillion, US consumers are now back to the same net worth levels they had in Q3 of 2009.
The next chart shows the sequential change in key Financial Assets: as expected, equities and pension funds were the primary reason for the change. In fact the total decline in assets of $1.7 trillion was the highest goingback all the way to Q4 2008 when Lehman blew up and resulted in a $4.6 trillion loss in household net worth.
Lastly, the chart that shows changes in borrowings by sector needs no explanation.
We will have much more to say about this report later, as we analyze just how much the shadow banking system has plunged in Q2, following its record $1.3 trillion deleveraging in Q1.
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Wanna bet the calculation for "household net worth" is complete and utter BS? And that the real "market value" net worth is, oh, 60% (generous) of the reported number?
Probably so, but fudged numbers or not, it's one more admission that the great Black Hole of anti-consumption is busily swallowing up every pseudo-dollar created over the past 15 years or so.
Gird your loins, kids.
"And possibly the most important data point: the change in borrowings, confirmed that everyone is deleveraging except for the government..."
the old 'do as i say and not as i do' model, ay?...
LOL - but liesman is explaining "it could be worse"
the results of "hope and change" are in and its not pretty
Borrowings by Sector ($TN)
____________________________
The charts were all purple
They were spending money everywhere
Tryin' to run from the destruction
You know I didn't even care
They say two thousand zero, zero,
Party over,
Oops, out of time!
So tonight I'm gonna party like it's 1999!
...
http://www.google.com/url?url=http://ilike.myspacecdn.com/play%23Prince:1999:14500:s461011.10273324.4077037.0.2.128%252Cstd_cb97f8cffabe424692665fe7eb1d7275&rct=j&sa=X&ei=852TTJi1HIKdlgfZ4MXAAg&ved=0CCIQ0wQoADAA&q=prince+1999&usg=AFQjCNFeSDS5b8nYIpfjrPMgXbrIe6vqGQ
Meanwhile they spin the purple into the ever lovable Barney.
I love you
You love me
Lets go spend some free money
Without a care in the USA
Let's go spend it all today!
Thank you, and good night.
now the deflationists can pour over this data in an attempt to find what is inflating and what is deflating and all that bullshit, even though they dont know where inflation incipient hyperinflation comes from.
Being a deflationist and hyperinflationist is not inconsistent as the terms are not mutually exclusive, they merely represent different points on the same timeline...
Do hyperinflationists believe it persists in perpetuity? Why require that of the other side?
+1. Can't one precede the other?
"Another consideration is that sometimes there is a "deflationary
head-fake" right before the onset of hyperinflation as the private bank credit money disappears...
With these charts [charts would not translate; see original article below] I am not saying it always looks exactly the same. I am only observing that the common deflationary metrics can fall while credit collapses, but then be immediately followed by a confidence collapse in the currency itself. Deflationists don't see this because they are viewing the economy as if it were a machine. And machines don't flip 180 degrees on a dime like this." -- http://fofoa.blogspot.com/2010/09/just-another-hyperinflation-post.html
In other words, hyperinflationists rule and deflationists can suck it? Gotcha...
I'll say it again for good measure. The two positions are only mutually exclusive at the exact same point in time...
To put it in question format, exactly what do hyperinflationists believe while they are waiting on being right? What is the vehicle that gets us to hyperinflation?
Bueller???? Bueller????
It should have happened in 2008 but, the inflationists over estimated the intelligence of the investment community. People ran toward the blast instead of away from it. Buying the dollar was the dumbest move ever in 2008 but when everyone is equally as dumb, it makes it look like a smart move.
If people where smart, we would not be having this debate, we would have had hyperinflation by May of 09.
By that logic, we should have bailed from the dollar 80 years ago...
Household wealth and government debt! Both metrics moving in the WRONG direction!
We should send a copy of this to CNBC along with their Nielsen numbers.
Kill Your Television ( Friggin Now !)
The Fed will never accurately value the RE component--it would be too catastrophic, and expose the sham of even talking about U.S. "assets"...
Should the goverment bar color be like red rather than purple.
I'd be interested as to the breakdown of household net worth by income group. I bet that the working class is getting poorer at a much faster rate.
debt slavez bitchez!
http://www.youtube.com/watch?v=CLFQrhRRIKQ
nice rack.
Oh I just had a juvenile blue jay come to my suet feeder.
Is that your "tweet" of the day?
maybe, that is ok isn't it rocky. i haven't had one suet eating bird all summer. i had all kinds of birds in my woody creek house. peckers, jay's, flickers oh it was wonderful. so this little guy was adorable, and he has a funny bird song. just been getting seed eaters.
So, what happened after the Democrats regain power?
They squandered it on cheap propaganda and expensive bills...
Johnny Walker Black? Unfortunately probably not.
a wee dram of Black Bush...
SO Frank does just what most in these comments want... manages the worst fall in prices yet... and all y'all want is someone who will use a flamethrowing bulldozer to do it faster.
I bet most of you are writing checks to and voting for the Barney's on the ballot at every opportunity. If not, given your expressed hopes (total destruction), you should be.
I see it like this. If I'm going to fall off the roof of a building and die, I'd rather it be 3 stories than 300.
I do not think that most people here WANT total collapse, they have just accepted it as inevitable. I myself, like many here express and you seem to misinterpret, believe that we have passed the point of repairing this, and need to rebuild it. In order to rebuild an engine it has to be shut down. We act as though an infinite supply of Marvel Mystery Oil and STP Injector Cleaner will keep it running forever.
excellent analogy, colon. I learned so much about life when I pulled my chevy small block out. learned sooooooo much and I have more to talk about with people. I could even replace my belt on my washing machine. problem with the V8 I didn't know how to put it back in. that is OK though, I realized it and wasn't in denial and needed to ask for help cause that part you want to have precision.
Based on your last few posts Kathy, it would seem that the last bag of reindeer dust you picked up hasn't been stepped on too hard.
colon, every day i think i would be a lot better is cheeky would come back and post again. i know he is still alive and well. why doesn't he come back into my life again. i really miss his wit, mostly and his stories.
I miss reading CB as well. I didn't start posting here till shortly before he kind of catted out, but I was a lurker for a long time and always appreciated his shit.
I think maybe he got sick of people who didn't have the faintest fucking clue what they were talking about jumping all over his shit. (The old not suffering fools gladly) I don't mean a classic keynes/austrian type argument or honest difference of opinion, but just plain ass dumbshits.
You have to admit that this place has changed a LOT in the last year. Not better or worse, just different.
well come on, this is fight club, cheeks†
It looks like the insidious plan to march America down the path toward collectivism is working. The banking cartel, a.k.a. the Federal Reserve, needs to be abolished ASAP, along with the IMF and Worldbank. Restore mark-to-market and send these profligate bastards to their graves.
Quite the opposite... we are at the point of reckoning for our collectivist endeavors... the point where isolationism and individualism attempt to reign supreme.
DITTO!
The unwashed masses are droning, "one of us...one of us..." as they hold out their welcoming arms.
It's encouraged all through the educational system and life, peer feedback, group interdependence--anything on the basis of requiring others to form an individual's thoughts. So, we've ended up as a great population of crippled people, there is no "me," or "I": only what others perceive me as.
That is the new American ethos, the America of ironic narcissism.
When the house of cards collapses, a majority of the population will inevitably perish because they cannot hold the hand of their peers while they suckle one-anothers' teats.
I don't know who or how this stuff is cooked up, but I suspect its the same people who calculate your taxes.
I think they're moonlighting from the BLS.
This whole ponzi reminds me of Enron...Remember the front page of magazine covers?...Ken Lay...Man of the year? Corporate outings on the range in Africa, employees getting paid in stocks that doubled every month? Employees skipping their heels as they entered the tower with pride and joy? New Mc Mansions being bought everywhere by employees whose wealth ticked up by the minute? Then came Oct 2001 and reality set in.... when everybody lost everything.... and they all marched out of the tower crying with nothing but cardboard boxes in their hands! OVERNIGHT!
http://blog.zap2it.com/thedishrag/ben-bernanke-time-cover.jpg
One of the few times I'll outright recommend watching CNBC: watch "Enron: The smartest guys in the room" if you haven't done so already. Lots of original source materials like incriminating phone recordings between energy traders as they engineered the California energy crisis.
Compelling and damning video--widely available on DVD, btw.
+1 on the recommendation. I just watched it a couple of weeks ago, and it was great. The phone recordings were eye-opening (and sickening). And it was very interesting that a female journalist (from Fortune magazine, I think) had figured out something major was wrong with Enron, but no-one would pay attention.
Lay had 3 houses in Aspen right downtown on the roaring fork river. scoudrel and greedy bastard.
Depression biotchez!
Absent growth in business expenditures - check.
Absent growth in the consumer and business credit outstanding - check.
A recovery that is only in the minds of limited and falling number of beholders & none carbon based life forms - double check.
That's alright. Net worth is still going up for the Important People.
LOL - Chet describes it all with just one sentence.
Hey wait a minute. I read somewhere we were all equal or something.
If this gets out, we'll have the mother of all petulant frenzies.
So I guess that, in the wake of the new poverty level numbers, we are getting closer to the goal?
Somehow this LedZep gem comes to mind:
http://www.youtube.com/watch?v=RlNhD0oS5pk&ob=av3n
To rephrase something Andrew W. Mellon said
Liquidate Freddie, Liquidate Fanny, Liquidate The Fed, Liquidate GM, Liqudate Banks, Liquidate Labor, Liquidate Stocks, Liquidate the Farmers, Liquidate Real Estate
"It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.”
Hot Damn!...Love it!
Too bad the "rottenness" is running the show.
A lot of people are buying gold, that is obvious. People are convering IRA stock money in to precious metals. Since this is a fed report, are they calculating gold holdings as $42 and change per ounce (as they do their own gold)? No wonder it shows a decrease in wealth of the individual.
Stock market is holding up - makes perfect sence.
what market wouldn't like a gold standard?
This is all we need to know. All eras of massive credit expansion end in “busts”. Review your history. Take the “Panic of 1873” for example. In a nutshell, the economic collapse of 1873 was caused by years of loose railroad financing, at the end of which time too much speculative investment and credit chased a limited amount of real underlying wealth. The results were disastrous. Financial and social chaos ensued. Amazingly, today’s credit crisis, in both scope and number, is far more dramatic. And as a result, tens of millions of Americans are increasingly forced to confront the twin and daunting phantoms, the Scylla and Charybdis, of eventually staggering cost inflation and a simultaneous lack of access to money and credit. Our political leaders promise recovery. But history tells us that the hard times that follow the collapse of credit “booms” do not end overnight. Over 41 million Americans currently receive “food stamp” subsidies, and an estimated 1 in 5 American children lives in poverty. The worst is yet to come.
If world war is avoided, than people can live just fine for a few years on yellow cheese, powdered milk and wheat pasta. I grew up as a kid eating them. I wasn't raised in an ivory tower or sheltered environment.
The result on the public at large though will be a further catalyst of political change. I don't wish powdered milk or suffering on anybody but I do encourage people to have some physical hedging in luxuries for barter and three months food, water and medicine.
What the United States is going through is exactly what the Russians went through in the mid-nineties. Same group of economic U.S. "advisors" helped the oligarchs liberate the remaining wealth from the Russian citizens. Same cause, same effects. Russia had oil and trains. No one starved. Energy was rationed and a big black market emerged as did the violent crime rate. Methods of self-defense and/or food supply are always wise, even in the best of times. It is a chaotic universe. The U.S. has coal and trains. No one will starve here either. So yes, the worst is yet to come but living your life with total anxiety all of the time isn't healthy either and makes fighting for a better world far less worth it. I know all about, I have lived that life too.
Agree 1000%! Not anxious here, just honest. Meditation, small communities, family, friends. We will survive.
If it ultimately brings about this:
than I am not only NOT anxious, but will welcome the struggle necessary to help bring it about.
I'm normally just a snark, but I'll step OOC and thank you for your post.
and loose women and a town called Deadwood.
Madoff LLC sent out statements etc too
same shit
yep; the difference here is the FED has an army of workers to make these charts. Poor madoff only had a small office suite and look what he pulled off.
They know what is q of Tobin.
The 'Profit with Cramer' banner has me horse laughing!!!
The report includes the top ten percent of US households?
The keg is empty.
The pill-bowls are overturned.
The buffet tables are picked clean.
There's puke, crap, and other bodily fluids all over the floor and walls.
LAST CALL!
Then it's "turn out the lights, the party's over."
But that fuckin bearded guy from Princeton keeps shoving alcohol, barbituates, and narcotics into the corpses on the floor!! What's wrong with that guy??
No No No Wait a minute.
You can't leave until you eat that puke, crap and bodily fluids.
signed
The Criminal Elite.
p.s. have a nice day.
Coming to a theater near you soon....
http://www.youtube.com/watch?v=rYjvxpJf5eU
good night Alice...
Long Hemp
Short Armani
Hi Everyone,
My mach-ine crashed and burned but now have a new one and return.
I read somewhere of a possible auto-refi Plan that may be in the works.
The way it was to work was that all residential mortages would be re-fried, oops I mean re-fied to somewhere near 3% across the board, for all homeowners (all inclusive).
This possible?
It would put huge amounts of monthly spending money in the pockets of all U.S. citizens, which might be a game changer if it could be done across the board by the Govt. Agencies.
Just askin.
Curious, but how does it 'change the game' by once again incentivizing (giving away) home ownership (to many who already can't afford their mortgage principal) at tax payer expense in a vain attempt to prevent the market from realizing its true value?
Putting a little extra money in the hands of consumers who are already in way over their head won't change anything.
Besides, it would be short changing the elite masters of the universe-the banksters; therefore, it will never be done.
Suddenly I wonder if the Internet itself is one big money pit acting as a giant sink hole sucking money of people who cannot learn to build thier own machines instead of running to the store to get one.
This is not a personal attack, your comment make me think of this because 15 years ago we had no internet, just a news paper and you had to work with what little you knew back then.
this is a stupid post. if you add up all the things that make up net worth in FOF report, you will see that households are in fact the wealthiest theyve been ince the recession.
and something other than rank speculation suddenly chimes in. i'm an art critic myself.
As net worth declines, inflation that they tell us "doesn't exist" creeps in:
Cotton, already at record highs up 2.4% today
Corn over $5 for the first time since 2008 up 3.5% today
Soybeans up 2.9% today
Wheat up 2.7% today
Copper climbs to 5 month high
@Caviar
Yes, commodities are behaving like they did in the Summer of '08. Ditto the markets. We know what happened next.
Reducing debt is not just cutting back, it's by defaults too.
also, the markes have rebounded since q2
But money that's been pulled out for 20 straight weeks amounting to $100s of billions did not participate in the government sponsored pump, offsetting the benefit.
Oops. Just stepped in it graft. The prevailing sentiment in here is that government intervention is propping up market...see the giant purple line above reflecting government debt since the miracle rebound you've cited. Good luck to you.
the giant purple line is from q2, not q3, and the recovery happened in Q3. the fof doesnt reflect when the borrowing actually happens, it reflects when it was spent(or put in the pipeline to be sent, enacted as policy). thats why the other big line is after lehman when they did tarp/aig bailout
2 answers......
1) Wage inflation must begin.
2) Interest rates must go up - stop fucking over the savers.
Oh yeah....Obama is a prick!
"I am a saver. I have been fucked over"
First step to overcoming a problem, is admitting to it....
I guess American households have been wasting money again on viagra, booze, guns and cocaine.
Nothing wrong with that, I can dig it.
Total Credit Market Debt increased by 15 billion.
Hey Mako, you said this number would only go down as we descended into a deflationary collapse and the hyperinflationists were all 'nutbags'.
I wouldn't put it past them to fudge the number, but hyperinflation is coming.
This means nothing when you have the magic index futures. It's getting close to the end of day jam up. We have been in a 40 point range on the Dow for the last 4 hours.
The pros who shorted last night near 10630 on the Dec contract have covered and flipped long are now ready for the lift into the close. How else are the banks going to make money.
Most people I know are broke or pretty close to broke, some in severe negative equity situations. Where the fuck is $43.7 trillion hiding????
Do they still have a job?
Criminal Bankers and Government Employees $63.7 trillion
American Private Working Class (20.0) trillion
Its all good and well that the American people are so bad at Math, otherwise we'd have a revolution by tomorrow morning
To be fair pretty much all of humanity lets the bankers screw them in the @ss with willfull ignorance, and you know its not the Evil Bankers or other dictators that get my goat, its the Fuking Willfull Ignorance of the people(beeeeee, baaaaa)!
Seems to me most people have been overwhelmed with informaton (mostly bad information) for so long and so relentlessly that they no longer can apply critical thinking. They can't sort it out. Rather it all becomes white noise with a general direction that is the direction of the herd.
Mobile technology, TV, radio, internet, etc. - a flood of data. And an audience that has been trained to have the attention span of a doorknob.
About 99% don't have a fucking clue. I had a conversation today with some people about the economic prospects in general. Just casual talk you know.
THEY ARE CLUELESS! Really, they think all is fine again.
They don't care about government debt
They don't care about corporate debt
The mostly don't even know how much turnover the company they work for makes. They mostly think companies make a 95cent profit on every dollar the company makes.
Last week I also discussed things with my own brother to invest some money in silver and gold. Just in case. He doesn't care about that, he doesn't want to think about "the crisis" because he's a buzy man and he's got other things on his mind.
Just inform yourself, and do what you think is important and what's not.
Amen SD. I call them, Media Suckers.
The correlations with mid-90s Soviet Union are growing. The big difference is the Russians were used to pain, suffering and deprivation, unlike their spoiled, pampered American counterparts. This will not end well for the USSA.
Hate to say it, but Katrina / New Orleans was an eye-opener to how a welfare state reacts to crisis.
It just showed how America has always been.
A society can be judged on how they handly their weakest.
America is a capitalistic country with no socialist backbone.
Meaning = if you can pay for it, and all your dreams are yours.
Otherwise, beat it and drown in the mud.
"Otherwise, beat it and drown in the mud." And this is how it should be, be prepared or be sorry
African demographics behave like african demographics. Don't attempt to extrapolate
+1 trav7777.
Lost in all the background noise is an important word, "average." Average my net worth with Oprah's and I am one rich somebitch. Where can I get a HELOC on that?
Looked at another way, Z1 D.3 shows that the domestic non financial credit sector is growing at 3.1% YoY.
The financial sector is off 10.4% YoY, total is -1.3% YoY or $844 B.
Total financial sector is off $2.4T since the peak in 4Q 2008.
Actually, the 2q FOF shows that non-financial private sector debt growth turned positive for the first since 3q08, which undoubtedly boosted GDP growth in 2q10. Increases in the pace of non-financial private sector debt growth add to GDP growth, even if they're bum debts that will come crashing down later.
The non-financial private sector took on net new debts worth 1.7% of GDP in 2q10, a turn from shedding debt at a pace of 0.4% of GDP in 1q10.
But looking at the individual sectors, there's a sharpening divide between big business, represented in FOF data as "non-financial non-corporate business", and the small business and household sectors.
Big business has never deleveraged even for one quarter throughout this crisis. The lowest pace of non-financial corporate debt growth was 0.7% of GDP in 2q09. In 2q10 it was back up to 5.2% of GDP. That's not so far below the average page of 7.7% of GDP in 2005-2007. So the Fed and the government have definitely succeeded in persuading big business to renew its racking up of debts.
There are some big problems with this corporate debt-raising. It is generally very low interest and largely long term. A lot of it is held indirectly by households as bonds in retirement savings. A lot is held by the financial sector supported by demand deposits and other short-term money. When rates go up, as they someday must, the value of all that long-term low-interest debt gets hammered. If we get QE2 and serious inflation, the losses on long-term low-interest debt will be staggering.
Meanwhile the household sector continued deleveraging, by 1.4% of GDP in 2q10, in the middle of the range of 1.1% to 1.7% that it has kept up since 1q09.
Small business, represented in FOF data as "non-financial non-corporate business", also continued deleveraging, by 2.2% of GDP, a very slightly slower pace than in 1q10.
http://keynesianfailure.wordpress.com/2010/09/10/delayed-deleveraging-meets-the-keynesian-endpoint/
Looking closer at the details, I see that the acceleration in the non-financial corporate sector's net debt growth came from "other miscellaneous liabilities", not bonds. This is a category that spikes occasionally with no obvious rhyme or reason. Not sure what it means.
you can't say keynesianism was a failure. its not over yet. the handoff has only recently begun from gov stimulus driven economy to a market based economy. it will take a quarter to reset.
everyone is recapitalized.
how is keynes a failure when credit and individuals are wealthier on the whole, as the FOF report.
Household net worth numbers don't include whats in the mattress, in the zip lock bag behind the canned goods, etc.
This is what I forecast: gov't takes up the mantle of credit growth.
The system is the master; all must serve it. Credit must grow or else SHTF. I told Douchinger too; if you do not borrow, they will borrow on your behalf.
That already happened since 3q08
I found lots of interesting information here. I love zerohedge.
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