Household Wealth Rises Above $100 Trillion For The First Time Ever... There Is Just One Catch

In the Fed's latest Flow of Funds report released at noon today, the Fed unveiled released the latest snapshot of the US "household" sector as of March 31 2018. What it revealed is that with $116.3 trillion in assets and a modest $15.6 trillion in liabilities, the net worth of US households rose above $100 trillion for the first time ever, hitting a new all time high of $100.8 trillion, increasing for 10 consecutive quarters and up $1.0 trillion as a result of an estimated $490 billion increase in real estate values, as well as a $511 billion increase in various stock-market linked financial assets like corporate equities, mutual and pension funds, and deposits as the market soared to new all time highs in the fist quarter, even if it ended Q1 on a slightly subdued note after the February VIXplosion and March rate spike.

Total household assets in Q1 rose $1.1 trillion to $116.3 trillion, while at the same time, total liabilities, i.e., household borrowings, rose by only $44 billion from $15.5 trillion to $15.6 trillion, the bulk of which was $10.1 trillion in home mortgages.

The breakdown of the total household balance sheet as of Q1 is shown below.

And the historical change of the US household balance sheet.

And while it would be great news if wealth across all of America had indeed risen as much as the chart above shows, the reality is that there is a big catch: as shown previously, virtually all of the net worth, and associated increase thereof, has only benefited a handful of the wealthiest Americans.

As the following chart from Deutsche Bank shows, the wealth inequality in the US is now as bad as it just during the Great Depression, with the top 0.1% of the US population owning as many assets as the bottom 90%.

Source: Torsten Slok, Deutsche Bank

In the CBO's latest, if somewhat dated, Trends in Family Wealth analysis published in 2016, the budget office showed a breakdown of the net worth chart by wealth group, which sadly shows how the "average" American wealth is anything but, and in reality most of that $100 trillion belongs to just 10% of the US population.

While the breakdown has not caught up with the latest data, it provides an indicative snapshot of who benefits. Here is how the CBO recently explained the wealth is distributed:

  • In 2013, families in the top 10 percent of the wealth distribution held 76 percent of all family wealth, families in the 51st to the 90th percentiles held 23 percent, and those in the bottom half of the distribution held 1 percent.
  • Average wealth was about $4 million for families in the top 10 percent of the wealth distribution, $316,000 for families in the 51st to 90th percentiles, and $36,000 for families in the 26th to 50th percentiles. On average, families at or below the 25th percentile were $13,000 in debt.

In other words, roughly 75% of the $1.1 trillion increase in assets went to benefit just 10% of the population, who also account for roughly 76% of America's financial net worth.

It also means that just 10% of the US population is worth roughly $90 trillion, while half of the US population was virtually no wealth, and if anything it is deeply in debt.

Even worse, when looking at how wealth distribution changed from 1989 to 2013, a clear picture emerges. Over the period from 1989 through 2013, family wealth grew at significantly different rates for different segments of the U.S. population. In 2013, for example:The wealth of families at the 90th percentile of the distribution was 54% greater than the wealth at the 90th percentile in 1989, after adjusting for changes in prices.

  • The wealth of those at the median was 4 percent greater than the wealth of their counterparts in 1989.
  • The wealth of families at the 25th percentile was 6 percent less than that of their counterparts in 1989.
  • As the chart below shows, nobody has experienced the same cumulative growth in after-tax income as the "Top 1%"

The above is particularly topical at a time when either party is trying to take credit for the US recovery. Here, while previously Democrats, and now Republicans tout the US "income recovery" they may have forgotten about half of America, but one entity remembers well: loan collectors. As the chart below shows, America's poor families have never been more in debt.

The share of families in debt (those whose total debt exceeded their total assets) remained almost unchanged between 1989 and 2007 and then increased by 50 percent between 2007 and 2013. In 2013, those families were more in debt than their counterparts had been either in 1989 or in 2007. For instance, 8 percent of families were in debt in 2007 and, on average, their debt exceeded their assets by $20,000. By 2013, in the aftermath of the recession of 2007 to 2009, 12 percent of families were in debt and, on average, their debt exceeded their assets by $32,000.

The increase in average indebtedness between 2007 and 2013 for families in debt was mainly the result of falling home equity and rising student loan balances. In 2007, 3 percent of families in debt had negative home equity: They owed, on average, $16,000 more than their homes were worth. In 2013, that share was 19 percent of families in debt, and they owed, on average, $45,000 more than their homes were worth. The share of families in debt that had outstanding student debt rose from 56 percent in 2007 to 64 percent in 2013, and the average amount of their loan balances increased from $29,000 to $41,000.

And there - as we say quarter after quarter- is your "recovery": the wealthy have never been wealthier, while half of America, some 50% of households, own just 1% of the country's wealth, down from 3% in 1989. And finally, America's poor have never been more in debt.

Comments

pods JibjeResearch Thu, 06/07/2018 - 15:44 Permalink

This shows how futile the "tax the rich" schemes are.

The real $$ is with the wealthy.  They don't have income. They have "charitable trusts and foundations" to hold on to their gains.

I like the Chris Rock description:
Shaq is rich.

The man who signs his paycheck is wealthy.

The wealthy have access to ungodly amounts of free leverage at 0%.

The bottom 90% don't.  

So the gap continues to widen as long as this monetary scheme continues.

pods

In reply to by JibjeResearch

bshirley1968 fbazzrea Thu, 06/07/2018 - 19:12 Permalink

"Wealth"?

Real wealth isn't increased by adding zeros to the numbers. "Wealth" is a relative term and means a wide range o things to different people. I have a dog (of no special breeding) that you couldn't buy for a hundred thousand dollars. Does that mean she is a hundred thousand dollar dog? Probably to me only. I have other "things" in my life that are priceless....to me.

For thus article they are obviously defining wealth by "market value" i.e. stocks, bonds, real estate, etc. When you have a $20,000 house and it becomes a $200,000 house because money printers printed enough paper to inflate the price of EVERYTHING, you are no more wealthy today than when the house was $20,000 because cost have gone up as well.

I wonder what the total credit market debt was when "household wealth" was $50 trillion. Today TCMD is $68 trillion. Does that mean if we paid the debt off we have $32 trillion in equity? Bet the numbers were similar when household wealth was $50 trillion.

In reply to by fbazzrea

Nunyadambizness directaction Thu, 06/07/2018 - 15:37 Permalink

It's not the only cause.  If one does some research, it becomes apparent that what is happening fiscally is by DESIGN.  Marxism doesn't work well as long as there is a strong Middle Class, it NEEDS to have the rich vs. the poor, and then useful idiots can be convinced that Marx and Engels had it right (or mostly right).  Get rid of the nuclear family, get rid of the middle class.  Get rid of the middle class, and you will essentially end up with the rich vs. the poor, which Marx was all too familiar with.

We're all just watching from the sidelines...

In reply to by directaction

Nunyadambizness Juggernaut x2 Thu, 06/07/2018 - 15:49 Permalink

Property taxes are Marxist at their core--they are there to remind you that YOU don't really own anything, the GOVERNMENT owns it all.  Try not paying your taxes and see how long you stay on your property.

Frankly, I think property taxes are unConstitutional, as the Founding Fathers never allowed for such a thing in the Constitution.  Government revenues were supposed to be generated from tariffs.

In reply to by Juggernaut x2

InnVestuhrr JibjeResearch Thu, 06/07/2018 - 17:15 Permalink

"So, how do we stop property taxes?"

Replace them with local sales/consumption taxes, but those who adhere to the ideologies of coercive collectivism and forcing the successful to be no better ofF than the unsuccessful, will fight to the death for property taxes, which are based upon value - fuck them!

How does my property, occupied by one person, and which costs more than the many nearby properties occupied by large families of over-breeding proletariat, incur a much greater load on local services to justify having to pay higher property taxes ?

PROPERTY TAX BASED UPON VALUE IS IMMORAL AND NOT JUSTIFIED, IT IS JUST ONE MORE EXAMPLE OF FUCK THE MORE SUCCESSFUL PEOPLE TO SUBSIDIZE THE LESS SUCCESSFUL PEOPLE

In reply to by JibjeResearch

InnVestuhrr JibjeResearch Thu, 06/07/2018 - 18:58 Permalink

Then use local sales/consumption taxes ONLY, what is the rationale for ADDING property taxes, especially based upon value, instead of based upon number of occupants of the property, if not to further fuck over rape ravage and pillage the more successful people to subsidize the less successful people and contribute to the Marxist cult of worshiping the proletariat masses ???????

In reply to by JibjeResearch

VZ58 Justin Case Thu, 06/07/2018 - 16:36 Permalink

Meanwhile in your socialist union wonderland less and less actual work is accomplished and more and more other people are forced to subsidize crony union  jobs and pensions. And while you minimum wage increase increases inflation and reduce the middle class' wealth even more, corporations leave as they find cheaper means of production and wage cost areas in other parts of the world. Oh yeah...that's already happened with all the great socialist policies from both sides. Hmmm...

In reply to by Justin Case

SeaMonkeys Nunyadambizness Thu, 06/07/2018 - 16:08 Permalink

If it's happening by design, the purpose isn't to end up in a Marxist world. The purpose would be to replace productive incomes and investment with debt, just as we have been doing. In a world where labor is needed less and less, the only way to keep wealth in the hands of the elites is thru ownership. This translates into monopoly.

Hypothetically speaking, if we could build machines for zero cost, the price would be as high as monopoly ownership could extract from the public. The flip side of the price would be cost of production, which would contain labor costs. Since the hypothetical machine costs nothing to produce, household incomes don't rise from the machines' production. Yet price is still high due to monopoly.

The missing piece of the puzzle is money injected into society via debt - as it has been for ages. Commercial banks lend money ex-nihilo. Loans created by banks are the deposits in the borrowers' accounts, and they spend that debt-money into circulation. No productivity needed.

When the elites talk of Marxism, it is largely a red herring. They are using Marx as a diversion. The real economist the elites are afraid of is Henry George.

Read Henry George's Progress and Peverty written in 1879. One single tax on land values. No income tax on wages or business profits. Zero. This is a formula for massive productivity and wealth. Poverty would be all but a memory. We can have our cake and eat it too.

In reply to by Nunyadambizness

any_mouse directaction Thu, 06/07/2018 - 15:53 Permalink

Not really, since both international socialism and national socialism are projects run by the same group of people that create the extreme wealth inequality.

It pays off big to make people think differently.

Think BigAg creating food that causes problems, then BigPharma creates expensive drugs to alleviate, but not cure, the same problems.

Bayer is Monsanto, Monsanto is Bayer, both are IGFarben of the Third Reich. Broken up in the Nuremberg show trials. Reanimated in the 21st century.

In reply to by directaction

roddy6667 directaction Sat, 06/09/2018 - 05:56 Permalink

There are a lot of articles on ZH blaming socialism for Venezuela's ills. They tried to use socialism to fix the huge economic inequalities, but it never got far. They never arrived at socialism. They never came close to having a thriving middle class or helping the desperately poor. Socialism can't be blamed  for the problem. It was there 50 years ago, and it is still there. Capitalism never fixed it either.

When you don't have a large, thriving middle class, you get social unrest, political upheaval, and economic failures.

In reply to by directaction

rockstone Thu, 06/07/2018 - 15:23 Permalink

It’s a part.......of my rock and roll fantasy............

It’s a part.......of my rock and roll dream..............

Fantasy......... yeah, yeah, yeah, yeah, yeah.........

brushhog Thu, 06/07/2018 - 15:25 Permalink

They told me years ago that my house and property were worth 150k. Now they tell me its worth 210k...whats changed? Nothing. Same place, same life. The numbers go up and down.

Nunyadambizness brushhog Thu, 06/07/2018 - 15:41 Permalink

Inflation changed.  Your house's value went up, but your money value decreased by approximately the same percentage.

Think of it like this....  1,000 years ago, an ounce (or its equivalent) of gold would buy you a really nice suit.  Today, an ounce of gold will buy you a really nice suit. 

The only thing that's changed is the fiat currencies always start strong ("Full faith and credit!"), then go to Zero, so it takes more of them to buy the same amount of stuff.  Ask yourself why a loaf of bread 100 years ago was a nickel and now it's $3?  Same thing.

In reply to by brushhog

any_mouse Nunyadambizness Thu, 06/07/2018 - 16:02 Permalink

The house's value is still the same. The dollar's value is declining.

Takes more worth less dollars to buy your house today.

But you are not sure what the actual value is until you open the box and close a sale of the house on the market.

Meanwhile they raise your property taxes based on the inflated value, because the property tax dollars are also worth less.

Everybody around the world is chasing declining dollars.

Your equities went higher(lower), the dollar goes lower(higher).

And somehow precious metals are exempt from dollar inflation.

In reply to by Nunyadambizness

Kidbuck CultiVader Thu, 06/07/2018 - 19:07 Permalink

Make your own bread for 50 cents a loaf. 

Wow. Your time must be worth a negative amount. If your time is worth $20.00 an hour and you make 2 loaves in half an hour, that's $5.00 per loaf just in labor. Ingredients and oven heat must cost something, too.  Also, don't forget clean up time. Comparative advantages exist.

In reply to by CultiVader

InnVestuhrr Kidbuck Thu, 06/07/2018 - 20:15 Permalink

Good point !

I am a bread lover, got addicted while living in Germanic areas in Europe, came to USA and used to bake all my different kinds of breads, because I did not like the breads sold in the USA supermarkets, and you need more than just one kind, but I found it was costing me a lot of my precious time.

But then a master baker opened a bakery nearby and he makes SUPERB varieties of breads European style, so now I buy from him - the loaves cost an average of $7 each, much more than the supermarkets, BUT I get DELICIOUS breads and I support a local craftsman, and I don't waste my time baking, so it is worth the higher cost.

In reply to by Kidbuck