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US Household Net Worth Reaches Record $74.8 Net Trillion in Second Quarter

October 10th, 2013 | by Morris Beschloss | Comments

One of the surprising aspects of the better-than-expected 2.5% annualized second quarter increase in the U.S. gross domestic product of goods and services is the record amount of total household net worth ever comprised by America’s vast 300 million plus population. This amounted to a gross close to $90 trillion, with $74.8 trillion after debt reduction. This statistic is primarily made up of real estate, stocks and bonds, cash and savings, pensions, and a variety of miscellaneous holdings and proprietary investments.

Home mortgages, consumer credit and other private debt made up a total of a near $14 trillion deficit. The major boost in the wake of the 2008-10 global financial recession came from two major factors— the remarkable comeback of the overall U.S. stock market and the seventh quarterly increase in home values. The combination of these two factors alone enhanced U.S. household wealth by $1.3 trillion in the second quarter of this year, according to highly respected Federal Reserve figures. Adjusting for U.S. inflation, household net worth is about four percent below its peak, which means that America’s households have recovered roughly 85% of what they lost during the highly traumatic “great financial recession.”

To the credit of the American public, they have bounced back smartly, both by paring debt and mortgages, as well as re-engaging the consumption sector. This is a main reason that the final second quarter GDP numbers beat the original 2% projected growth factor by one-half a percentage point. While surprisingly springing back to near record automotive purchases and better-than-expected discretionary buying, the U.S. consumer also exhibited prudence by paring down debt, which is reflected by total consumer debt payments reaching a 30-year low.

While both consumer savings as well as increased consumption have done the heavy lifting for the nation’s gross domestic product increase during the past two quarters, the Federal Reserve Board’s quantitative easing has also played a major role in making both increasing housing and stock purchases available at all-time low interest rates.

However, as a turbulent and politically combative new fiscal year gets underway, it’s almost a sure bet that the expected tapering of the Fed’s monthly $85 billion worth of U.S. Treasury bonds and bank-held mortgage derivatives will be getting underway before the end of 2013. With unemployment, and increasing part-time work weighing on a sizable segment of America’s 140 million worker potential, the economy will not be able to get off the ground enough to give a real lift provided by a growth-inspired energy sector that may reach the highest levels of oil and natural gas production this nation has ever seen.

Further complicating a mediocre employment comeback will be the full-time jobs reduction due to “Obamacare burdens” on independent businesses, and the accelerating technology that’s making both the manufacturing shop floors, as well as all back offices more productive than ever.
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