Click to enlarge
Chart
Source: Merrill Lynch

 

I meant to get to this last week but travel (a/k/a Nasdaq Freeze) got in the way

“After collapsing in 2008-10, net worth is booming again and has now surpassed the 2007 peak. A generous take on this is that the dollar value of wealth has now fully recovered; a more realistic interpretation is that wealth as a share of income has been flat over the last 14 years. During this period, boomers moved out of their 40s and into their 50s. Saving and wealth gains should have been unusually high as they set up for retirement; instead they are running in place.”

Two things to note about this: This is national net wealth, not per capita. So it does not reflect population growth, inflation, etc.

Second, it does now show where we would have been had the crisis never occurred. Its 5 years later, and getting back to breakeven is not my favorite metric to show the impact of the crisis . . .

 

 

Source:
Ethan S. Harris, Alexander Lin, Joshua Dennerlein, Michael S. Hanson, Michelle Meyer
Bank of America Merrill Lynch, August 20, 2013

Category: Federal Reserve, Wages & Income

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

18 Responses to “How Much Has America’s Net Worth Recovered?”

  1. Hallsto says:

    Wealth distribution, not total wealth, seems to be the bigger issue since the crisis.

  2. capitalistic says:

    “This is national net wealth, not per capita. So it does not reflect population growth, inflation, etc.”

    Bingo. If you exclude home equity, most Americans have not seen an increase in net worth, but I guess you can’t exclude real estate. The proof is in access to capital : Most Americans could access capital fairly easily pre-2009.

    As a sponsor, I’ve noticed that even small business owners (<$20M enterprise value) have a hard time securing non-recourse financing, while financial engineers such as yours truly can secure a term sheet of whatever amount, non-recourse. I've had capital sources ask me to verify the "quality" of management, in reference to MBO's, i.e. How sophisticated are they?

    There's a widening binomial economy – Goldman can have it's hiccup reversed, yet Fabulous Fab is found guilty of negligence, Joe Public can't secure $1M in an ABL, but your neighborhood purveyor of LBO's can secure non-recourse cheap financing at bizarre rates.

    So, that national net worth data, although compelling, is quite misleading.

  3. Herman Frank says:

    How does the saying go again? Ah yeah, I remember! “Hope springs eternal!” No better graph, ANY graph than one which shows something cratering and then recovering. “Listen folks, see the graph! We’re back to normal again, we can breath and rejoice, because the winter is over and spring is on the horizon!”

    Strange, I look around me and don’t get cheers and whoops of joy. Only a weary look of shell-shocked persons for whom the dream has turned to a daily grind of survival.

    Hip-hip! ….. for the 1% who open up the champagne!

    Bollocks! The only time that our people can start saving is when the “Patient Protection and Affordable Care Act” starts kicking in come October. Till then it is “Don’t get a cold, don’t break anything, don’t see any doctor, nurse or care-practitioner, stay healthy, stay healthy, stay healthy!”

    • Note: This is not distribution analysis, but rather total wealth. (Yes, lots of this has been stock market, much has been RE and increase in employed / total wages paid.

      Maybe I will get around to doing a breakdown of that . . .

  4. Apinak says:

    The whole concept of National net worth is pretty meaningless, while wealth is highly concentrated at the top. I would be much more interested in a graph of the median net worth.

  5. wisegrowth says:

    it is healthier for society when net worth is below 30% of disposable income. When net worth rises above 30%, you can see bubbles forming. … and as we can see, we are heading back into that territory.

  6. rd says:

    Another way to look at the graph is that net worth as a percentage of disposable income has grown from about 15% to 40% since the late 80s when the baby boom generation was just entering its peak earning years. This makes sense as one would expect a demographic bulge to accumulate wealth and assets over a period of time in a growing economy (long-term economic data indicates that it is not a zero sum game).

    In the interim there were two major asset bubble periods when a lot of people thought they were wealthy, but it turns out they weren’t really.There seems to be a fairly distinct trend line if the peaks of the two huge bulges are ignored. The 2002 bottom was probably a reasonable net worth value at that point as stock market valuations were somewhat reasonable and house prices had not gone into bubble mode yet.

    My guess is that we have some assets that are still over-valued and maybe a realistic ratio would be 30% to 35%, but still much higher than the 10% to 20% from the late 80s-early 90s. I would expect to see the total net worth grow much more slowly in the next couple of decades as baby boomer incomes from labor decline and they tap into their assets. However, the ratio of net worth to income may not decline too much as disposable income will likely decline as baby boomers tap into their portfolios and house equity to replace labor income, so their part of the ratio may not change much. Social Security payments will likely be a major buffer supporting disposable income up at that point.

  7. Frwip says:

    I’m looking at the graph and looking and looking and there’s definitively something which doesn’t compute, especially in light of the associated comment.

    Are the labels correct for the curve ? Shouldn’t it be the blue curve for net worth national aggregate in trillion $ referenced to the (non-zero-based) axis on the left and the brown curve the net worth to disposable income ratio, referenced to the right axis ?

    Then, it would make a lot more sense.

    • sensibleinvestor says:

      I guess I misunderstood Frwip. I disagree. The labels are correct. It’s the interpretation of some comments. The left axis is for net worth as % of disposable income, and the right axis is the net worth. Net worth should be certainly much more than disposable income. Otherwise we’re not accumulating wealth.

  8. panskeptic says:

    There are just not words for how irrelevant this study is. Fellating your customers for fun and profit may make the parties concerned feel good, but only HNW individuals have recovered from the crash – the middle and working classes have NOT been made whole, and probably never will be.

    Social mobility is dead in this country – the figures I saw show your parentage determining your wealth as more frozen here than in Western Europe, which is shocking and shameful, a betrayal of the American Dream.

    And Merrill Lynch is saying, don’t worry, be happy. Nuts. The people who were washed out of the middle class in the crash are still un(der)employed and sleeping in their cars.

    • There is no doubt doubt “HNW individuals have recovered from the crash” and while the data shows everyone else is lagging, I have doubts about your prediction that “middle and working classes have NOT been made whole, and probably never will be

      As to “Social mobility” — it has fallen significantly and I agree with it is “shocking and shameful, a betrayal of the American Dream.” We can hope the political pendulum swings back again.

      The point of this chart is not to say “don’t worry, be happy.” Its to reveal what happened. The rest of this is interpretation

      • panskeptic says:

        When Bush was inaugurated the top one tenth of one percent owned 8% of the country’s wealth. When he left office, they owned 20% of it. I’d love to see the figures for today.

        As long as execs get million dollar bonuses for axing jobs, breaking unions, fighting the minimum wage, there’s no way the middle and working classes can be made whole again. And the damage is not uniform across ethnicities – I’ve seen figures that the black middle class has been disproportionately decimated.

        And as Bill Moyers and others have pointed out, this inequality is not an accident, it was engineered. The Revolt of the Rich is a mean-spirited attempt to prevent these people from recovering from the Crash. There is no political will to help them get on their feet, just stern lectures on rugged individualism and the immorality of poverty. Read the New York Times headlines from the mid 1930′s and you’ll find the same deranged rhetoric about “Social Security sapping our nation’s moral fiber” and the rest of that Pete Peterson bullsquash.

        When we say that 2008-2009 was the worst since the Great Depression as expressed in dollars and percentages, we should also recognize that it inflicted the same societal trauma on us that 1929 did on our grandparents. There’s no wiping out the memories for those who lost their jobs, their houses, their identities.

  9. clipb says:

    obviously the numbers are skewed by wealth increases for the top 20%. i agree that a median + average breakdown would be interesting, as well as a demographic and historical look. maybe FRED has something?

  10. VennData says:

    ROFL. In other words how can we be this rich under Kenyan Socialism.

    “Access” to capital? Which day’s WSJ opinion page did you roll up and smoke?