You know, when I look at this graph of total U. S. net household net worth, reproduced above, what I see is a continuous arc with interruptions in the form of sharp inflection points in the mid-90s and, again, in the Aughts. In other words, we’re returning to trend. For some reason other people see the 90s and Aughts as normal and what’s going on now as abnormal.
BTW, do you see the jaggy points in the graph since the end of the recession? I strongly suspect that those are the result of the various interventions since then, empirical evidence of regime uncertainty. Also note that the various minor ups and downs don’t have a lot of impact on the ultimate shape of the curve.
There’s a destiny that shapes our ends rough-hew them how we may.
I’m a little surprised by two things: First, that the Fed lumps households and non-profits together; I think this is misleading given that non-profits almost certainly fared the recession very differently than households (with the ability to fund-raise from donors who may be willing to give, and the fact that non-profits may have been disproportionately been given grants from various stimulus programs, something you hint at).
Second: That according to this, we’re already “half way” at returning to the pre-crisis peak despite persisting high unemployment and lower household equity because of lower home values.
I wonder how this graph would look if you produced 5 different graphs by income quintile.
“BTW, do you see the jaggy points in the graph since the end of the recession? I strongly suspect that those are the result of the various interventions since then, empirical evidence of regime uncertainty”
But, then, wouldn’t the bounces back be evidence that regime uncertainty is transient, more akin to a fleeting neurosis than anything else?
I’ve seen such graphs. The lowest declines were in the lowest income quintile with, as you might suspect, the greatest in the highest quintiles. IIRC the second lowest quintile was the next greatest decline.
Kind of the point I was making. The ride in the washing machine feels bumpier when you’re inside of it.
This looks most likely to me to reflect value of investments.
I can see from other charts on the FED site that household/nonprofits have slightly decreased their liabilities, and the value of real estate has not begun to recover yet, so what else could be on the balance sheets?
I’ll second TimH’s confusion as to why nonprofits are mixed in here.
“The ride in the washing machine feels bumpier when you’re inside of it.”
Yeah, I was just thinking of the famously hypochondriacal Oscar Levant. A friend of his said to him, “But Oscar, it’s all in your head”. Levant: “My God, what a terrible place for it to be!”
Here’s the chart of “Total Financial Assets – Assets – Balance Sheet of Households and Nonprofit Organizations (TFAABSHNO)” for comparison:
http://research.stlouisfed.org/fred2/series/TFAABSHNO
That chart tells the same story, PD: it’s the bubbles that are the deviation from trend not present conditions.
Sometimes you have one of those dreams that carries over with you into conscious life because it seemed so real. We dreamed we were rich. Turned out: not so much. Now we’re having a hard time shaking off the dream.
Goes to the point Dave has been making that “real” wealth such as asset values accumulated during bubbles is illusory. The financial wealth (money) doesn’t disappear, it’s just transferred from one party to another. Bu the guy who originally borrowed that second mortgage just saw the wealth in the price of his house evaporate.
As is typical, I think PD hit it on t he head. The jagged portion reflects stock market movement, as this has become the dominant wealth mover since the housing collapse.
The ultimate shape of the graph reflects the general trajectory of the economy. There is no rule of physics that says it might not flatten.
If you are a believere in Obama, good luck in improving your financial position, or anyone else’s.
…empirical evidence of regime uncertainty.
Uh-oh now you’ve done it.
Nice find Dave, and I have to wonder where the good doctor is…?
I honestly can’t speak to uncertainty regarding policies from a given administration, mostly because I break the law whenever I feel like it. But I think you van certainly add uncertainty due to poor market signalling. As spending declines businesses receive less information about what to expect in the short-term and become more defensive. As inventories rise they reduce investment and lay off employees in order to better weather the storm. Together those two forms of uncertainty are sure to have a significant impact.
Regime uncertainty = Stock market movement? Really? When I get home from call tonight I will look for that identity. (BTW, some of the bumpiness is just a charting artifact. A 10% change at 50,000 makes a jag halfway up the scale between 50 k and 60k. A 10% change at 10,000 gives you a change 1/10 of the distance between 10,000 and 20, 000.)
Steve
I think the antecedents of the moves by the stock market were various different policy moves, either by the Congress and the Administration or by the Fed.
No, nobody said that.
Considering you just made it up, don’t bother.