Today at noon the Fed released its quarterly Flow of Funds (Z.1) report in which we found the state of the US household as of September 30, 2012, or just after the market had peaked courtesy of QEternity. Not surprising, total household assets, as always driven primarily by the stock market, rose by a total of $1.7 trillion, consisting of $0.5 trillion in Corporate Equities, $0.3 trillion in Mutual Funds shares, and $0.4 trillion in Pension fund Reserves. The contribution from the so-called “housing recovery”, which is merely a two-year long (and continuing) instance of Foreclosure Stuffing: a mere $0.4 trillion, or less than 25% of the total quarterly net worth increase.Said otherwise, any drop in the stock market will promptly wipe out any “gains” as a result of the housing “recovery.”
Another way of visualizing the household balance sheet: total assets of $78.2 trillion, of which just $24.6 trillion was in the form of tangible assets (Real Estate, Durable Goods and other), or under one third of total.
The balance, or $53.6 trillion, comprising of deposits, corporates, mutual funds, pension funds and other assets, was all in one way or another tied into the stock market and the viability of the financial sector.
One can see why with over two thirds of total household assets embedded in the stock market Bernanke will never allow stocks to go down, even if that means monetizing every last one of them (after he is done with all fixed income of course). On the liability side, total debt remained flat with Home Mortgages declining by $0.1 trillion, primarily as a result of discharges, offset by $0.1 trillion increase in Consumer debt. Net result: household net worth at September 30, 2012 for the world’s wealthiest nation was $64.8 trillion, or back to where it was in Q4 2006.
Somewhere, someone’s mouth is watering profusely at the mere though of applying a uniform tax on all household assets. After all, it’s “only fair”.
The change of the household balance sheet over time:
And a snapshot of the balance sheet as of September 30.