U.S. Household Net Worth Declines To $81.3 Trillion In Q3

The Federal Reserve published its quarterly Z.1 report today (also known as the Flow of Funds report) which summarizes the balance sheets for U.S. households.

U.S. household net worth decreased to $81.3 trillion in the third quarter from $81.5 trillion in the second quarter, and is up 6.7% from last year.

Household Net Worth

Assets were little changed at $95.4 trillion and liabilities increased to $14.1 trillion from $13.9 trillion.

Assets Liabilities and Net WOrth

 

Financial assets as a share of total assets decreased to 70.0% in Q3 from 70.3% in Q2.

Household Assets

Real estate, the largest household asset, made up 24.3% of total assets from 24.0% in Q2.

Household Assets All

Home mortgages as a share of liabilities declined to 66.7% from a high of 75.0% in 2009.

Household Liabilities

The World’s Gold

Gold

The total amount of mined gold in the entire world is somewhere in the ballpark of 175,000 metric tonnes (1,2,3,4,5). There are 32,151.7466 troy ounces in a tonne, giving us a total of 5,626,380,655 troy ounces of gold in existence.

After peaking in August 2011 at $1,826, the price per troy ounce of gold today is about $1,206. That means the value of all the gold in the world today is approximately $6.788 trillion.

As pointed out by @RudyHavenstein, there is a possibility that the U.S. Federal Reserve could end up carrying more assets on its balance sheet than the total value of gold in existence, should the price of gold continue to decline (or the Fed’s assets continue to increase).

The Fed is currently sitting on $4.408 trillion in reserves, which means that its balances would surpass the gold market at a gold price of $783.42 per troy ounce.

Gold Chart

Tightness Of Mortgage Credit May Be Excessive

Bernanke

Ben S. Bernanke said the mortgage market is still so tight that he’s having a hard time refinancing his own home loan.

The former Federal Reserve chairman, speaking at a conference in Chicago, told moderator Mark Zandi of Moody’s Analytics Inc. — “just between the two of us” — that “I recently tried to refinance my mortgage and I was unsuccessful in doing so.”

When the audience laughed, Bernanke said, “I’m not making that up.”

“I think it’s entirely possible” that lenders “may have gone a little bit too far on mortgage credit conditions,” he said.

You Know It’s a Tough Market When Ben Bernanke Can’t Refinance

U.S. Household Net Worth Rises To $81.5 Trillion In Q2

The Federal Reserve published its quarterly Z.1 report yesterday (also known as the Flow of Funds report) which summarizes the balance sheets for U.S. households.

Household net worth increased to $81.5 trillion in the second quarter from $80.1 trillion in the first quarter, and is up 10.4% from last year.

Net Worth Change

Assets increased to $95.4 trillion from $93.9 trillion and liabilities increased to $13.9 trillion from $13.8 trillion.

Z1 Summary

Financial assets as a share of total assets increased to 70.3% in Q2 from 70.1% in Q1.

Assets Split

This was driven largely by increases in corporate equities.

Assets Composition

Home mortgages as a share of liabilities declined to only 67.2% from a high of 75.0% in 2009.

Liabilities Composition

What’s Holding Inflation Down

101904323-Paul-McCulley.1910x1000

First, we’ve had very low inflation for a long time, and there’s inertia to inflation. The best indicator of where inflation will be next year is to start from where it is this year. We won the war against inflation. It’s that simple.

Second, we still have slack in our economy, in both labor markets as well as in product markets. Companies have very little pricing power—as an aside, the Internet is a reinforcing factor because consumers can find the price of everything. And we have too many people unemployed or underemployed for workers to be running around demanding raises.

Finally, the Fed has credibility, so expectations of inflation are low. Unmoored expectations could foster higher inflation, as companies try to anticipate higher costs. Fed credibility is a bulwark against that. Unlike 30 years ago, the Fed has had demonstrable success in keeping prices stable by showing it is willing to raise short-term rates to slow growth and inflation.

TIME interviews Paul McCulley, Chief Economist at PIMCO

Delineating Cyclical And Structural Factors

447581_88260821-1038x576

Along with cyclical influences, significant structural factors have affected the labor market, including the aging of the workforce and other demographic trends, possible changes in the underlying degree of dynamism in the labor market, and the phenomenon of “polarization”–that is, the reduction in the relative number of middle-skill jobs.7

7. For convenience, the analysis here is presented as if cyclical factors and structural factors can be neatly delineated. In reality, the line between the two may be indistinct. Moreover, what begins as cyclical weakness may evolve into structural damage. For a discussion of the strategic issues that arise when policymakers believe such evolution from cyclical to structural to be an important feature of the economy, see Dave Reifschneider, William Wascher, and David Wilcox (2013), “Aggregate Supply in the United States: Recent Developments and Implications for the Conduct of Monetary Policy.

Federal Reserve Chair Janet Yellen’s speech at Jackson Hole today.

Global Central Bank Positioning

Let’s take a glance through the cross-hairs at this scope of global central bank positioning from Nomura.

The U.S. Federal Reserve and the Bank of England are both currently in strong economic cycles (one might argue…) and employing dovish/loose monetary policy, but are shifting more hawkish/tight. The European Central Bank is currently in a weak economic cycle, but is also dovish, and becoming more so.

Global-Central-Banks