The Federal Reserve issued their quarterly Flow of Funds Accounts for fourth quarter 2009 (PDF). Their statement was summarized with the following flow chart which continues to show explosive government debt growth and contracting household and business debt.
While the Fed headlined this release with a discussion on debt which showed an overall debt growth at a 1.6% annual rate – this was a story we pretty much understood.
The real story was on page 104, B.100 Balance Sheet of Households and Nonprofit Organizations. Here is what we find out what happened in the fourth quarter to Joe Sixpack.
On the surface it appears Joe is worth 1% more. But there are two components – tangible assets and financial assets. Investors and Joe own tangible assets which is primarily our houses.
Here our homes lost about $20 billion. Owner's equity as a percent of real estate value remains around 38% from a pre-recessionary high of almost 60%.
But it is our investor assets which provided the majority of the growth of household assets – corporate equities and mutual funds.
It is not unusual the better off profit first. But you cannot spin this to show Joe that the recession is over.
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