Collectively, people own a lot of assets - almost 160 trillion worth:
Liabilities, like mortgages and credit cards, aren’t nearly as big:
But if we change the scale, we do see how liabilities ran up quickly prior to the Financial Crisis and then moderated for many years as households fixed up their financial situation:
Subtracting assets from liabilities, we get net worth:
Now, although net worth has gone up dramatically over time, we know that prices of things go up as well. We can’t buy a candy bar for a nickel anymore after all. So, it’s important to consider inflation:
If we adjust household net worth for inflation then, we can see how much that net worth has increased in real terms over time:
This is a more powerful metric now because we can see that we are collectively wealthier now even when adjusting for price.
It also shows that inflation, if it were to accelerate, would put significant downward pressure on that real wealth. Just another reason to keep a close eye on those rising prices (as if you needed another)!
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Hi Luke, this is an interesting analysis however I wonder if it is skewed with the wealth of the ultra rich -- after all an average Joe didn't increase his total worth 70% during the pandemic craze. Is there a way to do the same analysis with he household worth of "99%"?
HS.