Household Net Worth

Oh it's too easy to live like clockwork
Tick tock watching the world go by
Any change would take too long
So dry your eyes
--Genesis

Taken from this article, the below chart plots US household net worth (HNW) since the early 1950s. Fairly stable at around 350% of GDP until the late 1990s, when HNW began increasing toward 500% in fits and starts.

The obvious question: How is it possible for households to gain wealth in increasing proportions to overall production? Generally, real productivity improvements should increase output and wealth simultaneously. Plausibly, higher savings rates might generate proportionately more wealth as those savings are invested in productive capital. But we know that US savings rates have been going down, not up.

The answer is that this isn't about changes in real wealth. It is about paper wealth gains. Inflationist policies have distorted the asset side of balance sheets--i.e., assets appear more valuable than they really are.

Overlay a chart of the SPX on the HNW line since the mid 1990s and you'll get the picture.

You can be certain that policymakers get the picture as well.

position in SPX