Fed’s Flow of Funds tells us how much debt there is

The Q2 US balance sheet is out via the Fed’s Flow of Funds statement and it reveals that household debt (home mortgages + consumer credit) as a % of disposable income fell to 118% from 120% in Q1 and 123% at the end of ’08 and vs the record high of 127% in ’06. It was last below 100% in 2001 and was at 89% 10 years ago so while we are headed in the right direction in terms of consumer financial health, the process could be a long one. According to the data, the value of household real estate ROSE by $323.4b which is strange considering home prices have continued to decline, albeit at a slower pace. This, in addition to a $1.6t rise in stock prices, led to an almost $2t rise in net worth. For the country as a whole, debt as a % of GDP was little changed at 360% due to an increase in government borrowing at all levels and this is up from 257% 10 years ago.

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