Our Balance Sheet

The Fed’s Q4 ’09 flow of funds statement (a balance sheet of the US, incl households, companies and gov’t) reveals an improvement in the aggregate debt levels on an absolute basis but at a snails pace. Household debt (home mortgages + consumer credit) as a % of disposable income fell to 115% from 117% in Q3, vs 121% in ’08, and vs the record high of 125% in ’07 and is back to the lowest level since 2004. However, it remains well above the level of 10 yrs ago at 91% and 83% back in 1995. Debt to GDP for our country as a whole fell to 348% from 355% in Q3. It was 308% back in ’05 and 231% back in ’94, right before the secular bull market began its last move higher. Households and companies did the rational thing and cut debt by a net $474b but this was partially offset by a $267b rise in local, state and fed’l gov’t increases, with the fed’l gov’t making up 90% of the increase. Household net worth rose by $682.7b as asset prices rebounded.

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