BBRG: The Economy Is Booming. So Is Financial Stress.

The Economy Is Booming. So Is Financial Stress.
Even after a decade of recovery, family balance sheets show that gains in security have been narrow while exposure to downturns remains broad.
Bloomberg, May 30, 2019




There is an old joke, that when Bill Gates walks into a bar, the average net worth goes up tens of billions of dollars, while the median hardly budges at all.

That is a classic example of how the aggregate can obscure the specific.

To identify what might be happening beneath the broad averages in the economy, we sometimes need to get more granular. The St. Louis Federal Reserve Bank has done just that, with a more comprehensive look into household balance sheets.  “The Unequal Recovery: Measuring Financial Distress by ZIP Code” used a clever data analysis to measure financial distress among households.

To determine changes in levels of financial stress, researchers looked at “the percentage of people within a ZIP code that have reached at least 80 percent of their credit limit, that is, the maximum balance that they can hold on their bank-issued credit cards.” They compared that debt against measures of household assets, including median home price, stocks, and bonds across the two time periods.

The results were fascinating. What the St Louis Fed found was an uneven, bifurcated, post-credit crisis economy


Continues here



I originally published this at Bloomberg, May 30, 2019. All of my Bloomberg columns can be found here and here



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