E-Newsletter No. 22
October 2015
If not us, who?________If not now, when?

In this month’s newsletter, we were originally going to provide an update on the ongoing dysfunction occurring in our nation’s capitol now that Congress has returned from their August recess, and now that the federal government’s new fiscal year has begun on October 1st – – No budget for the upcoming year, Congress passing a short-term “Continuing Resolution” that merely pushes off the next round of the same problem until December 11th, No action on entitlement reform, No action on the country’s debt ceiling, etc., etc. However, we recently ran across an interesting Associated Press article with the headline “Household Wealth Reaches New High”, and we thought that we should share some of this information with you instead, and we could help put some of this information into perspective.

The article reported on a recently released Federal Reserve report that disclosed the Fed’s latest estimates of US households’ assets and liabilities as of the second quarter of 2015. The article was basically a “feel good” piece, which stated that the wealth of US households has recovered over the past several years and has risen to a new high of $85.7 trillion, and “rising household wealth can help boost growth by making consumers feel wealthier and more likely to spend.”

We have included the following link to the Federal Reserve’s report –
http://www.federalreserve.gov/releases/z1/current/z1.pdf

Here are some of the key amounts – – Total Household Assets – $100 trillion, Total Household Liabilities – $14.3 trillion, which equals US Households’ Net Worth (Wealth) – $85.7 trillion.

The Federal Reserve’s report contains some interesting details, but the report was more interesting for what it failed to include. Total Household Assets include $69.8 trillion of “financial assets” (with the details shown for bank accounts, stocks, bonds, treasury securities, mutual funds, etc.) and $30.2 trillion of non-financial assets (the largest amount being real estate). The $14.3 trillion of Total Household Liabilities primarily consist of $9.4 trillion for home mortgages and $3.3 trillion for consumer credit (credit cards, student loans, etc).

What we found interesting is that in determining the wealth of US households, the Federal Reserve includes treasury securities in US households’ financial assets, but fails to include the US households’ $18 trillion liability for the cumulative US debt that has been incurred by our federal government. In our opinion, the US Households’ Net Worth of $85.7 trillion should be reduced by 21% to show the effect of this liability. The US debt incurred by our federal government (on our collective behalf) exceeds the amount of liabilities that have been directly, consciously incurred by US households.

Maybe some fairy godmother is going to come along and make this $18 trillion liability magically disappear. (We suspect not). So maybe the Federal Reserve and Associated Press should make a note that in future press releases they should communicate all of the pertinent facts to our country’s citizens.

US Debt Clock – – September 1st – $57,120 per citizen / October 1st – $57,150