Record Net Wealth

Kash examines the latest Flow of Funds data in terms of how households hold their wealth. I have periodically looked at overall household net worth in real per capita terms noting that the NRO cheerleaders who periodically trumpet real wealth levels are ignoring the twin facts that both population and prices have risen over time.

I happy to point out that this cheerleading might finally be justified. Well, not in terms of a record net wealth to GDP ratio as the first graph shows. But then, let’s be fair – real GDP has grown since 1999 both in absolute terms and in per capita terms. The second graph shows that real wealth was 7.9% higher at the end of 2005 than it was at the end or 1999. And with population growth being 6.1%, the third graph shows that real wealth per capita was 1.7% higher at the end of 2005 than it was at the end or 1999.

So is the average American wealthier today than he was six years ago? Not quite for two reasons. First of all, average in terms of median is different than average in terms of mean. Secondly, as Michae Mandel often does, we should consider the deferred tax liabilities from government debt:

Real net worth per capita is household net worth, minus credit market liabilities of federal state and local governments, adjusted for inflation and population growth.

But I’m not following Michael’s calculations. Expressing real wealth in terms of 2000$, we had $153,311 per person in household wealth in 1999 and $155,965 in 2005 – an increase of $2655. Federal debt per person rose from $20,404 in 1999 to $23,662. So hasn’t our real wealth per capita fallen by approximately $600?