$56 trillion—Remember this number.
Saturday, September 20, 2008 at 06:00PM The aggregate net worth of all US families and non-profit organizations was about $56 trillion on June 30, 2008, according to the Federal Reserve Board flow of funds report. That number is a useful frame of reference in which to consider the financial system bailout, the Iraq war, the federal budget deficit, the trade deficit, and other big government and economic numbers.
The June 30 estimate of $56 trillion is $2.7 trillion dollars less than just 9 months earlier, according to the flow of funds report, and takes us back to where we were at the end of 2006. About 70% of the 9-months' decline was in the value of securities and most of the rest was decline in real estate values. There seems to be a consensus that substantially more declines in real estate values are coming.
The financial system bailout announced yesterday has been presented as a $700 billion event but of course nobody really knows. The same Washington Post article reports that the annual Pentagon budget is about $600 billion. In addition, about $650 billion has been specially appropriated for Mr. Bush's War, but Joseph Stiglitz and Linda Bilmes have estimated that when the future and hidden costs are included the war will cost $3 trillion.
The latest projection from the Congressional Budget Office is that the federal budget deficit will be $407 billion for the fiscal year ending September 30, 2008. Altogether, the federal government owed $9.7 trillion on September 18, 2008, $4.0 trillion more than it did the day George W. Bush was inaugurated. To the extent this debt is owed to American families or entities owned by American families, this does not diminish aggregate wealth. But increasingly US government and corporate securities are owned by foreigners as a result of chronic trade deficits, and that should be considered a diminution of national wealth.
The negative "balance of payments" (technically, the "current account" deficit), which the US has had every year but one since 1982, was $811 billion in 2006 and $739 billion in 2007, according to the IMF. Imports of crude oil alone (about 5 billion barrels per year at $100 per barrel) are now transferring $500 billion dollars a year to oil producing nations. Between 1982 and 2007, the US has accumulated current account deficits totaling $6.7 trillion, with $4.3 trillion added in the 7 years of the George W. Bush Administration.
Skeptic
More interesting numbers from Paul Krugman are here. The Fed's balance sheet is about $800 billion, which PK says is looking puny in relation to the size of the problem. Besides, if the flight to safety keeps short term T-bills close to zero percent interest, we're in the "liquidity trap" where the Fed can't goose the money supply by buying T-bills for cash.
The total amount of debt owed by US citizens and entities is about $50 trillion. Actually, the Fed source linked by PK says $51 tillion as of 30 June 2008, and there is a lot of potentially interesting detail in the Fed report, including this one: Domestic households increased their total debt from $8.5 trillion at the end of 2002 to $14.0 trillion 5.5 years later. (The fact that total debt is close to total net worth is a coincidence, because debt has already been subtracted in computing net worth, but it would be interesing to compare net worth to total debt in prior years to see how much we have levered up.)
Skeptic
To get later or earlier Fed Funds Flow reports go here. The next scheduled release date is December 11, 2008
Skeptic
Net worth shrank to $51.5 trillion at the end of December 2008. Next release, June 11, 2009.
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