Angry Bear has some facts for us about what is going on in the US household portfolio:
The following table displays the annual changes in the assets and liabilities of US households over the last several years.
Sources: FOF tables F.100 and B.100. Note that this data is actually for households and nonprofit organizations. Nonprofit assets are estimated to comprise about 6% of the total combined category.
A couple of aspects of this data strike me as interesting. First of all, for the seventh year in a row, US households acquired more financial liabilities than they did financial assets. Naturally, this is due to the fact that much of the debt taken on by households was taken on to buy real estate. The escalating price of real estate meant that in 2005 the gap between the financial assets that households acquired and the financial liabilities they incurred was by far the largest ever.
It’s also interesting to note that households (and their pension funds) were net sellers of equities during 2005.
OK. So households as a sector as selling stocks and deeper in debt in both mortgages and other other debt (credit cards!). Does this mean they are house rich and cash poor, or just poorer over all?
Not to mention that I read this to mean that households will be in bigger trouble when the housing bubble pops. And that there’s less cushion nationally if the dollar overhang tries to come home…
At the heighth of the tech bubble the San Jose Mercury came out with a report that Silicon Valley folk were deeper in debt than almost any where else in the country, even if home values were taken into account.
What’s even more worrying is the national debt. Iran is threatening a new oil bourse based on Euros, Russia and many other countries have been selling off dollars for a while, and now Saudi Arabia and Dubai are upset with the US and are repositioning funds. Japan and China have slowed down their purchase of US bonds, with the ‘Caribbean Islands’ picking up the slack.
Let’s just hope China doesn’t decide to call their loans.