Status of US Household Wealth

The US Federal Reserve released its Flow of Funds release for the second quarter of 2009, which provides a fascinating insight that should normally debunk the theory of "green shoots". However, the recent events since March 2009 in the financial markets have brought about a paradigm shift in irrationally of the ever exhuberant Wall Street, whose new centrality is the concept of "Less bad news is good news". Moreover,c onsidering the fact that rationality is alien to the irrational markets, we just have take cognisance of the problem and keep reminding ourselves that deflation is still a likely possibility, if the world economy doesnot recover quickly.

The following points have been gleaned from the most recent release (on 17 September 2009):

-- Household debt contracted at an annual rate of 1.75 percent in the second quarter, the fourth consecutive quarter of contraction.

-- home mortgage debt decreased at an annual rate of 1.5 percent, while consumer credit decreased at an annual rate of 6.5 percent.

-- Household net worth—the difference between the value of assets and liabilities—was an estimated $53.1 trillion at the end of the second quarter of 2009, $2.0 trillion dollars more than in the preceding quarter