Politics & Policy

Debt Be Not Proud?

Actually, when compared with household net worth, it's of little concern.

By Jerry Bowyer

Would you judge the status of someone’s personal finances without even looking at his assets? Probably not. But that hasn’t stopped the mainstream media from obsessing over the level of debt of the average American family, which they only look at in a vacuum, completely ignoring the growth of family net worth.

According to the Federal Reserve’s “Flow of Funds” report, released last month, the net worth of the American household (measured as assets minus liabilities) stands at a robust $51 trillion — yes, that’s trillion with a “T.” This isn’t just higher than last year (or the year before that; or the year before that). It’s almost twice what it was in 1995 and over 27 percent higher than it was in 1998 — right in the middle of Clinton’s “economic miracle.”

In other words, American households may be borrowing more today, but they’re acquiring even more assets. And thanks to low interest rates they’re borrowing in an environment that is particularly friendly to borrowing.

The result of all this is the highest level of household wealth in our nation’s history.

– Jerry Bowyer is the author of The Bush Boom and an economic advisor to Independence Portfolio Partners. He can be reached through www.BowyerMedia.com.

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