A report released by the Federal Reserve last Thursday revealed that household wealth in the United States rose 14 percent from 2012 to 2013, topping off at $80.7 trillion – a record high.
Household wealth is figured by assessing the value of homes, stocks, bank accounts, and other financial assets minus any debts accrued from mortgages, credit cards, and elsewhere. Overall, household wealth increased by $9.8 trillion from 2012.
The majority of this rise in household income can be attributed to increases in stock share prices, which accounted for $5.6 trillion of the $9.8 trillion increase. The other major contributor to the increased wealth was real estate value, which increased by $2.3 trillion.
2013 makes the first year in which household wealth has recorded a net-profit after the market finally recovered from the $10.6 trillion lost in the Great Recession which began in 2008.
While household wealth increased during 2013, it did so unequally. Stocks represented the greatest percentage of the overall increase in household wealth, yet only 15 percent of all Americans own stock shares, with the wealthiest 10 percent owning 80 percent of the total stocks.
Last month, a study conducted by researchers at Ohio State University showed that American wealth is still down 14 percent since pre-recession levels in 2006. So while overall household wealth may be increasing, it has yet to recover from the Great Recession caused by the crash of the housing market.
Despite wealth increases going disproportionately to the wealthy and still being lower than pre-recession levels, economists see positive signs for the economy.
Total debt for those outside the financial sector grew 4.3 percent in 2013, with household debt increasing 0.4 percent in the fourth quarter. Surprisingly, this is good news according to most economists. Rising household debt means that Americans are borrowing and spending more money: “While in recent years we have certainly seen that household debt can carry serious negative consequences, overall an increasing level of borrowing indicates that the economy is returning to normal patterns,” reported James McAndrews, director of research at the New York Fed.
As the old adage goes, “You must spend money to make money.” – a quotation FDR put to great use to get America out of the Great Depression.
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