I've created a chart at FRED that compares household net worth to household financial obligations over the last 15 years or so.
This is a play off of Keen's charts that Tom posted yesterday. Similar to what Keen does this compares net worth, a stock, ie measured at a moment in time, to financial obligations ratio, a derivative of a flow, measured per unit time. Obligations here are represented as a percentage of income flow.
- To say the least, net worth really took a hit at the GFC, in fact this hit dwarfs even the dot-com crash of 2000 era.
- All the while net worth was increasing in the last decade, so was the obligation ratio. While increasing obligations is evidence of the success of the rent seekers, apparently the household sector was indirectly participating in this success probably due to increases in residential property values and household stock portfolios exposed to rent seeking.
- At this point, obligations as a percent of income is at a 15 year low. So somehow, the household sector has been able to shed obligations as a percent of incomes. This being perhaps more significant because incomes are down. Could also be evidence of cohabitation of would-be households.
- The drop in obligations shows no sign of bottoming, while net worth has stabilized. Evidence of wealth moving to the top, while J6P is still de-leveraging.
A bottom in the Obligations Ratio may be something to look for as evidence of the "recovery" finally starting to broaden.