The Federal Reserve reported on September 23 that American households had a big jump in net worth, but it was accompanied by a big increase in debt and credit. “Thanks in good part to a big surge in stock market earnings, total household net worth rose to $141.7 trillion through the second quarter of 2021”, this is a little above 4% better than the previous quarter and about 19% better year to date. A big reason this can be attributed to is the massive increase in the stock market. As I said previously debt also rose significantly “Household debt mirrored that of the federal government, which ended the quarter owing $28.5 trillion after a 9.6% increase”. It is good that households are seeing an increase in net worth, but at what cost? It is not good for our debt to rise simultaneously alongside net worth. Despite the positive of net worth increasing this past quarter, there is little evidence to suggest that this big increase in net worth will continue to occur. About 60% of the net worth increase is attributed to the rise in the stock market, the stock market performing as good as it has been cannot be the sole evidence to support a constant increase in net worth because of how inconsistent stocks can be.
source:
https://www.cnbc.com/2021/09/23/household-net-worth-rises-above-141-trillion-but-debt-up-sharply-as-well.html
2 comments:
Prof. Skosples continues to reference "bubbles" in class. I was just recently looking for a house with my boyfriend and we were looking for almost 7.5 months and had to settle on a condo instead. Any home that was available would go for 25k+ above list price with no inspections... basically 25k+ above with no other terms. For a first-time buyer, these conditions weren't feasible for us. I suspect that the housing market will crash again and that we are in a bubble. However, I hope that is not the case but it is a concern due to such high prices and a severe shortage in homes.
I agree that at some point there will be another crash. The question is how big of a crash will it be and will it collapse the economy again like it did in 2008? I don't think it will be that bad but it still has to be a major concern
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