U.S. Household Net Worth Hits Highest Level Ever | Hacker News Reader

U.S. Household Net Worth Hits Highest Level Ever

wsj.com

45 pointslxm59 comments

Note that this is _total_ net worth which is a bad metric to track. If the small percentage of people who own stocks had an increased value in net worth due to the bull market, this metric goes up. A better metric would be tracking the median or quartile values since that would track the majority who are burning through their cash reserves due to a job loss.

> small percentage of people who own stocks

According to this Gallup Poll[1], about 55% of Americans are estimated to own stocks.

[1]: https://news.gallup.com/poll/266807/percentage-americans-own...

The point is more that goal $ holding in stock per household is very uneven. Most of those 55% don't have much in the way of stock, and then a very tiny number have $billions.

How much is much? Median retirement account value at age 50 is about $100,000.

https://www.synchronybank.com/blog/median-retirement-savings...

Note this includes retirement accounts (like 401(k), IRA). Not really directly reflective of "net worth" given it's more or less locked up until retirement.

No need to make up your own definitions. Net worth = assets - liabilities. 401(k) and IRAs count as assets, and you can draw from them with various amount of flexibility depending on how dire your financial situation is.

Just substitute your preferred terminology if you weren't a fan of mine. I was just trying to get a point across, not debate semantics.

What was the point you were trying to get across?

That these include retirement accounts?

And therefore directly reflective of net worth.

A billionaire does not have a room of dollar bills either.

I can't read the paywalled story but did pensions count towards net worth? If not then the inclusion of retirement assets into net worth is clearly misleading when looking at historical numbers.

Yeah but tax penalties and other fees for withdrawing early.

Not really, as outlined here[0]. Even with penalties, becoming homeless and becoming homeless with a million in a 401(k) are vastly different despite some folks here thinking both are equally broke somehow.

[0] https://news.ycombinator.com/item?id=24550715

Yeah seen that, not too well up on all this. Sounds like they are talking about converting their account. I guess maybe a lot of people aren't up on this sort of stuff or aware of all their options unless maybe they went to college to be an accountant maybe.

Neither of those accounts are "locked up", there are ways to access your money before the government sponsored year of retirement. See rule 72(t) or periodic distributions for withdrawing without penalty. Finally you can always withdraw the money with a penalty.

You can withdraw your contributions to ROTH IRA's at any time, penalty free and ROTH 401(k)s are easily rollover-able to a ROTH IRA.

They are completely a part of net worth, it's in the very definition.

I thought it was obvious... I wrote "more or less locked up" precisely because I knew if I just summarized it as "locked up" without qualifiers somebody would eagerly jump in to trash my comment here. Somehow I forget people are keen to do that regardless. My bad, I thought I was trying to help people interpret that statistic but now I regret it.

I'm not sure I understood your point though.

Retirement accounts hold YOUR money, that is money that YOU saved for YOUr own use later.

Whether I put it in a savings account or taxable investing account it is still part of my net worth as it's money I will be using some time in the future.

Perhaps I'm too dense but I'm not understanding why you are not including retirement accounts as part of net worth calculations.

The sentence was "55% of Americans are estimated to own stocks", and I pointed out this includes retirement accounts, feeling (evidently quite wrongly) that that would be important to many readers to be pointed out.

If you don't see any value in that, then I'm sorry, the next time I won't mention it. My apologies. I repent.

why would that not be included in your net worth?

It doesn't say how much they own.

20% of Americans hold >90% of stocks: https://www.visualcapitalist.com/composition-of-wealth/

Without also providing the median stock value, that is a meaningless statistic.

I was wondering if that includes retirement accounts and checked it, looks like they consider that too. I know someone recently decided cash out their retirement account, sorta panicking with the market going down due to COVID, was stressful to check... but I guess with their type of account they didn't get to pick the individual stocks either. Not sure what type of account, back from when they used to work full time. Kinda wonder if maybe they just had a crappy broker or account person though, guess had trouble getting clear answers to things. Seems you have more control with an app like Robinhood but you lose out on employer matches and stuff like that though.

That number isn't great because it again counts people who have 1k in the 401k like they're getting the same benefits from stock market increases as million and billionaires. The majority of people have a pretty small amount of money in their 401k.

https://www.businessinsider.com/personal-finance/average-401...

It's like the old joke that Bill Gates walks into a room and now people in that room are billionaires (on average).

> A better metric would be tracking the median or quartile values

A better for what purpose? You comment seems to imply a bias towards celebrating only some people's wins.

Actually yours does. The numbers are raised by billionaires as opposed to the median numbers.

>A better for what purpose?

For the purpose of accuracy in communication. Speaking in terms of "household net worth" implies that you are referring to the net worth of individual U.S. households, not the net worth of the entire country taken as an aggregate. This is especially true when the net worth of most U.S. households has been stagnant or lower for almost 40 years while the net worth of the wealthy has exploded.

https://mises.org/wire/median-household-wealth-america-going...

Its a bias against celebrating the minorities wins by averaging and talking about everyone's wins.

So it's up .38 trillion from 119 trillion, less than a third of a percent, in dollar terms, in the same interval over which the dollar has shed 4.5% versus the Euro.

While I'm sure there's a lot of savings in many segments, I think some addressing of inflation is needed in this analysis. You can't inflate the monetary supply for free, as housing markets are showing right now...

Seems like another article covering the Census income and poverty data, where there was some discussion on if household income growth is correlated to a possible growth in household size.

https://news.ycombinator.com/item?id=24499723

What is a household? I've seen reports that a lot of 20-30 year olds have moved in with parents since COVID 19. That could cause this metric to spike, even if they're making less now than before.

Fair warning, I didn't read the article.

They aren't using household that way here. Household assets simply means assets owned by people and not owned by governments or businesses.

Well technically they are using households that way here too, it's just that they're looking at the overall total household net worth, so the actual number of households doesn't matter. But start looking at the average amount per household, a closely related statistic, and now we're back to the same problem that combining/splitting households affects the figure.

I would imagine this is going to be true at a majority of points where markets are around all time highs. Right?

This is functionally equivalent to just saying: we injected trillions of dollars into the markets in a short period of time.

I think it’s shorthand for ‘Americans are doing just fine’ and there is some truth to it.

In other words: This is why no one wants to emigrate to Venezuela nor are there coyotes for Americans to sneak into Cuba.

Isn't the number of Americans wanting to emigrate into other first world countries (Austria, Norway, Germany, etc) at an all time high, though?

Are they communist countries?

Once you subtract US Debt liabilities, citizens end up with -88826 per person though.

https://www.usdebtclock.org/#

Relative to GDP, US debt is still far below countries like Japan. In fact during low interest times like right now it would be almost irresponsible not to take on more debt, from a purely financial engineering perspective.

This is an incredibly misleading argument to make to anyone outside of the econ or finance world who lacks context. Japan is an extreme outlier in terms of debt loads for stable developed nations and they are conducting an experiment with their economy that many think will end poorly (also many argue that it won't end poorly)

The US's current debt load by percentage would have been a national outrage at any time in the last 100 years and we really have no idea how this game will play out. I would not trivialize it. 135% is a staggering and unprecedented for a major international power and the list of countries who have faced issues with smaller debt loads in the past is long.

135% is staggering? What are the repercussions? Zero. None. The financial world doesn’t care. MMT is right here. People keep talking about how large debt will “ruin” the US but it hasn’t had any effect on the US and other countries.

That’s why Japan didn’t suffer any of the theoretical downsides and neither will the US.

so why not go to 1000% ? 10000%?

MMT literally says why not

Yes, and this is why a majority of people knowledgeable about economics look down on mmt.

Here's one reason you cant. The whole argument around mmt is based on our reserve currency status. Ie if you are Zimbabwe mmt doesn't work. But if you were to increase debt buy that much (ie increase money supply drastically) that's essentially economic warfare on our trading partners who rely on dollars. So the more we print the less attractive the dollar is as a reserve currency. But remember that first part? Inflation will kick in more rapidly the further we push people toward adopting other trade currencies and dollar demand drops.

NOBODY who studies economic policy, not even any MMTer I've heard of advocates for a 1000% ratio because they understand it would break the international trade system. They simply think we can print a lot further than we have

> People keep talking about how large debt will “ruin” the US but it hasn’t had any effect on the US and other countries.

Yet. This argument can be viewed like smoking.

I think the real question becomes what happens when the lender decides not to lend more because they realize they're never getting paid, or the call the loans and now they want what? Our businesses, our land, our children, our sovereignty?

Also as money saturates a system, it gets used on less and less productive things. We'll see the results of spending a dollar (long run) to get a nickel (today).

Like all countries really. EU and UK debts are like 80% of GDP, US's about 100%, China's is 3 times their GDP.

China's national debt is definitely not 300% - checking Wikipedia it says only 48.4%. If you add ALL their debt: household, corporate, and national...then it's 317%.

Please be careful citing these figures.

Debt clock lists us at 136% debt to GDP. We are long passed 100%

That's not how government debt works. That debt ends up as deposits including your savings account. It's an accounting identity. Debt clock could be renamed Savings Clock.

No. That's insane. That's like saying I took out a million dollar loan and my bank account went up by a million so I saved a million.

There is no rule that that money has to be deposited or will be deposited. Huge amounts of it end up in financial instruments including things like leveraged derivatives that no one would say are anything like a deposit.

The OP seems to have a perfectly reasonable understanding of how government debt works and it is absolutely reasonable to hold the assets of a thing up against it's liabilities to ascertain standing.

>> That's like saying I took out a million dollar loan and my bank account went up by a million so I saved a million.

For many governments that issue currency, particularly the US government, that is how it works. Not exactly the machinery, but close enough. To a first approximation, "debt" is just part of the money supply.

For you, it is not. It is a debt. Because: you are not a government. You do not issue currency. You are not immortal.

Cheers.

It would be much more akin to saying you generated a revenue or cash flow of a million in exchange for a liability of a million. It would require an extreme feat of verbal and mental gymnastics to call that savings.

If creating debt == savings we would not limit ourselves to merely 135% because there is no downside to savings.

The US is not immortal at least it is certainly not guaranteed to be.

And as much as it hides the uglier realities of having to think through the mechanics of actually running a government, the assumption that the US has an unlimited capacity to monetize debt, even given it's current (and deteriorating) defacto reserve currency status, has never been a meaningful framework for thinking about monetary policy

A condescending cheers back to you.

Federal debt surged more than 50%.

And so did fed balance sheets[1]. It's clear that this is all just printed money.

[1] https://fred.stlouisfed.org/series/WALCL

Yes but that debt/printed money is interspersed throughout the economy in incredibly complicated ways and cannot easily be reversed. This does not necessarily mean the debt isn't real or can't cause problems.

Hey y'all, just noting that we're going to be seeing a lot of these massaged figures in the coming years. Just look around, how are the common people around you doing?

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