US Household Net Worth, Adjusted for Dollar Devaluation
October 08, 2007
Posted at 09:11 PM
The second quarter Fed survey of household net worth was released last week federalreserve.gov. It shows that household net worth has risen to $57.859 trillion, up 7.8% from last year.
And since the end of 2001, when household net worth was $40.402 trillion, net wealth has risen 43.2%
This is the accumulated wealth of US households by year since 2001, in trillions of dollars:
2001 $40.402
2002 $38.829
2003 $43.973
2004 $48.064
2005 $52.018
2006 $55.886
2007 Q2 $57.859
Not bad, eh?
Especially considering all the doom-and-gloom, end-of-the-world types out there telling us to stock up on rifles and canned goods for the coming economic apocalypse.
But why measure wealth accumulation in dollars, a currency which hasn't exactly replicated Atlas holding up the world? After all, the dollar is merely a unit of account, one amongst many.
What has been the growth in US wealth relative to the world's other currencies?
The dollar index is a basket of currencies relative to the US dollar. Since 2001, the closing levels of the dollar index are as follows:
2001 116.75
2002 101.85
2003 86.92
2004 80.85
2005 91.17
2006 83.65
2007 Q2 81.92
Adjusting for the declining dollar relative to the world's currencies, household net worth in the United States has been (using 2001 as the base)
2001 40.402
2002 33.874
2003 32.738
2004 33.285
2005 40.621
2006 40.041
2007 Q2 40.598
Total gain since 2001 = 0.5%
Not so good. It's even better when you do it in gold.
The closing price of gold:
2001 $278.95
2002 $347.85
2003 $415.05
2004 $438.05
2005 $517.00
2006 $635.70
2007 Q2 $650.90
In terms of gold, American household net worth has been (using 2001 as a base case):
2001 40.402
2002 31.138
2003 29.554
2004 30.607
2005 28.067
2006 24.523
2007 Q2 24.796
Total loss since 2001 = -38.6%
Ouch, that's painful.
A specious argument, you say? Not if you consider that the dollar was once fully convertible into gold. Today, gold closed at $733.30.
I am long gold and silver, and will be looking to get more so in the future.
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