$57.9 Trillion — American Net Worth

We previously reported on assets American families and individuals hold in retirement accounts and on our collective net worth in financial assets (see below). Now, we are putting it all together for you in one number–net worth–that is all assets including real estate minus all liabilities.The news on this front is very good and it keeps getting better. As of June, 2007 the report gives the net worth of American households as: $57,858,700,000,000. That’s almost $60 trillion. The increase from the previous quarter was: $1,205,800,000,000 With the following, you can see how we have been making progress year-by-year since 2001, with only one down year in 2002. These are all year-end results except for 2007, which is through June 30.

If you calculate from the year-end result for 2001 through this year’s result for June 30, you get a growth rate of nearly seven percent (6.76%). That is very impressive given what we have been through, including the worst bear market for stocks since World War II, the terrorist attacks of September 11, 2001, a recession and, recently, falling home prices). It is also impressive compared to inflation, which has been moderate throughout this period of time.

Now, you may ask, how can our net worth be going up so steadily if we are not saving any money? After all, we hear about our low or non-existent rate of savings all the time. When you read laments about our ‘low’ savings rate, you should bear in mind that this is a statistical item rather than a commonsense use of the term savings. The U.S. Commerce Department’s Bureau of Economic Analysis (BEA) compiles statistics on savings, but their calculations have little application in the real world in which we live because the BEA’s methodology of calculating savings does not include certain critical components that most of us think of as savings.For example, the BEA’s calculations of income and savings do not include capital gains even though capital gains on stocks, real estate, businesses and other investments are a significant part of what we would consider our savings or wealth. Also, the value of someone’s home equity and retirement plan holdings are also not fully-factored into this calculation of savings, so the published reports of national savings significantly understate the true savings that Americans are making.

I think it is clear that, despite the widespread handwringing over our lack of personal savings, our net worth is moving up nicely. And, this is true despite the fact that we went through a very difficult bear market for stocks from 2000-2002 coupled with a recession and we are now going through a downturn in real estate. So, the next time you hear a politician, a pundit or just your next door neighbor bemoaning our financial status and predicting gloom, doom or worse, just refer back to this statistic on our combined net worth and set him straight.