dshort.com: Glass Half Full or Half Empty?

Glass Half Full or Half Empty?
February 15, 2006

Glass Half Full? The new Fed chairman, Ben Bernanke, has made his first semiannual Monetary Policy Report to Congress. On the subject of personal finance, Bernanke describes a "good news, bad news" situation:

Good News: "At the end of the third quarter (the most recent period for which complete data on wealth are available), the ratio of household net worth to disposable income stood at 5.65, well above its long-run average level of 4.75."

Bad News: "All in all, personal outlays exceeded disposable income in 2005. As a result, the personal saving rate, which had dropped below 2 percent in 2004, fell further in 2005, ending the year at negative 1/2 percent."

Reinforcing the mixed economic news is a fascinating publication from Standard & Poor: Consumer Credit: Another Year Older And Deeper In Debt. See especially Chart 1, "Debt Is At A Record High, But So Is Wealth."

Relevant also are some sobering charts recently created by MBG Information Services. The topics illustrated are:

Total Personal Liabilities as Percent of Annual Personal Disposable Income
Household Liabilities as Percent of Household Assets
Household Liabilities as Percent of Household Net Worth
% Gain over 5 Years to date in Total Household Net Worth
% Net National Savings to Gross National Income
% Current Household Savings to Disposable Income

All in all, my reading today doesn't necessarily resolve the age old question of "glass half full or half empty," but it does suggest that some Americans might be a bit closer to the bottom than the top.