we are doing great

Discussion in 'Economics' started by EBenson, Dec 18, 2005.

  1. EBenson


    this year's debt development in the US :
    - private debt grew by 11,6%
    - income up by 2,8%
    - private savings rate -1,5
    - corporate debt up by 7,4%
    - fed debt up by 5,1%
    - state&county debt up by 12,6%
    private net worth went up by 11%:) (!!!)
    the government portion of the GDP is already higher than Australia,New Zealand (government interference in the economy)
  2. ??????................I'd guess that a lot of that net worth increase came from real estate gains. If real estate does head "south", be very very careful!!
  3. Alizar


    How does private net worth go up 11% when private debt went up 11.6%?

    That does not make sense to me, doesn't private net worth take debt into account?
  4. TGregg


    Yes, of course it does. You have confused total debt and net worth. Total debt does not factor in any assests, while net worth factors in all assets as well as all debt.

    Suppose you have 400 grand worth of stuff (investments, house, cars, etc) and owe 50 grand on a new BMW and 50 grand still on your mortgage. You're net is 400-100 or 300 grand.

    You open the paper to see GOOG is up $5 so your 10k shares are worth another 50 grand. To celebrate, you go buy that new BMW bike you've had your eye on. No cash on hand, so you take out a loan for 10 grand. So now your debt is 110 grand, your assests add up to (say the "used" bike is worth 8 grand) 458 grand. That makes your net worth 458-110 or 348 grand.

    Thus, your debt went up as well as your net worth.