Ben and the Assets

The Federal Reserve has come in for loads of criticism. Having once been regarded as the world's #1 central banker, Alan Greenspan's name is now mud in many circles. Ben Bernanke is also panned by those same detractors. But as each quarter passes you see method in the madness. While many fret that the huge rise in the Fed's balance sheet can only lead to disaster, the US personal balance sheet continues to improve. The latest data for 1st quarter 2013 shows another 8% rise in real personal net worth, following 8% and 9% in the previous two quarters. Many have lambasted the US for debt excesses especially during the 2000s. But what most fail to remember is that debt has its counterpart on the flipside of the balance sheet. And while the US consumer has reduced its debt burden, personal assets have surged. Total assets are now at $84 trillion while liabilities are at only $13 trillion, having fallen steadily for the past 5 years. Housing and equities make up a big slug of those assets and it's fair to say that these do not look particularly overvalued right now. On a cash flow basis, the combination of low interest rates and falling debt has pushed the consumer interest bill down to a record low of 8.3% of income, compared to 12.8% before the credit crunch. Being a liberal economist I argue that too many distortions and vested interests in the US economy lay behind the original explosion of debt and the 2009 credit crunch. However, once that had happened the Fed's focus on rebuilding asset values has slowly but surely medicated the recovery. We may see the outlook for US consumers continuing to improve for several years. Ben Bernanke was born in Augusta, Georgia. The QSL is from WTEL, Augusta, operating  in the US AM x-band and heard in Kent in 2001.