Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Net Worth--and the Dollar--Rise Again

Posted by: Michael Mandel on June 12

The amount of (pessimistic) nonsense that is written about the U.S. economy is truly extraordinary. The usual rap is that the U.S. is borrowing its way into oblivion—and eventually we are going to get our come-uppance when the dollar plunges and no one wants to lend to us anymore.

But oblivion is looking pretty good these days. Despite all the pessimism and all the borrowing, the country’s net worth continues to rise, according to the latest figures from the Federal Reserve!
What’s more, the dollar is up as well in recent weeks.

These two facts are connected. Borrowing (trade deficits and government budget deficits) is sustainable as long as a country is generating enough wealth to cover its debts. So as long as net worth is rising, the downward pressure on the dollar is limited.

Let me say this again. Rising net worth = trade deficits are sustainable.

Let’s look at a chart first. I calculate a concept that I call “real adjusted net worth per capita”. That’s equal to household net worth, minus government net debt, adjusted for inflation, and divided by the size of the population.

Here’s what the chart looks like.


Real adjusted net worth per capita rose to $142,000 in the first quarter of 2006 (in 2000 dollars). That’s up 6% over a year earlier, and higher than the previous peak.

You can see from the chart that there is a long-term upward trend, distorted by the late 1990s boom. So even with all of our borrowing, our net worth has been increasing.

What about the exchange rate? The yen-dollar exchange rate is at 114 as I write. That’s roughly where it was in the early 1990s, despite all of the U.S. trade deficits since then. The euro-dollar exchange rate is at 1.26. That means the dollar has depreciated a bit since the end of 1998 (when the euro went live), but not very much.

TrackBack URL for this entry:

Reader Comments

Brandon W

June 12, 2006 11:45 AM

I would like seeing this calculated out from 1970-present, at least, if not 1950-present. Americans think far too much in the short term; and anything can look really good - or really bad - in the short term. And swings one way or another can look huge on a short-term chart, but relatively insignificant in broader terms.

Brandon W

June 12, 2006 11:48 AM

.... Also, it would be good to see such charts with the top 10% shown seperately from the bottom 90%. Rising wealth for the top 10 million households does not necessarily mean good things for the other 100 million households in the US.

Mike Zarlenga

June 12, 2006 12:25 PM

Mr Mandel,

How much of that per-capita net worth growth in the last few years is real estate equity that's about to vanish as the RE bubble bursts?

Movie Guy

June 12, 2006 04:40 PM


I can't believe some of the stuff you write.

You really don't understand the dangers of our growing deficits.


June 12, 2006 05:19 PM

Hmmm, perhaps this explains the patently obvious observation that today's "struggling" middle class with their "falling wages" somehow stubbornly persist in indulging in ever-increasing material wealth ... spending their money on all those neat things that didn't even exist a generation ago, like iPods, Xboxes, broadband Internet, digital cable, pet healthcare insurance, pet psychologists, cell phones, VOIP phones, wi-fi phones, wi-fi hubs, media center PCs, DVD Players, hybrid vehicles, bottled water, bottled water for pets, RFID chips for pets

.... yes we're so freakin' poor, practically a 3rd world nation.


June 12, 2006 05:20 PM

Movie Guy,

You think Michael Mandel doesn't understand the risks (or lack thereof) of our deficits? Odd that you don't elaborate those risks.

Then again, you probably think Bush is the worst President ever, and that the economy is very weak right now.


June 12, 2006 05:21 PM


What is interesting is that per capita real net worth is growing at a trendline of 4% a year, while per capita GDP is growing at only 2.5% a year.

Why might that be?

This divergence is odd. The ratio of national household wealth to GDP is going to continue to increase.

Mike Mandel

June 12, 2006 05:43 PM

Hi Movie Guy,

And what exactly are those risks of deficits? The risk of borrowing is that you can't pay back your debt. But as long as our net worth is rising, that's a sign that our assets are growing faster than our debts.

David Foster

June 12, 2006 10:19 PM

What happens to these net worth numbers if the stock markets fall by 20% or so?

It would be interesting to look at national net worth in terms of Tobin's "Q" ratio (replacement cost of assets)

Mike Mandel

June 17, 2006 10:24 PM


Obvious net worth numbers jump around. But the long term trend is pretty clear.


December 20, 2006 10:07 PM

I'm skeptical of the numbers presented. How is household net worth calculated. If I borrow $50,000 dollars, buy an suv, and ipod, new clothes, a surround sound system, new skiis, etc has my net worth changed. The things I bought are assets so the answer from business terms in no. I'de like to see more detail on what I expect is a misleading article.


July 30, 2007 03:36 PM

Your words have had resiliance, Mr. Mandel, but I'm still horrendously pessimistic. Net worth has risen on an ephemeral sea of home equity, paper stock profits and low interest. The world markets cannot defy economic gravity forever, especially as deficits mount. I don't care who's pulling the levers behind the curtains.


July 7, 2008 01:18 PM

This is a strange article. How was the per capita net worth of $140,000 calculated? Are you telling us that according to Federal Reserve, average per capita networth of Americans is rising when the equity base of housing is declining? Where does the net worth come from? Moreover, you efort to combine trade deficit and budget deficit in one category is also strange.

Brandon W

November 7, 2008 10:40 AM

I wonder how this chart is looking now?


January 19, 2009 03:03 AM

how funny is it to read this bizarre article in Jan '09 after everything has imploded... and funnier still is the Bush-ite who laughed at anyone who thought Bush was the worst ever President (hard to believe that about 30% of the US still are in the dark on that point).


March 12, 2009 01:15 PM

Can somebody please tell where is Mr Mandel writing nowadays? I would like to enjoy another of his article, especially in these "pessimistic" days.


October 27, 2009 04:54 AM

hilarious in hind site.

Thank you for your interest. This blog is no longer active.



Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

BW Mall - Sponsored Links

Buy a link now!