As Chart #1 shows, private sector (households and non-profit organizations) leverage (liabilities as a percent of total assets) has now fallen 36% from its early 2009 high, and has returned to levels last seen in early 1985, when the economy was in full bloom. Our federal government, in contrast and very unfortunately, has borrowed with abandon, raising the burden of federal debt (federal debt owed to the public, as a percent of GDP) from 37% to 83% over the same 33-year period. If our government were run with the same discipline as households have displayed, that might be termed nirvana. We're as well off as we are today despite the ministrations of our government.
Chart #2 summarizes the evolution of aggregate household balance sheets. Note the very modest increase in liabilities over the past decade, the gradual recovery of the real estate market, and the strong gains in financial assets, driven by increased savings and rising equity prices.
Chart #3 shows the long-term trend of real net worth, which has risen on average by about 3.5% per year over the past 66 years. Note that recent levels of real net worth do not appear to have diverged appreciably from this long-term trend. That wasn't the case in 2000 or 2007 however, when stocks were in what we now know was a valuation "bubble."
Chart #4 shows real net worth per capita. The average person in the U.S. today is worth about $327K, and that figure has been increasing by about 2.2% per year, adjusted for inflation, for the past 67 years. (Note: the difference in the trends of Chart #3 and #4, 1.3%, is the average rate of population growth over this period.)
To be sure, there are lots of mega-billionaires these days who are skewing the statistics upward, but that doesn't imply that the average person's living standards have declined. Virtually all of the wealth of the mega-rich is held in the form of equity or real property investment, and all of that is available to everyone on a daily basis. A person making an average income in the U.S. enjoys all the advantages that our nation's net worth has created. Regardless of who owns the country's wealth, everyone benefits from the infrastructure, the equipment, the computers, the offices, the homes, the factories, the research facilities, the workers, the teachers, the families, the software, and the brains that sit in homes and offices all over the country and arrange the affairs of the nation so as to produce over $20 trillion of income per year. Would the average wage-earner (or, for that matter, the average billionaire) in the U.S. enjoy the same quality of life if he or she earned the same amount while living in a poor country? I seriously doubt it.