Saturday, September 22, 2012

The Real Value of QE1 Through QE3?

As a result of the collapse of the housing market that started in 2006, households in the US lost just over $7 T (yes, that is $7 trillion dollars) in home owner's equity (Q4 2005 through Q3 2011).  In recent quarters this loss is not quite so severe at $ 6.2 T.  See the first chart below:  

However, during a similar period of time household net worth declined initially $16.2 T (Q2 2007 to Q4 2008), however, all but $4.7 T has been regained as of the end of Q2 2012.  Clearly the difference in the household net worth and owner's equity has been the value of the stock market and the net repayment of debt (not quite $1 T).  See the chart below.

Just in case you are curious about the value of QE1 through QE3, these programs put excess reserves into the banking system and have the added feature of maintaining the level of the "wealth effect" for the US consumer by propping up the value of the stock market.  

In the Fed data used above household net worth and home owner's equity data includes non-profit organizations.  Although it is not specifically broken out by the Fed, the non-profit sector is assumed to be about 6% of the total.  Other authors.  

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