Q2 Fed Flow of Funds: Federal Gov't debt increases 24% while everyone else is getting out of debt

U.S. household wealth fell by $1.5 trillion in the second quarter.  Household net worth fell to $53.5 trillion, well below the $64.2 trillion it had reached at the end of 2007. 

Household debt contracted at an annual rate of 2¼ percent in the second quarter, the ninth consecutive quarterly decline. Nonfinancial business debt was unchanged in the second quarter.  State and local government debt declined 1¼ percent at an annual rate in the second quarter, after five consecutive quarterly increases. Federal government debt increased at an annual rate of about 24 percent in the second quarter, four percentage points faster than in the previous quarter.

BOTTOM LINE

What is clear with this data is that individuals and companies seem to be doing what they should be doing if they are recovering from overspending.  People are paying off their debt.  Mortgage debt contracted as did consumer credit.  Even states are paying down their debt.

What is also clear is that the Federal government is acting irresponsibly.  If the US is unable to stop this growth of debt, it will default.  There is no other alternative.  Just 3 months ago the Fed was reporting a 20% growth, and since then it has increased to 24%.That is why we have consistently warned against inflation.  It has the capability of destroying the fiscal stability of the United States.

More

Federal Reserve Release: Q2 flow of funds
Public debt outpaces private deleveraging

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