Holy bubble economy!

This figure is from the CBO's Budget and Economic Outlook, August 2009. It shows household net worth as a multiple of disposable income. Until the mid-1990s, the ratio was fairly stable in the 4.5-5 range, dipping during the bear market, high inflation 1970s. The two most recent business cycles show dramatic and unprecedented increases in net worth followed by massive crashes. This is a phenomenon that cries out to be incorporated Minsky-style into macroeconomic models.

Household net worth seems to be back to normal. Another sign that the worst is behind us?