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MONEY COMMENT
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As reported earlier, the Financial Services Authority (FSA) is very anxious about high levels of debt and low levels of saving. Every month's figures reveal new highs for mortgage debt and consumer credit, with few signs of any let up in growth. To balance things out, here's some more cheerful news. According to a recent survey, we're a lot wealthier than we've ever been - it just depends on how you look at the figures. A recent report from Michael Saunders, chief economist at investment bank Schroder Salomon Smith Barney (SSSB), reveals that, despite the doom and gloom and stock market falls, we continue to get richer. SSSB's figures reveal that, after accounting for inflation, overall wealth rose by 4.7% from £4,331bn to £4,535bn between 2001 and 2002. This means that, as a nation, we are around £204bn(4.7%) better off than we were a year ago. How can this be: after all, haven't plunging stock markets caused the value of our shares, life and pension funds, unit trusts and managed funds to tumble? Yes, but we've forgotten the UK's secret weapon: housing. Between 2001 and 2002, the equity in our homes (their value after subtracting mortgages) soared by a staggering 34% to £2,058bn - more than two TRILLION pounds. That's a gain of around £522bn, which more than compensates for the 26% (£156bn) fall in the value of our shares, gilts and unit trusts. Long-term savings assets (life and pension fund holdings) also fell in 2001-02, by £138bn to £1,233bn, again thanks to poor stock market performances. The figures from 2000 to 2002 aren't quite so good: as you can see from the table below, our real wealth has fallen fractionally (0.8%) over the last two years: Another bit of good news is that liquid savings were up £90bn over 2000-02, so we've got more cash (after subtracting personal debt) than we had two years ago. So, take heart: as long as house prices don't crash, your overall wealth may continue to rise. Nevertheless, remember than every pound you squander reduces your wealth - don't spend all that juicy housing equity living for today!Figures in £billions 2000 2002 Change Change %
Net housing equity 1,445 2,058 613 42.4
Life and pension funds 1,674 1,233 441 -26.3
Liquid assets (cash, etc.) 647 737 90 13.9
Shares, gilts & unit trusts 765 442 323 -42.2
Other 39 65 26 66.7
Totals 4,570 4,535 35 -0.8
On the other hand, if you exclude life and pension assets, which are salted away for the long term, the 2000-2002 total is up 14%, from £2,896bn to £3,302bn - an increase of £406bn.