Q4 Flow of Funds report shows record $5.1 trillion drop in wealth

Every quarter, the Federal Reserve releases its Flow of Funds report. This always makes for good reading if you're a numbers/economic wonk. But it's especially important now because it tells us a great deal about the depth and breadth of the economic downturn.

For starters, the report showed household wealth plunged $5.1 trillion between Q3 and Q4 of last year. That drop is the most on record (the data goes back to 1952) and it left the net worth of households at $51.5 trillion, the lowest in four years. The decline in the housing market also left owners' equity as a share of total household real estate holdings at just 43%, a record low.

Some other details: Household debt shrunk at a 2% annual rate, the first decline ever, driven by a 1.6% fall in home mortgage debt and a record 3.2% decline in consumer non-mortgage borrowing. Business debt increased at an anemic 1.7% pace, the slowest since Q4 2003, and state and local debt rose just 1.2%. Federal government debt exploded at a 37% rate.