But the loss in real wealth from January through September was about twice as large as the nominal loss — $13.5 trillion in current dollars—after accounting for the rapid inflation experienced this year. Inflation makes both debts and liabilities worth less in terms of purchasing power.

The 8.6% drop in real wealth over three quarters is the second-fastest decline on record (the data series begins in 1959). The only greater drop was following the financial crisis of 2008-09. (The wealth lost during the Great Depression of the 1930s would likely hold the record if we had the data.)

Balance sheets healthy—for now

Even after adjusting for inflation, real household wealth was about 10% higher than it was in late 2019, just before the COVID-19 pandemic hit.

Household balance sheets—in the aggregate—remained in excellent shape despite the losses on Wall Street and the erosion of purchasing power. Wealth as a share of annual disposable (after-tax) personal income slipped slightly to 769%, not far off the record 825% in the first quarter of the year.

At $18.8 trillion, liabilities were just 103% of annual disposable incomes, far below the peak of 136% seen in 2008, just as that housing bubble burst. In real terms, liabilities are lower today than they were back then, despite the much larger economy.

Homeowners, in particular, were in good shape financially as September ended, with the equity in their houses rising to a near-record 70.5% of market value from a record low of 46% in 2012. But if home prices continue to fall as they have done in the past several months, homeowners without much exposure to the stock market will begin to feel poorer. What will happen to home prices as mortgage rates rise is a major unknown facing policy makers and homeowners alike.

Taking on more debt

Warning signs are also flashing as household debt has awakened, like Rip Van Winkle, after a 10-year nap. Following a decade of no growth in debt in inflation-adjusted terms, real household debt grew at a 4.3% annual rate in the third quarter, the fastest growth since 2007.

Consumers are taking on debt or dipping into their savings to maintain their living standards. By one measure highlighted in this Fed report, the personal savings rate has fallen to 3.7% of disposable income, after averaging more than 10% for the past 10 years.

In the aggregate, households still have plenty of ready cash, however. Bank accounts and money-market funds are still bloated with more than $18 trillion in relatively liquid deposits. That’s nearly enough to pay off every cent of debt that households own.

But of course, the people who own the debt and the people who have millions in the bank are not the same.

The Fed will report additional details of the financial accounts next week, including the distribution of assets and liabilities according to various groupings, such as age, race, educational level, income and wealth. But even Fed economists have cast doubt on the accuracy of those distributional tables, because the pandemic disrupted everything.

Follow the money, if you can

One of the biggest unknowns in the economy today is how much savings typical families have to fall back upon if times get tougher. Under one set of assumptions, the typical family in the bottom half of the wealth rankings has about $10,000 in ready cash equivalents. That doesn’t pass the smell test for me, considering how many people live paycheck to paycheck. But who knows?

We may not know who really holds all that cash until harder data from the Fed’s Survey of Consumer Finances, which is conducted every three years, are released next year.

I hope families really are resilient enough to maintain their living standards even as the Fed continues its effort to slow their spending to bring inflation back into line. If regular families tighten their belts too much, a job- and wealth-killing recession is inevitable.

Rex Nutting is a columnist for MarketWatch who has been writing about the economy for more than 25 years.