The wealthiest 1 percent now control 39 percent of the world's wealth, and their share is likely to grow in the coming years, according to a new report.
The world's total private wealth grew 7.8 percent last year to $135 trillion, according to the Boston Consulting Group's Global Wealth report. The top 1 percent control $52.8 trillion, and those worth $5 million or more control nearly a quarter of the world's wealth.
That concentration is likely to increase in the coming years as the wealth of the wealthy grows faster than overall global wealth. The number of millionaires in the world surged by 10 percent year, reaching 13.8 million. The study predicts that global wealth will grow around 4.8 percent a year over the next five years—though millionaires will see their wealth grow nearly twice as fast.
Those worth $5 million or more will see their wealth grow 8 percent, while those worth more than $100 million will see their wealth grow 9.2 percent. The $100-million-plus group will see their share of global wealth grow to 6.8 percent in 2017 from the current 5.5 percent.
Here in the United States, it's paper wealth, inflated by Federal Reserve printing and stock market gains propped up by Fed policy.
Robert Reich wrote the following yesterday:
Economic forecasters exist to make astrologers look good. But the recent jubilance is enough to make even weather forecasters blush. “Just look at the bull market! Look at home prices! Look at consumer confidence!”
Please.
I can understand the jubilation in the narrow sense that we’ve been down so long everything looks up. Plus, professional economists tend to cheerlead because they believe that if consumers and businesses think the future will be great, they’ll buy and invest more – leading to a self-fulfilling prophesy.
But prophesies can’t be self-fulfilling if they’re based on wishful thinking.
The reality is we’re still in the doldrums, and the most recent data gives cause for serious worry.
Almost all the forward movement in the economy is now coming from consumers — whose spending is 70 percent of economic activity. But wages are still going nowhere, which means consumer spending will slow because consumers just don’t have the money to spend.
On Thursday the Commerce Department reported that consumer spending rose 3.4 percent in the first quarter of this year. But the personal savings rate dropped to 2.3 percent — from 5.3 percent in the last quarter of 2012. That’s the lowest level of savings since before the Great Recession. You don’t have to be an economic forecaster, or an astrologer, to see this can’t go on.
Yes, home prices are rising. The problem is, they’re beginning to rise above their long-run historical average. (Before the housing crash they were were way, way above the long-run average.) So watch your wallets. We’ve been here before: The Fed is keeping interest rates artificially low, allowing consumers to get low home-equity loans and to borrow against the rising values of their homes.
Needless to say, this trend, too, is unsustainable.
What about the stock market? It’s time we stopped assuming that a rising stock market leads to widespread prosperity. Over 90 percent of the value of the stock market — including 401(k)s and IRAs — is held by the wealthiest 10 percent of the population.
Moreover, the main reason stock prices have risen is corporate profits have soared. But that’s largely because corporations have slashed their payrolls and keep them low. Which brings us full circle, back to the fundamental fact that wages that are going nowhere for most people.
Not even fat corporate profits are sustainable if American consumers don’t have enough money in their pockets. Exports can’t make up for the shortfall, given the rotten shape Europe is in and the slowdown in Asia.
So don’t expect those profits to continue. In fact, the new Commerce Department report shows that corporate profits shrank in the first quarter, reversing some of the gains in the second half of 2012.
And, by the way, the full effect of the cuts in government spending hasn’t even been felt yet. The sequester is going to be a large fiscal drag starting next month.
Look, I don’t want to rain on the parade. But any self-respecting weather forecaster would warn you to zipper up and take an umbrella. Don’t be swayed by all the sunny talk. There are too many storm clouds ahead.
I would add that in some areas, the real estate is bubbling again because the hedge fundies and Wall Street free marketeers are buying real estate with cheap Fed money and causing prices to soar again.
I'm sure that will end well.
In fact, I'm sure this will all end well.
Just like it did the last time - for the 1%, who now have 39% of the world's wealth.
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