Some five years after the worst financial crisis in living memory, it seems that while many are still trying to find a way out of it, others are becoming more richer than ever…
One of the worst consequences for the majority of a financial crisis is the resulting redistribution of wealth. In the aftermath of the GFC it seems that Governments, and that are ironically elected by the masses (not the tiny elite), have been helping this process along where the 1% who enjoy riches beyond the dreams of the many have been benfitting disproportionately from these policies.
The massive U.S. experiment that started with a simple so called Twister operation and then expanded through three QE programs has served only to bolster the wealth of the worlds wealthiest to some $33 trillion now. This is the shocking amoun that the world’s 2170 billionaires control. A sum this is in fact double that of the globes wealthiest nation, the U.S.’s GDP. It looks likely under the stewardship of Janey Yellen that their wealth will continue to grow again during 2014.
Data from the Bloomberg Billionaires Index, a ranking of the World’s 300 wealthiest individuals, revealed a net addition of $524 billion to their collective net worth in 2013, a 16.5% gain for the year. The aggregate net worth for these individuals was $3.7 trillion at the end of 2013, which averages $12.3 billion for each. Of the 300 people that are part of the index, only 70 recorded a loss in the year. The trend has been really positive for all these billionaires, in particular for Bill gates who was able to recapture the top position with a net worth of a staggering $78.5 billion.
The year was a great one for tech guys like Zuckerberg, Page and Brin, as their companies outperformed the market with substantial rises. Facebook doubled in price, yielding a $12.4 billion gain to Zuckerberg, actually the 6th best dollar performance for the year.
With the Federal Reserve keeping interest rates near zero and buying $75 billion per month in assets now after the token $10bn taper, the equity madness of the 1990s is back and companies like Facebook, Netflix, and many other technology companies have seen their stock prices skyrocket way beyond any fundamentally justifiable real value.
Sadly for the majority of US and global citizens, and in contrast to what many FED officials have said in the recent past, the price increases experienced by equities isn’t shared equally. Equity ownership is unevenly distributed as only half of US households own them. In fact, the bottom 80% households own just 20% of all equity wealth whilst in contrast the top 1% households own 40% of all that wealth. While this equity income is asymmetrically distributed, home prices have still to recover their peaks (an area that the bottom 80% are more exposed to) and if we look at income, the scenario turns even worse. A recent study by Emmanuel Saez from UC Berkeley shows that a staggering 95% of all income growth since the recovery began in 2009 was captured by the top 1% households. Put another way, income growth for the bottom 99% during the recovery has been around 0.4%.
So, for the globes 2170 billionaires, monetary and fiscal policy has been very effective so far allowing them to control a total of $33 trillion. They have been able to press policy makers in the direction of their own interests, and which resulted in a massive reflation of financial assets – the primary area where their net wealth is.
In 2014 Janet Yellen will continue to work on these billionaire’s agendas and likely drive shares higher until the point where prices are so out-of-sync with fundamentals that a new crash and crisis will inevitably occur… The poor will then became poorer and the wealthier will no doubt once againpress for another reflation to restore their wealth!
Filipe R Costa