Global Wealth Rising at the Fastest Rate Ever Recorded

The Research Department at Credit Suisse has released its Global Wealth Report 2014, which measures trends in wealth across the world. Its key findings are that although economic recovery overall remains challenging, total global wealth has grown to a new record between mid-2013 and mid-2014, increasing to more than twice the USD level recorded in the year 2000.

Further, it has added an interesting study on Wealth Inequality, a subject to be covered in more depth at the Distinguished Advisor Conference early next month.

Capital market growth was a key source of wealth, growing by 22.6% in the US and close to 30% in Canada, France and Germany. At the same time, the report has focused special attention on wealth inequality, stating that there are many factors that affect the phenomenon, but that these factors are not well understood. 

In the short run, the report explains, changes in the distribution of household wealth are driven by changes in asset prices, including housing. Cross-country comparisons, on the other hand, are sensitive to exchange rate movements. But over the long run, wealth inequality is affected by demographic trends, the most important of which are rising longevity and aging societies, it says. “As the length of retirement is extended, savings for lifecycle purposes will become more important. . .and pension wealth is expected to reduce inequality.”

Other factors will also impact inequality over the long run, says the report. Owner-occupied homes, cars and other “consumer durables” provide reasons for declines in wealth inequality in the 20^th century.

However, property rights and inheritances are core subjects in the debate. The report states: “wealth inequality is almost synonymous with unequal landholding perpetuated through inheritance,” especially important in developing nations. In Canada, as well as Argentina, Australia, and the US, land was distributed freely to settlers, creating what the report calls a remarkably equal initial distribution of wealth. Today unequal land ownership is not a core social issue, it says, but inheritances continue to be an important route to wealth.

Finally, the report states governments can have a large impact on wealth inequality. High inflation, for example, restricts people’s ability to build wealth through savings and more important, “high bouts of inflation can erode or even wipe out the savings of broad groups.” So can the lack of secure property rights – too much debt, for example? – as well as reduced growth rates all can create high wealth inequality.

This report is interesting reading and will form the basis of discussion Knowledge Bureau speakers and delegates will be having at Distinguished Advisor Workshops (DAW) being held next week in Winnipeg Nov. 3, Toronto Nov. 4, Calgary Nov. 5, and Vancouver Nov. 6 as well as the Distinguished Advisor Conference which takes a global perspective from Nov. 9-12 in Horseshoe Bay Texas.