Fri. Aug 12th, 2022

Global wealth has tripled in the last two decades, with China leading the way and surpassing the United States for the top spot in the world.
This is a step taken from a new report by the research arm of consultant McKinsey & Co., which examines the national balance sheets of ten countries representing more than 60% of world income.

“We are richer now than ever before,” John Miss, a partner at the Global Institute in McKinsey, Zurich, said in an interview.

According to the survey, global total value increased from $ 514 trillion in 2020 to $ 156 trillion in 2000. China is responsible for about one-third of the growth. Its wealth rose from just $ 7 trillion to 120 120 trillion in 2000, a year before it joined the World Trade Organization, accelerating its economic growth.

Richest 10%

The United States has lagged behind due to further silent rise in property prices, with its total value more than doubling to $ 90 trillion during this period.

In both countries – the world’s largest economies – more than two-thirds of the wealth belongs to the richest 10% of households and their share is growing, the report said.

As calculated by McKinsey, 68% of the world’s total wealth is stored in real estate. The balance is kept in infrastructure, machinery, and equipment and much less so-called obscure objects such as intellectual property and patents.

Financial assets are not counted as global assets because they are effectively offset by liabilities: a corporate bond held by an individual investor, for example, an I.O.U. By that company.

‘Disadvantages’

According to McKinsey, the sharp rise in net worth over the past two decades has outpaced the growth of GDP worldwide and has been fueled by rising property prices through lower interest rates. It was found that the value of assets is about 50% higher than their long-term average compared to income. This raises questions about the sustainability of the asset boom.

“Net prices are in many ways questionable above and beyond inflation through price increases,” Miske said. “It comes with all types of side effects.”

Rising real-estate prices could make homeownership impossible for many people and increase the risk of a financial crisis – such as after the 2008 housing bubble burst in the United States. China could potentially run into similar problems with loans from property developers, such as the China Evergrand Group.

The ideal resolution, the report said, would be to find ways to invest more productively for the world’s resources that expand global GDP. The nightmare scenario would be a fall in asset prices that could wipe out as much as one-third of global wealth, bringing it even higher with world income.

By arnews

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