The Boom in Global Wealth 12/4
Timothy Taylor points to some surprising patterns
It’s interesting to note that the United States is not leading the way here in growth of national wealth. In the more detailed discussion, while it’s true that wealth in the form of real estate and corporate stock values has been rising in the US, it’s also true that foreign ownership of US wealth has been rising faster than US ownership of foreign wealth, which has kept the overall US ratio relatively unchanged.
Taylor is commenting on a study by the McKinsey Global Institute. The study says that the ratio of wealth to GDP is rising around the world. To me, it looks like our real estate has gotten more expensive, and people in China own more of it.
For the study’s possible interpretations of what is happening, read Taylor’s post. I myself offer this story: Government deficits around the world have been ballooning. Households and firms think they are wealthier. They put the bonds that the government issues onto their balance sheets, without taking into account future taxes needed to repay those bonds. They are allocating a lot of this additional wealth to real estate, particularly American real estate. It’s ersatz saving, because people treat government bonds as wealth even though they are not. And it’s ersatz investment, because real estate is not capital. (Neither is Bitcoin, I might add.)
Think about what happens when something that cannot go on forever, stops. (Stein’s Law)
Have a nice day.
If you import a lot more than you export, for a long time, and foreigners getting your currency don't want to accumulate any more of it, especially if your bonds pay little interest and there is worry of inflation, then inevitably those chickens are going to come home to roost. They might consume more of your exports, but if not, then they are going to take increasing levels of ownership of what was formerly your property, assets, and productive capital, until you have nothing left to sell to maintain your lifestyle of living beyond your means.
New money creation has bid up the real estate prices, increasing the relative wealth of the lucky asset holders at the expense of everyone else.
And some people think (or at least claims to think?) that inflation helps the poor (lol).