World's Wealthiest People Now Richer than Before the Credit Crunch

 (Raise your hand if this surprises you in the least...--jef)

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Wednesday, June 22, 2011 by The Guardian/UK

by Jill Treanor 

 

We are not all in this together. The UK economy is flat, the US is weak and the Greek debt crisis, according to some commentators, is threatening another Lehman Brothers-style meltdown. But a new report shows the world's wealthiest people are getting more prosperous – and more numerous – by the day.
 
 The globe's richest have now recouped the losses they suffered after the 2008 banking crisis. They are richer than ever, and there are more of them – nearly 11 million – than before the recession struck.

In the world of the well-heeled, the rich are referred to as "high net worth individuals" (HNWIs) and defined as people who have more than $1m (£620,000) of free cash.

According to the annual world wealth report by Merrill Lynch and Capgemini, the wealth of HNWIs around the world reached $42.7tn (£26.5tn) in 2010, rising nearly 10% in a year and surpassing the peak of $40.7tn reached in 2007, even as austerity budgets were implemented by many governments in the developed world.

The report also measures a category of "ultra-high net worth individuals" – those with at least $30m rattling around, looking for a home. The number of individuals in this super-rich bracket climbed 10% to a total of 103,000, and the total value of their investments jumped by 11.5% to $15tn, demonstrating that even among the rich, the richest get richer quicker. Altogether they represent less than 1% of the world's HNWIs – but they speak for 36% of HNWI's total wealth.

Age also helps: more than eight out of 10 of the world's wealthiest people are aged over 45. So does being male: women account for just over a quarter of the total – though this is slightly higher than in 2008. The highest proportion of wealthy women is in North America – 37% of HNWIs – while the lowest is in the Middle East, which has 14%.

Generally, HNWIs are most concentrated in the US, Japan and Germany: 53% of the world's most wealthy live in one of those three countries, but it is Asian-Pacific countries where the ranks of the rich are swelling fastest. For the first time last year the region surpassed Europe in terms of HNWI individuals.

This scale of wealth of the richest people in Asia Pacific – fueled by the fast-growing economies in China and India – is now threatening to overtake North America, where the value of the wealth rose more slowly – 9% – to reach $11.6tn.

The richest people in the Asia-Pacific region have also fared better since the crisis. Their wealth is now up 14.1% since 2007 while individuals in North America and Europe are yet to recoup the losses they suffered during the banking crisis.

Britain is lagging behind in the league of affluence – it has not yet enjoyed a return to pre-crisis levels of wealth as sluggish economic growth holds back prospects. The growth in the number of rich individuals in the UK was among the slowest in the top 10 nations, showing a 1.4% rise to 454,000 and remaining below the 495,000 recorded in 2007.

The report said that while the UK stock market rose almost 30% and GDP grew 1.3% – after contracting by 4.9% in 2009 – the fortunes of the rich were held back by falling house prices and the rise in unemployment.

Their prospects might improve next year, however. "Construction spending for the 2012 London Olympics is expected to help propel the economy and the housing market recovery," the report said.

The 1.4% rise in the number of rich people in Britain compares with a 7.2% rise in Germany and 8.3% in the US – where there are 3.1m HNWIs – and the 3.4% rise in France.

India moved into the top 12, with a 20.8% rise to 153,000, for the first time, while Italy, 10th in the table, endured a contraction in the number of wealthy people from 190,000 to 170,000.

The performance of investments made by wealthy individuals in shares and commodities, and their willingness to take more risks, helps drive their wealth, which in turn fuels "passion" purchases of multimillionaire must-haves, ranging from Ferraris to diamonds, art and fine wines. Demand for such luxuries is especially high among the growing number of wealthy individuals in the emerging markets.

The report warns of problems for this year, saying "the path to global recovery will likely be uneven and various risks remain".

It added: "The global effects of the financial crisis receded in 2010 but aftershocks still materialized in many forms, including the sovereign debt crisis in Europe and the growing burden of a gaping fiscal deficit in the US. These types of shocks showed the fragility of the economic recovery and could still pose an obstacle to growth in 2011".

The Triumph of the Bankers

by George F. Smith on May 25, 2011

 

In spite of its success in bestowing wealth on some men while funding an unnecessary war, [1] the National Banking System proved unsatisfactory to financial leaders. Even with laws discouraging or restricting redemption, crises still occurred, and banks had to contract and deflate to survive. They were unable to inflate their way out of recession because they lacked a centralized lender who could provide them emergency funding.

In addition, people, especially those who kept their savings outside the banking system, generally saw the notes that circulated as mere substitutes for the real thing, which financier Jay Cooke disparaged as a “musty [relic] of a bygone age,” a sentiment no doubt shared by a certain Scottish adventurer of the early 18^th Century. [2] Even if the system had a centralized lender, it would still be subject to market retribution because it could not arbitrarily create gold or silver coin. Money was still the most marketable commodity, rather than tickets or digits a centralized lender could issue at will, as the Fed does today. [3]

Another problem the national banks faced was the growing competition of private and state banks, neither of which had the national system’s high capital requirements. After 1873, total bank deposits were shifting in favor of non-national banks, as were clearings outside of New York. Furthermore, in 1887, St. Louis and Chicago bumped New York from its monopoly position as the base of the National Banking System’s inverted pyramid, and the two newcomers gained an alarming share of the percentage of total deposits of all three cities from 1880 to 1912. [4]

For bankers and government alike, the ideal monetary situation would seem to be a permanent state of specie suspension; even better would be a world in which everyone thought of money as only paper or deposits redeemable in paper, with specie relegated to the status of a collector’s item. The ideal in banking would be a government-enforced banking cartel that would ensure a uniform rate of monetary inflation to prevent currency drains and bank runs. With this power, it could inflate its way out of recessions and bail out the big commercial banks as an emergency lender. And for its part, the government would have a reliable market for its debt in peacetime and war.

To bring this about, the big bankers leveraged the rising tide of Progressive ideology. They began by hiring agents to promote the idea that banking crises were the result of inadequate regulation and an “inelastic” currency. As Rothbard has written, they formed an alliance with trained economists and other opinion-molders, many of whom already favored bureaucratic control of business from their exposure to Bismarckian statism while acquiring their doctorates in Germany. In the U.S., the National Civic Federation, founded in 1900, became the chief forum for promoting the “the new ideals of civic cooperation and social efficiency” for the purpose of “correcting” the rampant individualism of American society.

The academics were eager to use the state to license membership into their own professional organizations and thereby restrict competition and raise members’ incomes. They also saw themselves acquiring lucrative grants and filling vital government posts in running the bureaucracies. The public already had a deep distrust of Wall Street’s enormous concentration of wealth, and the task facing J. P. Morgan and other banking elites was to get opinion-molders to convince everyone that the big bankers needed public-spirited bureaucrats to rein in their power. [5]

Their push for a central bank, initiated by Morgan and Rockefeller forces, began following Republican William McKinley’s defeat of Democrat William Jennings Bryan in 1896 and ended with passage of the Federal Reserve Act in 1913. Bryan expunged the laissez-faire heritage of his party with his opposition to sound money and his proposal for a bold inflation of silver, an inflation that circumvented the banking system. In his famous “Cross of Gold” speech, Bryan said his party was “opposing the national bank currency” and stood “against the encroachments of aggregated wealth.” McKinley campaign manager Mark Hannahad no trouble raising a record amount of money from the Morgan-Rockefeller alliance to defeat Bryan.

Though the McKinley victory secured the gold standard, gold served mostly as a camouflage behind which the elite bankers could set up a system of inflation they controlled. [6]

A Banker’s Dream Comes True

When the next fractional-reserve breakdown occurred in 1907, Thomas Woodrow Wilson, then president of Princeton, endeared himself to the banking movement by declaring that “all this trouble could be averted if we appointed a committee of six or seven public-spirited men like J. P. Morgan to handle the affairs of our country.” [7] Colonel Edward Mandell House, a close Morgan associate who served as shadow president when Wilson was elected to the White House, became the “unseen guardian angel of the [banking] bill” that emerged in 1913. [8] Originally drafted at a secret meeting of banking elites at Morgan’s hunting lodge on Jekyll Island, Georgia in November, 1910, the Glass-Owen Bill, as it was finally called, overwhelmingly passed the House and Senate on December 22, 1913 and was signed into law by Wilson the following day. [9] The Fed began operations in November, 1914, with Morgan men occupying key positions.

The new law gave the bankers what they wanted: a monopoly of the note issue. Commercial banks could only issue demand deposits redeemable in Fed notes or nominally in gold. National banks were compelled to join the System but had the legal option of becoming state banks, which were not required to join, though many state banks chose to do so in 1917 when federal regulations were relaxed. [10] Critically, gold coin and bullion were moved further away from the public when member banks shipped their gold to the Fed in exchange for reserves. [11]

The inflationary potential of the system is revealed by its structure: The Fed inflated by pyramiding on its gold, member banks by pyramiding on its reserves at the Fed, and nonmembers by pyramiding on its deposits at member banks. Furthermore, after a few years the Fed began withdrawing fully-backed U.S. Treasury gold certificates from circulation and substituting Federal Reserve Notes instead. With Fed notes requiring only 40 percent backing of gold certificates, more gold was available on which to pyramid reserves. Also, with the advent of the Fed, reserve requirements for demand deposits were cut approximately in half, moving from a 21.1 percent average under the National Banking System to 11.6 percent, then lower still to 9.8 percent in June, 1917, after the U.S. had joined the war. Reserve requirements for time deposits dropped from the same 21.1 percent average to 5 percent, then 3 percent in 1917. Commercial banks developed a policy of shifting borrowers into time deposits to inflate even further. [12]

Thus, the country now had a government-privileged central bank called the Federal Reserve. By hoarding gold as its pyramidal base, the Fed was weaning the public from the use of gold coins, which would make them easier to confiscate later on. Through the Fed, member banks would be inflating at a uniform rate to avoid trouble with redemption demands.

Did this new system bring the big bankers in line? Did the Federal Reserve Act provide “a circulating medium absolutely safe,” as the Report of the Comptroller of the Currency of 1914 stated? How accurate was the report’s claim that:

Under the operation of this law such financial and commercial crises, or "panics," as this country experienced in 1873, in 1893, and again in 1907, with their attendant misfortunes and prostrations, seem to be mathematically impossible. [13]

Imagine, no more crises. Did the people running the banking cartel, almost all of whom were Morgan men, create a better world for most Americans?

They indeed have if you believe wars, depressions, massive debt, depreciating helicopter money, and unaccountable government constitute improvements in our quality of life.

References:

1. See Thomas J. DiLorenzo, The Real Lincoln: A New Look at Abraham Lincoln, His Agenda, and an Unnecessary War, Prima Publishing, Roseville, CA, 2002

2. Murray N. Rothbard, The Mystery of Banking, Mises Institute, Auburn, AL, 2008, p. 230

3. Carl Menger, Principles of Economics, Mises Institute, Auburn, AL, 2007, pp. 257-260; Ludwig von Mises, The Theory of Money and Credit, The Foundation for Economic Education, Inc., Irvington-on-Hudson, New York, 1971, pp. 30-33.

4. Murray N. Rothbard, “The Federal Reserve as a Cartelization Device,” from Money in Crisis: The Federal Reserve, the Economy, and Monetary Reform, edited by Barry N. Siegel, San Francisco, CA: Pacific Institute for Public Policy Analysis, 1984, pp. 91-93

5. Murray N. Rothbard, The Case Against the Fed, Mises Institute, Auburn, AL, 1994, pp. 84-90

6. Murray N. Rothbard, A History of Money and Banking in the United States: The Colonial Era to World War II, Mises Institute, Auburn, AL, 2002, p. 189

7. G. Edward Griffin, The Creature from Jekyll Island: A Second Look at the Federal Reserve, Fourth Edition, American Media, Westlake Village, CA, 2002, p. 448

8. Ibid, p. 459

9. Ibid., p. 468

10. Rothbard, Money in Crisis, p. 112

11. The Case Against the Fed, p. 119

12. Mystery, pp. 238-239

13. Annual Report of the Comptroller of the Currency, December 7, 1914, Vol. 1, p. 10

Wealthy lawmakers increased their riches as economy sputtered in '09

(So, when you wonder why the govt. isn't doing more to offset unemployment, lost wages, lost savings, and other fallout from the ongoing financial crisis which continues to be underreported by the corporate media, this is a good indicator of why? It's not hurting them, why should they have any sense of urgency whatsoever?--jef)

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By Kevin Bogardus and Barbra Kim - 08/31/10 06:00 AM ET

The wealthiest members of Congress grew richer in 2009 even as the economy struggled to recover from a deep recession.

The 50 wealthiest lawmakers were worth almost $1.4 billion in 2009, about $85.1 million more than 12 months earlier, according to The Hill’s annual review of lawmakers’ financial disclosure forms.


Sen. John Kerry (D-Mass.) tops the list for the second year in a row. His minimum net worth was $188.6 million at the end of 2009, up by more than $20 million from 2008, according to his financial disclosure form.
While the economy struggled through a recession during much of 2009 and the nation’s unemployment rate soared to 10 percent, the stock market rebounded, helping lawmakers with large investments. The S&P 500 rose by about 28 percent in 2009.

Total assets for the 50 wealthiest lawmakers in 2009 was $1.5 billion — that’s actually a nearly $36 million drop from a year ago. But lawmakers reduced their liabilities by even more, cutting debts by $120 million last year.

There are various reasons why asset values dropped. Some lawmakers saw their real estate holdings fall as the housing crisis intensified. A handful of lawmakers also had other investments or businesses that turned sour.

The only newcomer to the Top 10 list is Rep. Michael McCaul (R-Texas), who came straight in at No. 5. He replaced Rep. Harry Teague (D-N.M.), the 10th wealthiest member in 2008. Teague fell off the top 50 list after the value of a company he has a stake in — Teaco Energy Services Inc. — fell in value from $39.6 million in 2008 to at the least $1 million in 2009.

There were a few other new faces in the Top 50, including Rep. Patrick Kennedy (D-R.I.), who received an inheritance after his late father, Sen. Edward Kennedy (D-Mass.), died in 2009.

Sen. Ron Wyden (D-Ore.) and Rep. Tom Petri (R-Wis.) also made the list.

Twenty-seven Democrats along with 23 Republicans make up the 50 richest in Congress; 30 House members and 20 senators are on the list.

The bulk of Kerry’s wealth is credited to his spouse, Teresa Heinz Kerry, who inherited hundreds of millions of dollars after her late husband, the ketchup heir Sen. John Heinz (R-Pa.), died in a plane crash in 1991.

Rep. Darrell Issa (R-Calif.), with a net worth of $160.1 million, is the second-richest member of Congress under The Hill’s formula, even though his wealth declined by more than $4 million in 2009.

He is followed by Rep. Jane Harman (D-Calif.), who saw her net wealth leap to $152.3 million, a jump of more than $40 million from a year ago.

The rest of the top 10 are Sen. Jay Rockefeller (D-W.Va.), McCaul, Sen. Mark Warner (D-Va.), Rep. Jared Polis (D-Colo.), Rep. Vern Buchanan (R-Fla.), Sen. Frank Lautenberg (D-N.J.) and Sen. Dianne Feinstein (D-Calif.).


To calculate its rankings, The Hill used only the lawmakers’ financial disclosure forms that cover the 2009 calendar year.
Lawmakers are only required to report their finances in broad ranges. For example, a $2.5 million vacation home in Aspen, Colo., would be reported as being valued at between $1 and $5 million on a congressional financial disclosure form.

To come up with the most conservative estimate for each lawmaker’s wealth, researchers took the bottom number of each range reported. Then, to calculate the minimum net worth for each senator and member, the sum of liabilities was subtracted from the sum of assets.

As a result, the methodology used to find the Top 50 wealthiest in Congress can miss some of the richest lawmakers.

Sen. Herb Kohl (D-Wis.) is certainly one of the wealthiest lawmakers on Capitol Hill. As owner of the NBA’s Milwaukee Bucks, Kohl has a $254 million asset on his hands, according to Forbes magazine.

But under The Hill’s methodology, his team ownership only counts for $50 million, the highest range reported on the congressional financial disclosure form. Because of high liabilities on his 2009 form, Kohl actually is listed as being more than $4.6 million in debt on the 2009 form.