Daily Management Review

Capgemini: Quantitative easing creates new millionaires


09/05/2016


Fresh publication of Cap Gemini’s "World Wealth Report" showed surprising consequences of the world's central banks’ quantitative easing in 2015. Number of millionaires in the world has increased not only in the United States and China, but also in Japan, as well as in the Netherlands and Norway. Japanese results are particularly unusual. They are accompanied by a direct increase in social inequality. Apparently, they can serve as proof that incentive policy of central banks and growing number of states are phenomena associated with each other.



DeeganMarie
DeeganMarie
Cap Gemini’s report on the world’s large fortunes in 2015 was largely predictable. Trends such as continuing long-term growth in number of HMWI (High Net Worth Individuals) in the US by 2%, and increase in number of super-rich in the UK are unsurprising. HMWI population in Singapore reduced due to peculiarities of the country’s tax policy, changed in 2011-2014. Finally, China increased number of HMWI by 16%, keeping the lead in the ranking. There are a little over a million of people of this category in China. Note that decline in GDP growth there was by standards of the world economy not too noticeable

The survey authors’ observation on HMWI in Japan and the EU are much more unusual. Both regions are known for their sufficiently tight fiscal policy, and a social stratification relatively smaller than in the US, China and emerging markets. Nevertheless, Cap Gemini ranking’s makes Japan second only to China in terms of growth of HMWI population. Their number in the country has grown by 11% and amounted to 2.72 million. Results of Spain being in recession are no less demonstrative (increase in the number of millionaires 8%). Remarkable conclusions were made for Norway (8%, experiencing difficulties due to falling prices of hydrocarbons), Austria and France (6% both), as well as for Germany (5%). At that, structure of ultra-HMWI grew more slowly than HMWI, and all great fortunes were increasing more slowly than in 2010-2014. Cap Gemini determines three main sectors, which will attract owners of large states until 2025. These are the financial sector, high-tech (including financial), and health care, closely followed by real estate and telecom market. The oil and gas sector is three times inferior to them in terms of future income.

Results of Japan and the EU countries are unusual. Even Cap Gemini analysts are not expecting prolongation of trend of growing number of HMWI (expected to increase by 0.2% to 2025). The survey practically does not explain a phenomenon of increasing number of HMWI in stagnating economies fighting for inflation. The figure in these countries exceeds the same performance for much more balanced economies. A unifying force here may be strengthening of quantitative easing programs held by national banks. Scales of their plans are much higher than that of the US Federal Reserve, and are certainly different from monetary policy of central banks of countries such as Brazil and Russia. Large-scale QE may lead to the formal strengthening of growth, and this is a common place in all mainstream economic concepts. However, their influence on distribution of formal wealth in economies has not been studied, while Cap Gemini’s report suggests QE create new millionaires through financial markets. 

source: bloomberg.com, worldwealthreport.com






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