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#187: It is Not as Good as it Looks

#187: It is Not as Good as it Looks

micksonmatch
November 26, 2024

S2N Spotlight

I spent quite a bit of time pondering this chart. Recently, I came across some global wealth data from one of the main investment banks, and I just didn’t feel comfortable with the way it was being presented. Intuitively, it felt misleading.

I will let you draw your own conclusions about what the data is telling you about the distribution of wealth around the world. The part that I felt was important to correct was at the bottom end, where looking at the category of people with less than $10,000 has dropped from 75% to 40%. This implies a dramatic reduction in the number of people suffering from extreme poverty. The same can be said about the category of people in the 10k-100k grouping; it has gone from 17% to 43%. Is this a sign of a growing middle class?

Ignore the fact that the data provided summed to 101%; it is probably a rounding artefact. I decided to take the global inflation in USD terms over the period, which is a cumulative 80%. I added a 3rd bar on the right that takes the categories and inflation adjusts them to a 2000 base. I added some hatching to try and draw your attention to the inflation-adjusted bar where it is easier to see how the effects of reckless monetary policy and profligate government spending have punished the poor and disproportionately rewarded the asset-rich wealthy. Inflation adjusted the exact same number of people on the poverty line. What seems like a burgeoning middle class is in fact not the fact it is going backwards from 43% to just 8% which is half of what it was in 2000.

I am all for capitalism. I am also not naive to the fact that the general rule is the rich get richer; it is just the way it is. However, I am strongly opposed to rewarding reckless borrowing, both private and public. I am also strongly opposed to interest rate manipulation to support the said borrowing. The story is not over. Tomorrow I will share some evidence that I think supports my argument.

S2N Observations

Gold got punished I am going to share a few charts to highlight this. Going back to 1980, this is only the 101st time it has dropped 3% in a day.

This chart’s green and red bars might be an easier way to visualise the moves.

I find this chart quite instructive—how a bull market grabs hold of the animal spirits within and manages to suck people into borrowing more to feed the beast. The debt might not be inflation adjusted, but the picture is clear: people don’t borrow less as they make more in the markets, they borrow more.