Why Do the Ultra-Wealthy Matter to Us?
The ultra-wealthy populate the highest levels of the public and private sectors. In recent decades they’ve increasingly collaborated into omnipresent public/private partnerships across a wide range of industries supposedly for the purposes of financial and operational efficiency.
This efficiency is essentially the public/private partnerships’ financial & political protection and serves their objectives neatly. Private industry serves the needs of the shareholders while the government serves the needs of the general public. Because certain projects are unacceptably too big and risky for private firms to undertake and which government agencies lack the know-how, the aforementioned arrangement is made so that the project is “too big to fail.”
In basic terms the government provides generous tax incentives and paves the legal road to private firms so that projects can be undertaken. The private firm and its shareholders profit while the taxpayers, under the illusion that it’s a private undertaking, assume the risk.
The wealthy in both realms include policymakers, captains of industry, powerful financiers, de facto public relations and publicists in the form of the mainstream and social media influencers in the media all of whom have more and better information to make better decisions well ahead of us mortals.
The Canary in the Coal Mine
For this reason the ultra-wealthy are the proverbial canary in the coal mine when there’s an upcoming seismic shift in the global economy and subsequent shift as to how and where they will invest their assets.
This seismic shift through various economic reports and anecdotal tales, indicate that the wealthy are no longer pursuing the highest return or most favorable tax havens rather seeking a safe harbor for the purposes of wealth preservation. Government policies can “vaporize” their assets literally overnight and maintain those policies indefinitely.
The wealthy fervently want to avoid what happened to their Saudi counterparts when in 2017 Prince Mohammed Bin-Salman (MBS) held them hostage in luxurious hotels until he “extracted” what he needed under the guise of cracking down on corruption. The hiring of 87,000 armed IRS agents in the US provides a clue as to the length at which a government may seek to aggressively enforce tax laws and perhaps more.
“Who are those guys?”
The aforementioned phrase as repeated by a puzzled Paul Newman and Robert Redford being pursued by an elite posse in the classic Butch Cassidy and the Sundance Kid, applies to the regular world citizenry as to who and how many of the ultra-rich, beyond those who intentionally are in the lime light, and where they reside. The next series of charts provide a profile of the ultra-wealthy.
The following chart entitled The World’s Billionaire Population provided by Billionaire Census by Altrata/Wealth-X and presented by Visual Capitalist chart provides the demographics of the billionaire community globally by country and their net worth and underscores the stupefying global wealth inequity by city. A quick summary of the status:
· There are 3,311 billionaires globally whose net worth is $11.8 trillion.
· This figure increased in 2021 by 3% while the wealth of the total group increased 18%!
· Billionaires account for 11.8% of the world’s GDP.
· Billionaires’ net worth increased 90% in the past 10 years.
The Top 20 Billionaire Countries
The following chart entitled Top 20 Countries by Ultra-High Net Worth Individuals provided J. Davies, R. Lluberas and A Shorrocks, Credit Suisse Global Wealth Databook 2022 indicate country-specific breakdown of the ultra-wealthy.
The Top Billionaire Cities
Finally the following chart entitled The Top 10 Billionaire Cities provided by Visual Capitalist presents the crème of the crème top 10 billionaire cities.
“On the Road Again”
The following chart entitled Millionaire Migration provided by Henley & Partners and presented by Visual Capitalist indicate the top 10 countries gaining and losing High Net Worth Individuals (HNWI) defined as those with at least $1 million in liquid financial assets. For this reason, this chart provides a deeper & broader base of wealthy individuals, not just the super-rich.
Henley & Partners project that there will be 88,000 migratory millionaires. The largest millionaire migratory outflows in gross numbers are Russia (15,000), China (10,000), Hong Kong (3,000), India (8,000) and Ukraine (2,800). For obvious reasons the war in Ukraine has compelled the wealthy to migrate while China+Hong Kong have become high-risk for the targeted wealthy.
The UAE has experienced the largest inflows because the government has created an extraordinarily friendly investment and tax environment for the wealthy.
A confluence of major events already in play are arriving at the crossroads at the same time which could represent a nasty market crash and trigger an economic downfall.
· Food insecurity and severe inflation as a result of droughts, floods, projected poor harvests, and stubborn logistical problems.
· Escalating risks in the Russian-Ukraine war which are raising the risk of severe winter energy shortages in Europe.
· The possible cut-off of Ukrainian agricultural wheat exports and the interruption of planting and subsequent 2023 spring harvest.
· Political instability and uncertainty in major legislative and national elections in developed countries such as Italy, Brazil, UK and US and how the respective new leaderships will work together not only as sovereign countries, rather also through their representation in international organizations ranging from Nato to humanitarian ones.
· The impacts of government-imposed tax and interest hikes, and sanctions based on political rather than economic motives.
The Pre-Positioned Wealthy
Even before the pandemic the wealthy have been aggressive in changing their asset allocation to greater cash holdings and jurisdictional diversification.
Nonetheless just because they have far better access to better an almost beyond the horizon quality of information, this doesn’t mean that they have Nostradamus or Cassandra-like vision. Historically events have gone sideways, known as Black Swans, which often sink all boats.
With respect to physical mobility, many of the wealthy hold multiple passports and residence permits with access to gated-community residences throughout the globe as par for the course.
Super Growth for the Super Rich
Indeed following the adage, “The rich get richer” is true. It always has. The net worth and liquid assets of Larry Lunchpail have eroded their savings thanks to intensive and unabated inflation against stagnant paychecks, but the net worth of the super-rich community has been growing in leaps & bounds throughout the pandemic.
The following chart entitled The Global Super-Rich Club is Growing provided by Knight Frank | The Global Wealth Report 2022 articulates, by regions, the impressive growth of this class whose net worth is at least $30 million.
The following chart entitled The Global Wealth Pyramid in 2021 provided by Credit Suisse 2022 Global Wealth Report breaks the Gini index which measures economic inequity
The series of aforementioned charts underscoring the continued and unequal unabated growth of the ultra-wealthy will in all likelihood lead to the inevitable explosion of social unrest in developing and developed countries.
Statistically there’s already a huge disconnect between the merely wealthy and the rest of humanity. The struggling global economy has reached its Icarus moment at which point social media will gleefully accentuate this economic gap provoking even greater social instability.
Present-day we’re experiencing the “calm before the storm” as late fall and winter looms. For this reason whatever one’s financial situation, preparations for food & personal security should take immediate and urgent priority for the rough period ahead.
Jake Sommers of USA Radio interviewed A Goldson, CEO of the Cerulean Council and author, on 21 October 2022 through the following link:
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The Cerulean Council is a NYC-based think-tank that provides prescient, beyond-the-horizon, contrarian perspectives and risk assessments on geopolitical dynamics and global urban security.