World Millionaires Parties on Central Bank Policies

I am not a fan of the political correct issue called “inequality”, whereby populist politics calls for political solution to redistribute wealth in order to make economic standings “equal”. 

This inequality issue for me is really nonsense. Simple reasons, there is no such thing as “equal” (e.g. even public schools’ rating of students have ranks). Second, political ways of solving inequality extrapolates to a shift in inequality from the markets to politics or from market inequality to political inequality. Wealth (or resource distribution) will be skewed towards those whom political patrons anoint as beneficiaries. So when you hear "it is not what you know but who you know", those are signs of politically based inequality.

For instance when Ben Bernanke, yet as a university professor wrote a “smart central bank can protect the economy and the financial sector from the nastier side effects of a stock market collapse”, which became a social policy, popularly known as the Bernanke/Greenspan PUT, this translates to an implicit subsidy to equity market owners, financed by the ordinary citizens. 

And since global central banks have embraced and assimilated US Federal Reserves’ policies of ZIRP and QEs that has inflated asset markets, these has increased “wealth” of mainly of equity (as well as other asset) owners around the world.

From the Wall Street Journal Real Time Economic Blog

Overall, the world’s wealth grew by 15% to $152 trillion, led by a 31% jump among countries in the Asia-Pacific region (excluding Japan) to $37 trillion. In North America, the world’s richest region, wealth grew by 16% to $50.3 trillion, thanks largely to strong returns in the stock market.

Globally, the number of millionaire households hit 16.3 million in 2013, a 19% rise from the previous year.

Millionaires in China have reportedly eclipsed Japan to place second behind the US.

The difference has been that growth in the millionaires of Chinese, instead of coming from equity markets, has been mostly a product of shadow banking.

The Chinese saw their portfolios swell as wealth in the country grew by a whopping 49% to $22 trillion last year. The report’s authors attributed that explosive rise to specialized financial products such as trusts — the amount of wealth in trusts rose 82% in 2013 — “reflecting the country’s rapidly expanding shadow-banking sector.”

While booming stock markets fueled wealth growth in many other countries, including the U.S., China’s investors experienced the opposite: Wealth in equities actually fell 6.8% on the year among Chinese.

Notice that inflated assets markets have been the basis of “wealth” which means they are artificial and depends on sustained central bank subsidies. This includes China’s shadow banking system.

And as I pointed out here, in the US booming stocks mostly benefit the elites.

The sad part is that while inflationary boom supports a few, when the bust comes most will get hurt.

In short, central bank policies have both serious externality and inequality issues.