Should we weep, cry, or join in a vote of sympathy for the world’s mega rich?
Many of them have been reduced to ‘rich’ status by the global crunch.
Many won’t be able to get by because they no longer have a jet, plane, or in some cases, money to spend at upmarket retailers like Tiffany’s, which is feeling the pinch as a result.
Tell that to the clients of Storm Financial, who would gladly swap positions, as would a long queue of investors in other markets after their losing experiences over the past 18 months.
Forbes Magazine has issued its new list of the world’s wealthiest people and like the markets and economies many have stalked and plundered their numbers are much reduced.
Forbes reckons the number of the world’s billionaires has slipped 29%, from 1,125 a year ago, to 793, while their average wealth has dropped 23% to $US3 billion on average.
Forbes said its list of billionaires was $US1.2 trillion poorer: by most forecasts that’s less than half the losses we have seen from banks around the world and other groups in the past 18 months.
But, according to the US Federal Reserve, the net worth of American households dropped $US11.2 trillion last year, the biggest fall on record. It doesn’t cover losses by corporates and Wall Street.
It was driven by the fall in US shares, investment funds, real estate and other assets.
Seeing markets are down 40%-60% in some cases (80% in Russia) from their all time peaks, we could say that the Forbes’ billionaires have ‘outperformed’ in that their number only shrank by just over 29%.
But they and everyone else with a stake in the markets are likely to be a bit poorer again this year.
Even if share prices don’t fall by much more, dividend income is coming down: the ANZ, NAB and Fairfax will be joined by others in the months ahead.
The IMF, World Bank and Asian Development Bank all see economic growth this year across the world turning negative for the first time in 80 years.
But they also see some of the world’s poorest countries being so badly hurt by the slump that their finances won’t recover for decades, and their people face years of declining or static living standards.
According to Stephen Schwazman, founder of the Blackstone buyout and investment group, the world financial crisis has destroyed "40% to 45%" of global wealth.
According to Reuters he told a conference in New York this week:
"Between 40 and 45 percent of the world’s wealth has been destroyed in little less than a year and a half," Schwarzman told an audience at the Japan Society. "This is absolutely unprecedented in our lifetime."
Now, he’s not just talking about the people Forbes was once again writing about, but also the wealth of countries large and small.
It’s also the wealth of small shareholders, investors in super funds and other entities: those looking at losses of 30%-60% and more on some portfolios and retirement plans, the millions of people who lost their homes and their jobs in the US subprime mess and gathering recession.
The absence of irony or reflection on the damage wrought by many of America’s banks, politicians and business leaders on Wall Street on their country and the rest of the world from the Forbes report was embarrassing.
According to the Asian Development Bank, around $US50 trillion dollars in value has been destroyed so far: about equal to a year’s output from all the world’s economies.
The Bank Of England estimates that $US3 trillion in losses from banks having to mark their investments down to market prices, that’s about a year’s output from the UK economy, or three times Australia’s GDP.
The ADB estimated that more than $US9 trillion in value has been destroyed in Asia, with big hits being felt among the newly rich of China, India, Malaysia, Thailand and the more established wealth in Japan, South Korea and Taiwan, not to mention Hong Kong.
The poor in Burma, Indonesia, Vietnam, China, Papua New Guinea and Africa will also feel the pain more deeply.
But the losses are more than just very rich people being reduced to the ranks of just ‘rich’: it’s the loss of output and the losses in exports and financial assets in the various economies of the world; it’s not just the banks: it’s the impact of the slump on employment, output etc.
Losses have been huge in the US, and in Russia, the UK, Germany and in Australia where the Packer, Lowy, Forrest and other rich have shed a few billions of value and are now slimmer, and poorer.
Here shonky companies like ABC Learning, Allco and Babcock And Brown, have led the losses, but so too have more established groups like Westfield, the slate of property groups, such as Stockland, Centro, GPT; not to mention miners like the stricken Oz Minerals and the damaged Fortescue Metals.
Fortescue’s Twiggy Forrest has lost ground, Westfield’s Frank Lowy is back on top of our rich list, according to Forbes and James Packer is a bit poorer.
Forbes said 10 Australians made it onto the annual list, down from 14 last year. Their combined fortune has collapsed from $US38.4 billion to just $US16.2 billion.
Andrew Forrest fell from 145th on the list last year to 376th, Frank Lowy, is No234 on the list worth $US2.7 billion, down from $US6.4 billion. James Packer was at No261 down from $US5.7 billion to $US2.5 billion.
Forbes said the global shake out had meant many new billionaires from Russia, India and other emerging economies were no longer; mea
