We’ve all heard that the pandemic recession was unlike any we’ve ever seen.
Now, a new report affirms how deeply bizarre this crisis has been.
The Credit Suisse Global Wealth Report, which claims to be the most comprehensive source of information on household wealth globally, says that when it comes to the world’s wealth, it’s almost as if the worst recession in recent times it never would have happened.
“The contrast between what has happened to household wealth and what is happening in the broader economy could never have been more stark,” the report says.
“Stranger still, the countries hardest hit by the COVID-19 pandemic have often been those with the largest gains in wealth per adult.”
Total global wealth grew 7.4% in 2020, and wealth per adult increased 6% to hit an all-time high of $ 79,952. That’s two and a half times the average wealth in 2000.
In the financial crisis of 2008, wealth per adult plummeted 13.9% in the United States and 22.9% in Canada.
The reasons for this are clear, Credit Suisse said. Eager not to repeat the mistakes of the financial crisis, governments and central banks injected money quickly into businesses and individuals and lowered interest rates, making it clear that rates would remain low for some time.
“Lowering interest rates by central banks has probably had the biggest impact,” Credit Suisse said.
The lower rates, coupled with unplanned savings, ignited a fire in housing markets, not just in Canada, but around the world. In Russia, house prices rose by 22%, in Turkey by 31%, along with Austria, Canada, the Czech Republic, Denmark, Germany, Poland and Sweden, which recorded increases of between 8% and 11%.
It was the combination of rising asset prices, coupled with the currency’s appreciation against the US dollar (the Canadian dollar was trading at 81.33 cents today) that boosted wealth around the world.
Canada is among the 10 countries with the highest wealth gains per adult in 2020, with Switzerland and Australia topping the list.
This is another surprising feature of this recession: The countries that experienced the biggest shocks to their GDP have done disproportionately well in growing wealth. Credit Suisse cites Canada, Belgium, Singapore and the United Kingdom as examples.
Despite being among the worst affected countries, with an average GDP loss of 7.1%, they achieved unusually high wealth gains averaging 7.7% net of exchange rate considerations. Therefore, the size of the wealth gain exceeded the magnitude of the GDP loss. “
The ranks of global millionaires increased by 5.2 million to 56.1 million in 2020. Canada gained 246,000 millionaires, the eighth highest increase in the world.
Globally, you now need more than $ 1 million to enter the top 1% of the world.
“2020 marks the year that, for the first time, more than 1% of all adults in the world are dollar millionaires,” Credit Suisse said.
But while wealth inequality in the US has widened, it has narrowed in Canada. Since 2007, the wealth share of the top 10% of wealth holders has increased from 71.6% to 75.7% in the United States, but has fallen in Canada from 57.1% to 56.5%.
Credit Suisse says one reason for this is that US stock prices have risen more than in Canada, increasing the wealth of the major groups. In Canada, house prices have risen faster, raising the wealth of the middle class.