Oct 242016
 

 What $300,000,000,000,000 Look Like

All $ amount in today’s post is in US dollars.

What would you buy if you had all the money in the world? According to British news site The Independent, the total amount of financial assets in the world is around $300 trillion. This is the total value for all the equities and fixed income, including company shares and both private and government bonds, plus all the other securities we can invest in. This $300 trillion does not include real estate or any derivatives.

If we had $300 trillion all in $5 bills and laid them out on the ground in a single layer, they would take up about as much space as all of Alberta.

16-10-300-trillion-visualize-spread-out

If we had a way to stack all these $5 bills one on top of another, the stack would measure 1.6 million km or 1 million miles high! Wow. That’s literally out of this world. 😀 That’s enough distance to cover a round trip to the moon and back, twice! By the way, have you guys heard about the new restaurant on the moon? The food isn’t bad. But there’s no atmosphere. 😄

Anyway, let’s take a look at how the allocation of financial assets in the world has changed over time. According to the MarketWatch chart below, it appears every type of asset class has become more valuable since 10 years ago.

16-10-financial-assets-world

As we can see, the stock market is the most volatile. Stocks lost nearly half of their global value during the financial crisis of 2008. However the graph also shows that equities do recover over time. This is why we should not sell our stocks in a bear market. In fact, lower asset prices may present an opportunity to average down and buy more stocks. 🙂

We can also see that the allocations haven’t changed much over time, with the exception of public debt securities. A lot of demand for public debt comes from Central Banks as they attempt to stimulate the economy. The act of quantitative easing creates trillions of dollars of wealth, but disproportionately benefits investors. That’s why the value of financial assets since 2008 has increased tremendously, but average income in the U.S. has not. Instead of working hard to get ahead, many investors like myself have increased our wealth by simply riding on the backs of central bank policies.

16-10-draghi-print-money-ecb

Central planners around the world will likely continue to print money for the foreseeable future. As the global population ages we can expect even more demand for fixed income securities. Dividend paying stocks will also be popular as investors look for higher yielding alternatives to bonds. The total value of financial assets in the world should continue to increase going forward.

$300 trillion divided by 7.5 billion people who are alive today means each person’s fair share is $40,000. This means accumulating $400,000 of financial assets would give us 10 times what the average person has. This is a respectable level of financial stability that can cover years of living expenses in case of long term unemployment or disability. Having $800,000 in financial assets represents 20 times the average. This would be enough for one person to claim financial independence, assuming the person knows how to manage his or her finances properly. 😉

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Random Useless Fact:

16-10-rip-off-medical-supplies-us-iv-bag

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Anon
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Anon

“How Much Money is There in the World? According to British news site The Independent, the total amount of financial assets in the world is around $300 trillion. This is the total value for all the equities and fixed income…” As we can see, ‘money’ and ‘value’ are two completely different things. So $300 trillion is the wrong answer. “This $300 trillion does not include real estate or any derivatives.” So how can $300 trillion be the sum total of anything if parts are excluded?! LOL “Central planners around the world will likely continue to print money for the foreseeable future.” They will ALWAYS continue to print money. Therefore, the correct answer to the question, “How Much Money is There in the World?’, is: Infinity. A better question would be, “How Much PRICE is There in the World?” (We also know that ‘value’ and ‘price’ are also two completely different things.) “According to the MarketWatch chart below, it appears every type of asset class has become more valuable since 10 years ago.” And now you know where inflation has gone. “$300 trillion divided by 7.5 billion people who are alive today means each person’s fair share is $40,000.” There’s a… Read more »

Stephen
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Only $300 Trillion? I wonder how that breaks down for each country’s wealth.

Paul N
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Paul N

If the total outstanding debt of only the USA is approximately $176 Trillion when you add up all forms of debt, the $300 T figure seems kind of small to me.

Anon
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Anon

You bring up an important point, Paul — why is open credit not counted as a financial asset? If I have $10,000 of credit available on my credit card, or $200,000 available on my home equity line of credit, then shouldn’t these amounts be counted? Just because I’m not utilizing them, doesn’t mean they don’t exist and are available to be put into economic circulation; just as stock valuations are based on future earnings. One more hole in this plot.

Not surprisingly, these dubious and non-complete sums were calculated (almost 2 years ago) by Deutsche Bank, and as we’ve all learned recently, BD stock has enjoyed a -65% return over the last year due to some really great management and decision making…not. I wonder which asset class their $14 billion in fines slots into?

“Not only do we need to filter, but we need to be aware of what filters our information has already been through.”
(The Pot-Belly of Ignorance
https://medium.com/personal-growth/what-you-spend-time-reading-changes-your-brain-ee2ab4f2aa17#.jgcnpihys)