The biggest Movers & Shakers of the Global Economy
3 Charts showing the biggest Economies, Currencies & where the Richest live
The wheels of the global economy are wobbling under the pressure of trade wars, geopolitical risk and cyclical factors. While a late rebound in bond yields in the U.S last week has eased some of the pressure, the markets still closed the most volatile week of the year.
The U.S market Dow Index closed down 800 points or 3% on Wednesday before recouping some of the losses, however, the major stock indexes posted a third straight weekly loss with Dow, S&P 500 and Nasdaq all down 1.5%, 1.0% and 0.8% respectively.
The economic numbers from Europe to Japan are not posting a pretty picture either, with the U.S budget deficit climbing to a record $867B in the first ten months of the fiscal year, a 27% increase from the same period a year earlier.
Let’s look at some of the major statistics of the global economy as they stand now.
The World GDP grew from $80.2 trillion in 2017 to $85.8 trillion in 2018 posting a handsome gain of 6.9% before slowing down significantly with an increasing fear of an onset of a global recession, owing to the trade war between the two biggest economies of the World.
The infographic (Figure 1) for the Global GDP in 2018 shows the developed countries contributing the most, followed by the emerging economies. Let’s dig a little deeper.
❒ The size of the total global economy stood at about $86 trillion.
❒ The United States was the World’s largest economy with a GDP of $20.49 trillion contributing 23.89% of the total GDP.
❒ China is second with a GDP of $13.61 trillion contributing 15.86% to the total, despite growing at the slowest rate in the past 30 years.
❒ Together, the top two economies make up nearly 40% of the Global GDP. No wonder then, any economic problems in either of these countries or both of them, as the current trade war, adversely affects the global economic outlook.
❒ Following are the rest of the members in the Top 10 group:
3. Japan ($4.97 trillion, 5.79%)
4. Germany ($4 trillion, 4.66%)
5. United Kingdom ($2.83 trillion, 3.29%)
6. France ($2.78 trillion, 3.24%)
7. India ($2.73 trillion, 3.18%)
8. Italy ($2.07 trillion, 2.42%)
9. Brazil ($1.87 trillion, 2.18%)
10. Canada ($1.71 trillion, 1.99%)
This makeup of the biggest GDP producers in the World will undergo a drastic change in the next decade or so, as more emerging market players like India, Turkey, Indonesia Egypt & Russia will overtake some of the biggest economies today. Asia’s slice of global GDP pie will increase from 20% in 2010 to 35% (estimated) in 2030.
The currency war has been another worry for the economists as the trade war took another dimension with the continued hostilities between the U.S & China. The U.S has long accused China of manipulating its currency to make its exports cheaper — a claim that the latter has vehemently denied.
Let’s review some of the biggest currency assets in the forex landscape (Figure 2):
🞉 Gold, which is also traditionally considered as a hedge against risk, is the biggest contributor to World’s reserves with a value of $8.7 trillion.
🞉 US Dollar, which also the global reserve currency, has the biggest amount of paper money in circulation amounting to $1.7 trillion, comes in second.
🞉 Following closely are Euro zone’s Euro ($1.3 trillion), commodity Silver ($1.1 trillion) & China’s Renminbi ($1 trillion) in the Top five.
🞉 An interesting entry in the Top is that of the top crypto Bitcoin valued at $182 billion at the time of writing — it is increasingly being sought as digital gold and next-gen hedge.
While commodities like Gold & Silver and Bitcoin to some extent are considered stores of value owing to their fixed supply, the value of the fiat currencies like Dollar and other global currencies varies according to inflation caused by an increase in supply, which is controlled by the Central banks around the World.
This infographic (Figure 3) measures average and median wealth to determine where the wealthiest people live. The simplistic measure of average wealth is usually used to determine this — by dividing the country’s gross assets by its adult population.
However, this study has taken into account the median wealth which is calculated by dividing wealth distribution into two equal groups to determine the inequality gap between the rich & poor. A more equal distribution around the median wealth points to lower inequality while a skewed distribution points to a higher inequality (Figure 4).
⯁ Switzerland & Australia top the charts for mean & median wealth. But this comes at a price as both countries have the highest debt-to-GDP ratio of 129% and 120% respectively.
⯁ The United States has the highest concentrations of millionaires in the world — 41% of the total be exact. But the huge difference between the average wealth ($403,974) & median wealth ($61,667) highlights the growing disparity between the rich & the poor. The top 1% in the U.S own 40% of the total wealth.
⯁ Japan is the best example in developed nations with the least inequality — with a median wealth list at $103,861 while the average wealth stands at $227,235 per adult.
⯁ The Scandinavian nations of Norway & Denmark are in the Top 10 for average wealth, but drop down to 12th ($80,054) and 19th ($60,999) respectively for median wealth. These countries have some of the World’s best healthcare & educations systems.
While the biggest challenge for developing countries would be lifting millions out of extreme poverty, an even bigger challenge for developed countries is to reduce the income equality gap between the rich & the poor.