23 January 2014
Press Release
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The world took full notice in December when the current head of the Federal Reserve, Ben Bernanke told the world that from January, $10 billion less bonds would be bought and would be expected to be completely wound down by the end of 2014. Analysis will be undertaken to demonstrate how the wrong move from the US Federal Reserve could cause Chinese HNWIs to overtake the US, before WealthInsights prediction of 2035.
However, the Federal Reserve news has been received with mixed feelings across the world, with many considering it to be too soon for the world’s largest economy to scale back its buying programme.
One of the main opponents to go public is the head of the IMF Christine Lagarde who agreed that the economy was moving in the right direction, but spoke about the recovery remaining "fragile" in needing to be closely monitored. Forecast figures from WealthInsight show that US total HNWI wealth far outweighs Chinese total HNWI figures by 318% in 2017. Yet if the Federal Reserve scale down there bond buying programme too early and harm the economy, this gap could narrow significantly and cause China to overtake the US sooner than the 2035 prediction.
US vs China Total HNWI Wealth 2006-2017
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By GlobalDataMany countries are exposed to the situation in the US and if the bond buying is wound down incorrectly, deflation could be seen in the eurozone and slower than expected growth in the US. Both these problems combined with other factors could result in a crisis similar to 2008, where HNWI figures in the US alone fell by 25%.
The decisions that will be made throughout 2014 by the Federal Reserve could have a profound effect on HNWIs and growth during 2014-2015. Forecasts are predicting that some of the largest economies in the world are going to struggle to grow over the forecast period, with four of the top six countries expected not to reach 3% real GDP by 2016. These figures could decline even further if the Federal Reserve reduces the bond buying programme too quickly and could cause many of the worlds greatest economies to contract or even produce negative figures.
"With the bond buying programme being withdrawn steadily the market could adapt to the situation well. However, there are a few backbenchers in the Federal committee that would like to see the scheme reduced quickly and it is imperative that they don’t influence the programme. Otherwise the road to recovery could well be cut short."
