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Prices drove 75% of wealth growth
Inflation and paper gains
Inflation accounts for roughly 38% of that price growth. More than a third was simply paper wealth creation, which means a large share of the gain never came from anyone making anything new.
Net worth pulls ahead of GDP
Net worth and GDP moved in sync for most of history, then diverged around the year 2000. Global net worth peaked at 6.1 times GDP in 2020, up nearly 50% from its long-term average, and sits at about 5.4 times today. Over the past 10 years global wealth almost doubled while GDP grew a comparatively modest 40%. The world is about four times wealthier than in 2000, at roughly $600 trillion, or $75,000 per person.
Housing squeezes budgets
When asset prices outrun income, people have to dedicate more and more of their budgets to buying stores of wealth like housing. That leaves less to invest in productive assets, since many can barely meet their monthly mortgage payments. The price of housing, the main place households keep their wealth, has tripled since 2000 and sits well beyond its historical norm.
How does inflation raise asset prices?
Real assets such as land, buildings, and equipment cost more to replace when general prices rise, so their market values tend to climb with the price level. Rents and business revenues also rise with inflation, which lifts what buyers will pay for the income stream. The result is a gain on paper even though each dollar buys less. Economists call the increase after subtracting inflation the real gain, and in the United States the Bureau of Labor Statistics' consumer price index is the usual measure used for that adjustment.
Has wealth outrun income like this before?
Japan in the late 1980s is the best-known case. The Nikkei 225 stock index peaked at 38,915 on December 29, 1989, and did not close above that level again until February 2024. Land prices in Japan's major cities also fell for well over a decade after the early 1990s. Japanese banks spent years working through the bad loans left behind by that boom.
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