The rise of the global financial markets has brought both wealth and risk to almost every crevice of the world.
“There have been huge fluctuations in asset prices over the past decade,” write the analysts at the World Gold Council. “Despite the volatility, financial assets have almost tripled during that period.”
“Currently at a striking US$156tn, the size of financial assets are a multiple of global GDP (Chart 1). This growth has been primarily led by fixed income markets. Between 2000 and 2013, debt markets have grown three-fold, from US$33tn to US$90tn, as a result of ageing demographics in many developed countries, heightened risk aversion, low interest-rate policies and record government spending to boost ailing economies. In particular, outstanding US treasury debt more than doubled from US$4.5tn in 2007 to US$11.9tn in 2013 — a large portion of which is held by foreign investors. At the same time, global stock markets have also grown — at a relatively more modest pace of 35% — from US$49tn in 2000 to US$66tn in 2013, partly driven by economic growth in emerging markets, better prospects for economic recovery in developed markets and an increase in initial public offerings (IPOs).”
The analysts note that if you include the market for securitized products, that number climbs from $US156 trillion to around $US200 trillion. And this doesn’t even consider the over-the-counter derivatives market, whose notional value is estimated at around $US693 trillion.