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Chart: What Assets Make Up Wealth?

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Chart: What Assets Make Up Wealth?

Chart: What Assets Make Up Wealth?

A look at asset distributions, based on net worth tiers

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

A person’s wealth can be made up of many different assets.

Net worth, the measure we use to gauge wealth, is actually the sum of all of a person’s assets after subtracting liabilities (such as loans). Therefore, net worth can be comprised of liquid savings, stocks, mutual funds, bonds, real estate, vehicles, retirement accounts (IRAs, pensions), and many other types of assets.

But how does the composition of net worth differ for a person with $100k in net worth, versus that of a billionaire?

Today’s chart uses data from the Federal Reserve Survey of Consumer Finances from 2016 to find out.

Simplifying the Data

Based on this original work done by Ben Weber of Windfall Data, we’ve since taken the data and tried to clean up the categories to make it more digestible.

For example, residential real estate and non-residential real estate were combined into a single category, and bonds, savings bonds, and certificates of deposit were merged into a single fixed income investment category.

The end result is a net worth composition for each of the six different wealth brackets, which are each grouped based on size. For example, in the $10k bracket, all five-figure net worths ($10k-$99k) are grouped together, and so on.

Different Makeups

The composition of wealth ends up varying considerably between lower and higher net worths:

Primary Residence:
This is by far the most important asset class for all net worth tiers up to $1 million.

Vehicle:
For the $10k net worth tier, the value of a vehicle is more than investments such as pensions, IRAs, mutual funds, stocks, etc.

Stocks:
The proportion of directly-held stock increases up the tiers, and billionaires hold a significant portion of wealth in stocks.

Business Interests:
Most multi-millionaires or billionaires are not liquid, and have most of their wealth in business interests.

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Gold

The World’s Gold and Silver Coin Production vs. Money Creation

In 2019, the value of global money creation was over 500 times higher than the world’s gold and silver coin production combined.

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World's Gold and Silver Coin Production

Global Gold & Silver Coin Production vs. Money Creation

Note: Data has been updated to correct a previous calculation error pertaining to Japanese Yen money supply.

Both precious metals and cash serve as safe haven assets, intended to limit losses during market turmoil. However, while modern currencies can be printed by central governments, precious metals derive value from their scarcity.

In this infographic from Texas Precious Metals, we compare the value of the world’s gold and silver coin production to global money creation.

Total Production Per Person, 2019

We calculated the value of global currency issuance in 2019 as well as precious metal coins minted, and divided by the global population to get total production per person.

Throughout, global money supply is a proxy based on the 5 largest reserve currencies: the U.S. dollar, Euro, Japanese Yen, Sterling Pound, and Chinese Renminbi.

2019 ProductionOuncesDollar ValueDollar Value Per Person
Global Gold Coins7,204,982$10.9B$1.42
Global Silver Coins97,900,000$1.8B$0.23
Global Money Supply$4.3T$556.33

All numbers are in USD according to exchange rates as of December 31 2019. Gold and silver values are based on the 2019 year close price of $1,510.60 and $17.90 respectively.

The value of new global money supply was 390 times higher than the value of gold coins minted, and 2,400 times higher than silver coins minted.

Put another way, for each ounce of minted gold coin, the global money supply increased by more than $593,000.

Change in Annual Production, 2019 vs. 2010

Compared to the start of the decade, here’s how annual production levels have changed:

 20102019% change
Global Silver Coins (oz)95,900,00097,900,0002.1%
Global Gold Coins (oz)6,298,3317,204,98214.4%
Global Money Supply (USD)$2,936,296,692,440$4,268,993,639,92645.4%

Annual increases to global money supply have increased by half, far outpacing the change in the world’s gold and silver coin production.

Even more recently, how has production changed during the COVID-19 pandemic?

The COVID-19 Effect

In response to the global pandemic, central banks have enacted numerous measures to help support economies—including issuing new currency.

The global money supply increased by more than $6.8 trillion in the first half of 2020. In fact, the value of printed currency was 930 times higher than the value of minted gold coins over the same timeframe.

Investors may want to consider which asset is more vulnerable to inflation as they look to protect their portfolios.

Want to learn more? See the U.S. version of this graphic.

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Mining

Visualizing U.S. Money Supply vs. Precious Metal Production in the COVID-19 Era

Amid trillions in COVID-19 stimulus, this graphic compares new U.S. dollars printed to U.S. precious metal coin production.

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U.S. Precious Metal Coin Prduction

U.S. Precious Metal Coin Production in the COVID-19 Era

Gold and silver have played an important role in money throughout history. Unlike modern currencies, they can’t be created out of thin air and derive value from their scarcity.

In the COVID-19 era, this difference has become more prominent as countries print vast amounts of currency to support their suffering economies. This graphic from Texas Precious Metals highlights how the value of U.S. precious metal coin production compares to U.S. money creation.

Year to Date Production

In this infographic, we have calculated the value of money supply added as well as bullion minted, and divided it by the U.S. population to get total production per person. Here’s how the January-September 2020 data breaks down:

 Total (Ounces)Dollar ValueDollar Value Per Person
U.S. Gold Ounces826,000$1.6B$4.79
U.S. Silver Ounces22,261,500$544M$1.65
U.S. Money Supply$3.4T$10,250.16
U.S. Debt$3.8T$11,578.36

Gold and silver dollar values based on Oct 5, 2020 spot prices of $1,915.93 and $24.47 respectively.

The value of new U.S. money supply was more than 2,100 times higher than the value of new gold minted. Compared to minted silver, the value of new U.S. money supply was over 6,000 times higher.

Production Per Day, Per State Over Time

Here’s how production has changed on a per day, per state basis since 2010:

 20102020 YTD (Jan-Sep)Min-Max Production, 2010-2019 
Minted Gold Coins 78oz61oz12oz-78oz 
Minted Silver Coins 1,945oz1,631oz899oz-2,633oz 
U.S. Dollars$19M$255M$19M-$50M 

Year to date, U.S. precious metal coin production is within a normal historical range. If production were to continue at the current rate through December, gold would be above historical norms at 81 ounces and silver would be within the normal range at 2,175 ounces.

The issuance of U.S. dollars tells a different story. Over the last nine months, the U.S. has already added 400% more dollars to its money supply than it did in the entirety of 2019—and there’s still three months left to go in the year.

A Macroeconomic View

Of course, current economic conditions have been a catalyst for the ballooning money supply. In response to the COVID-19 pandemic, the U.S. government has issued over $3 trillion in fiscal stimulus. In turn, the U.S. Federal Reserve has increased the money supply by $3.4 trillion from January to September 2020.

U.S. Money Supply

Put another way, for every ounce of gold created in 2020 there has been $4 million U.S. dollars added to the money supply.

The question for those looking for safe haven investments is: which of these will ultimately hold their value better?

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