Today Credit Suisse released its latest annual global wealth report, which traditionally lays out what has become the single biggest reason for the recent "anti-establishment" revulsion: an unprecedented concentration of wealth among a handful of people, as shown in Swiss bank's infamous global wealth pyramid, an arrangement which as observed by the "shocking" political backlash of the past year, suggests that the lower 'levels' of the pyramid are increasingly unhappy about.

As Credit Suisse tantalizingly shows year after year (most recently one year ago), the number of people who control roughly half of the global net worth, or 45.9% of the roughly $280 trillion in household wealth, is declining progressively relative to the total population of the world, and in 2017 the number of people who were worth more than $1 million was just 36 million, roughly 0.7% of the world's population of adults. On the other end of the pyramid, some 3.5 billion adults had a net worth of less than $10,000, accounting for just about $7.6 trillion in household wealth. And inbetween is the so-called global middle class – those 1.4 billion people whose rising anger at the status quo made Brexit and Trump possible.

As the report authors write, there is just one group to have benefited from the Fed's post-crisis monetary policies: " Our calculations show that the top 1% of global wealth holders started the millennium with 45.5% of all household wealth. This share was about the same until 2006, then fell to 42.5% two years later. The downward trend reversed after 2008 and the share of the top one percent has been on an upward path ever since, passing the 2000 level in 2013 and achieving new peaks every year thereafter. According to our latest estimates, the top one percent own 50.1 percent of all household wealth in the world.”

As the bank then laconically adds, "Global wealth inequality has certainly been high and rising in the post-crisis period." And as the chart below shows, in 2017, for the first time ever, the richest 1% now controls just over half, or 50.1%, of global wealth.

Incidentally, we tracked down the first Credit Suisse report we found in the "wealth pyramid" series, from back in 2010, where the total wealth of the top "layer" in the pyramid was a modest $69.2 trillion for the world's millionaires. It has nearly doubled in the 7 years since then. Meanwhile, the world's poorest have gotten, you got it, poorer, as those adults who were worth less than $10,000 in 2010 had a combined net worth of $8.2 trillion, a number which has since declined to $7.6 trillion in 2016 despite a half a billion increase in the sample size. Meanwhile, the layer right above, also known as the "middle class", has gone exactly nowhere, with a net worth of just over $32 trillion.

How about the very top?

Things here are even more nuanced, with 31.4 million people whose net worth is between $1 and $5 million gradually tapering off  to just 148,200 Ultra High Net Worth individuals who control more than $50 million in assets each.  Of these, 54,800 are worth at least USD 100 million, and 5,700 have assets above USD 500 million. The total number of UHNW adults has risen by 13% (19,600 adults) during the past year, as a result of the widespread
gains in wealth, primarily via artificially inflated rising financial assets, and the increase has been relatively uniform across all regions.

* * *

Here are some of the key excerpts from Credit Suisse

Wealth differences within and between countries

Wealth differences between individuals occur for many reasons. Variation in average wealth across countries accounts for much of the observed inequality in global wealth, but there is also considerable disparity within countries. Those with low wealth are disproportionately found among the younger age groups who have had little chance to accumulate assets. Others may have suffered business losses or personal misfortune, or live in regions where prospects for wealth creation are more limited. Opportunities are also sometimes constrained for women or minorities. At the other end of the spectrum there are many individuals with large fortunes, acquired through a combination of talent, hard work and good luck.

The wealth pyramid in Figure 1 captures these differences. The large base of low wealth holders supports higher tiers occupied by progressively fewer adults. We estimate that 3.5 billion individuals – 70% of all adults in the world – have wealth below USD 10,000 in 2017. A further 1.1 billion adults (21% of the global total) fall in the USD 10,000–100,000 range. While average wealth is modest in the base and middle tiers of the pyramid, the total wealth of these segments amounts to USD 40 trillion, underlining the economic importance of this often overlooked group.

The base of the pyramid

The layers of the wealth pyramid are quite distinctive. The base tier has the most even distribution across regions and countries (Figure 2), but also the widest spread of personal circumstances. In developed countries, about 30% of adults fall within this category, and for the majority of these individuals, membership is either transient – due to business losses or unemployment, for example – or a lifecycle phase associated with youth or old age. In contrast, more than 90% of the adult population in India and Africa falls within this range. In some low-income countries in Africa, the percentage of the population in this wealth group is close to 100%. For many residents of low-income countries, life membership of the base tier is the norm rather than the exception.

Mid-range wealth

In terms of global wealth, USD 10,000–100,000 is the mid-range band, covering 1.1 billion adults and encompassing a high proportion of the middle class in many countries. The average wealth of this group is quite similar to global mean wealth, and its combined net worth of USD 33 trillion provides it with considerable economic clout. India and Africa are under-represented in this segment, whereas China’s share is disproportionately high, having  risen rapidly from 12.6% in 2000 to 35% in 2015, where it remains. This contrasts with India, which accounted for just 2.7% of the group in 2000, and only 5.7% now, less than half the share of China at the turn of the century before the rapid rise in its membership.

The high wealth bands

The top tiers of the wealth pyramid – covering individuals with net worth above USD 100,000 – comprised 6.1% of all adults in the year 2000. The proportion rose to 9.1% by the end of the financial crisis, before dropping back to the current level of 8.6%. Regional composition differs markedly from the strata below. Europe, North America and the Asia-Pacific region (omitting China and India) together account for 89% of the group, with Europe alone supplying 155 million members (36% of the total). This compares with just seven million members (1.7% of the global total) in India and Africa combined.

The pattern of membership changes once again for the US dollar millionaires at the top of the pyramid. The number of millionaires in any given country is determined by three factors: the size of the adult population, average wealth, and wealth inequality. The United States scores high on all three criteria, and has by far the greatest number of millionaires: 15.4 million, or 43% of the world total (Figure 3). For many years, Japan held second place in  the millionaire rankings by a comfortable margin – with 13% of the global total in 2011, for example, twice as many as the third placed country. However, the number of Japanese millionaires has fallen, alongside a rise in other countries. As a consequence, Japan’s share of global millionaires dropped to 10% in 2012, and has settled around 7%. This has been linked to a 16% decrease in its average wealth since 2011.

The United Kingdom retains third place with 6% of millionaires worldwide. Germany, China and France each account for 5% of the global total, followed by Italy with 4%, and Canada and Australia at 3%. Korea, Switzerland, Spain, and Taiwan are the remaining four countries hosting more than 360,000 millionaires, the minimum requirement for a one percent share of the global total.

Changing membership of the millionaire group

Year-on-year variations in the number of millionaires can often be traced to real wealth growth or exchange-rate movements. This year, widespread rises in wealth per adult have led to an additional 2.3 million dollar  millionaires, almost half of whom (1.1 million) reside in the United States. Another 620,000 new millionaires are located in the main Eurozone countries (Germany, France, Italy and Spain) partly due to a 3% rise in the euro  against the US dollar. Australia added 200,000 new members and about the same number appeared in China and India taken together. Millionaire numbers fell in very few countries, the main exceptions – all associated with depreciating currencies – being the United Kingdom, which lost 34,000, and Japan, which shed over 300,000.

High net worth individuals

The primary sources of information on wealth distribution – official household surveys – tends to become less reliable at higher wealth levels.To estimate the pattern of wealth holdings above USD 1 million, we therefore supplement the survey data with information gleaned from the Forbes annual tally of global billionaires. These data are pooled for all years since 2000, and wellknown statistical regularities are then used to estimate the intermediate numbers in the top tail. This produces plausible values for the global pattern of asset holdings in the high net worth (HNW) category from USD 1 million to USD 50 million, and in the ultra-high net worth (UHNW) range from USD 50 million upwards.

While the base of the wealth pyramid is characterized by a wide variety of people from all countries and all stages of the lifecycle, HNW and UHNW individuals are heavily concentrated in particular regions and countries, and tend to share similar lifestyles, for instance participating in the same global markets for luxury goods, even when they reside in different continents. The wealth portfolios of these individuals are also likely to be more similar, with a focus on financial assets and, in particular, equities, bonds and other securities traded in international markets.

For mid-2017, we estimate that there are 35.9 million HNW adults with wealth between USD 1 million and USD 50 million, of whom the vast majority (31.4 million) fall in the USD 1–5 million range (Figure 4). There are 3.0 million adults worth between USD 5 million and USD 10 million, and another 1.6 million have assets in the USD 10–50 million range. Europe and North America had similar numbers of HNW individuals from 2007 to 2009, but North America then opened up a gap that has widened significantly since 2013. North America now accounts for 16.4 million members (46% of the total), compared to 10.8 million (30%) in Europe. Asia-Pacific countries, excluding China and India, have 6.1 million members (17%), and a further 2.0 million are found in China (5% of the global total). The remaining 1.2 million HNW individuals (2% of the total) reside in India, Africa or Latin America.

Ultra-high net worth individuals

Our calculations suggest that 148,200 adults worldwide can be classed as UHNW individuals, with net worth above USD 50 million. Of these, 54,800 are worth at least USD 100 million, and 5,700 have assets above USD 500 million. The total number of UHNW adults has risen by 13% (19,600 adults) during the past year, as a result of the widespread gains in average wealth. All regions shared in this rise in the number of UHNW individuals.

North America dominates the regional rankings, with 75,000 UHNW residents (51%), while Europe has 31,900 (22%), and 17,500 (12%) live in Asia-Pacific countries, excluding China and India. Among individual countries, the United States leads by a huge margin with 72,000 UHNW adults, equivalent to 49% of the group total (Figure 5), a rise of 9,900 compared to mid-2016. China occupies second place with 18,100 UHNW individuals (up
3,000 on the year), followed by Germany (7,200, up 500). The United Kingdom (4,700, up 400) made up for some of the losses suffered a year ago after the Brexit vote and retained fourth place ahead of France, Australia and Canada (all 3,000). The remaining places in the top ten list of countries are occupied by Switzerland (2,800, up 400), Italy (2,600, up 100) and Korea (2,300, up 300).

The wealth spectrum

The wealth pyramid captures the contrasting circumstances between those with net wealth of a million US dollars or more in the top echelon, and those lower down the wealth hierarchy. Discussions of wealth holdings often focus exclusively on the top tail. We provide a more complete and balanced picture, believing that the middle and base sections are interesting in their own right. One reason is the sheer size of numbers and their political power. However, their combined wealth of USD 40 trillion also yields considerable economic opportunities, which are often overlooked. Addressing the needs of these asset owners can drive new trends in both the consumer and financial industries. China, Korea and Singapore are examples of countries where individuals have risen rapidly through this part of the wealth pyramid. India has shown less progress to date, but has the potential to grow rapidly in the future from its low starting point.

While the middle and lower levels of the pyramid are important, the top segment will likely continue to be the main driver of private asset flows and investment trends. Our figures for mis-2017 indicate that there are now nearly 36 million HNW individuals, including 2.0 million in China, and 6.3 million more in India and other Asia-Pacific countries. At the apex of the pyramid, 148,200 UHNW adults are each worth more than USD 50 million. This includes 18,100 UHNW individuals in China (12% of the global total), nearly 40 times the number at the turn of the century. A further 6,400 UNHW adults (4% of the total) can be found in Taiwan, India, Hong Kong and Singapore.

Source: Credit Suisse

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Here’s the latest sign that the long-awaited facial recognition technology introduced by the iPhone X that caused production delays and myriad other headaches for Foxconn and its suppliers doesn’t live up to Apple’s lofty claims: A group of Vietnamese hackers became the first in the world to defeat the phone’s Face ID security, accomplishing the task with relative ease using a $150 silicone prop.

On Friday, Vietnamese security firm Bkav released a blog post and video purportedly showing them cracking Face ID with a composite mask of 3-D-printed plastic, silicone, makeup, and simple paper cutouts, which they assembled to successfully trick the iPhone X into unlocking. That demonstration, which has yet to be confirmed publicly by other security researchers, could poke a hole in the expensive security of the iPhone X, particularly given that the researchers say their mask cost just $150 to make, according to Wired.

To be sure, this vulnerability shouldn't alarm the average iPhone owner, given the time, effort, and access to someone's face required to recreate the silicone mask used by the hackers. Creating the dummy used to fool the phone required a detailed measurement or digital scan of hacker who owned the phone. However, the notion that these dummies could someday be used to unlock phones and steal sensitive data isn’t completely far-fetched. And it's also notable that Apple specifically boasted that the Face ID technology couldn't be defeated by masks.

"Targets of these types of sophisticated hacks probably wouldn’t be ordinary users, “but billionaires, leaders of major corporations, nation leaders, and agents like FBI need to understand the Face ID's issue," the Bkav researchers said. They also suggest that future versions of their technique might be performed with a quick smartphone scan of a victim’s face, or even a model created from photographs, but didn't make any predictions about how easy those next steps might be to engineer.

The hackers answer questions about beating Face ID in a humorous post published on the company’s blog.

Apparently drunk on their victory, the hackers pulled no punches with their Apple-bashing in a humorously worded blog post.

"Apple has done this not so well," writes the company. "Face ID can be fooled by mask, which means it is not an effective security measure."

Their responses to the “questions” listed in the Q&A were also, at times, nonsensical. But the video published on YouTube does appear convincing.

In the video, one researcher pulls a piece of cloth from a mounted mask facing an iPhone X on a stand, and the phone instantly unlocks. Despite the phone's purportedly sophisticated 3-D infrared mapping of its owner's face and AI-driven modeling, the researchers say they were able to achieve that spoofing with a relatively basic mask: little more than a sculpted silicone nose, some two-dimensional eyes and lips printed on paper, all mounted on a 3-D-printed plastic frame made from a digital scan of the would-be victim's face.

Apple’s technology purportedly becomes more secure with time as it continues to analyze the facial features of its owner. Still, the fact that these hackers were able to crack the phone with a plastic doll doesn’t bode well for the future of cybersecurity in the US.
 

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Authored by Ronald-Peter Stoferle via The Mises Institute,

The vote for Brexit and the election of Donald Trump has baffled the main stream and the establishment. Most market participants and observers didn't believe ex ante that they were possible, and as a result were completely surprised when the unexpected happened. Ever since the term populism has become socio-politically relevant in modern-day public discourse.

Google Trends illustrates that there was a veritable explosion in search queries for the term “populism” last year:

Source: Google

But, populism – regardless of its political flavor – merely represents a symptom. The generally surprising results were consequences of the economical erosion of the past years.

Although there are idiosyncrasies in every country that foster the rise of populist movements, the ailing foundation of the economy provides the fertile soil and is the major driver of people's dissatisfaction and the associated voting decisions. To assert that populism is the reason for this process of political change is in our opinion far too simplistic. An analysis of stating that economic erosion is responsible for the rise in populism is supported by by a McKinsey study, which examines the trend in real household incomes in 25 industrialized nations.

McKinsey arrived at the striking conclusion that real incomes of 65 to 70 percent of households in developed countries either stagnated or even declined between 2005 and 2014. The following chart illustrates the trend in household incomes in selected countries. (The y axis shows the percentage of households with stnating or declining income between 2005 and 2014): 

Source: McKinsey, Incrementum AG

The momentousness of this study becomes obvious when considering that the object under review are 25 industrialized countries with a population of more than 800 million people, generating 50 percent of global GDP.

Moreover, numerous studies show that the opportunities and expectations of coming generations to earn more than their parents have worsened significantly. While the probability that members of the baby boomer generation would earn more than their parents was 62%, this probability has declined to 50% for generations born since 1980.2 Income equality has deteriorated dramatically over time as well. The share of national income earned by the bottom 90% of the US population has decreased from 66% in 1980 to 50% today. Contrary to the picture painted by numerous macroeconomic statistics, the economic situation is apparently not as bright as it is often portrayed.

What cannot be quantified by statistical aggregates is the cause of the economic erosion suffered by the middle class, which can ultimately be traced back to our monetary system. The low interest rate environment orchestrated by central banks has not only failed to solve our economic problems, but is – in keeping with the business cycle theory developed by Mises and Hayek – the very cause of the business cycle.

Apart from creating the business cycle, ZIRP and NIRP-policies of central banks also result in an ever more pronounced concentration of incomes and wealth. In this context, it is crucial to understand the so-called Cantillon effect, which we have also discussed comprehensively in our book. As we point out there, when newly created money is introduced, it enters the economy at discrete points, it cannot be distributed evenly across the entire economy. Instead, every expansion of the money supply results in a transfer of wealth: the early receivers of new money can purchase goods at their existing prices and thus gain purchasing power, whereas later receivers of new money can only buy goods at prices that have already increased, and are losing purchasing power as a result. In today's monetary system, it is primarily commercial banks, the government and large corporations with good financial market access that are benefiting as the earliest receivers of newly created money, while all other sectors are losing out – the further removed from the source of money creation they are, the bigger their losses.

This concentration effect is inter alia reflected by real estate prices in international financial centers such as London or New York, as well as in large discrepancies between urban and rural areas. Maps showing the distribution of votes in the US election and the Brexit referendum can clearly be interpreted from this perspective as well:

Source: Wikimedia Commons, Incrementum AG

It is conspicuous that the Trump election and Brexit met with high approval rates in largely rural areas in the US and Great Britain, while metropolitan areas tended to vote in favor of the status quo (i.e., for Hillary Clinton or Remain).

The economic situation in these regions undoubtedly plays a role in this.

While large cities have often benefited from the fiat money system due to their proximity to politics and financial markets, many rural areas are drying up economically.

These regions were often hit the hardest by deindustrialization.

The following chart shows the discrepancy between productivity growth and real household incomes. After World War II income and productivity growth tended to track each other closely, but since the 1980s a growing divergence can be observed:

Source: EPI, Bureau of Labor Statistics, Incrementum AG

The same applies to hourly wages as well: between 1973 and 2015 net productivity grew by 73.4%, while the hourly wage of the average US worker rose by a mere 11.1% in inflation-adjusted terms, and thus effectively stagnated. Viewed from this perspective, it is not surprising that voters are increasingly warming up to populist ideas.

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Well-known Paris region Place Vendome is currently on lockdown, following a bomb alert after the discovery of a suspicious package.

DIRECT ???????? #Paris La place Vendôme évacuée suite à une alerte à la bombe vers 18h30. La manifestation des @efFRONTees stoppée avant d’arriver devant le ministère de la Justice. http://pic.twitter.com/E6oIYLQ0Nk

— Actu17 (@Actu17) November 14, 2017

Local reports note that part of Rue Saint-Honore and Rue de Castiglione is cordoned off.

Developing story…

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Jeff Sessions testimony before the House Judiciary Committee was about as contentious as many observers probably expected, with Sessions jousting with lawmakers who pressed him about troubling omissions in his previous testimony.

But nestled among questions about Sessions’ campaign-season interactions with Russian officials and former Trump campaign national security adviser George Papadopoulos, one lawmaker asked Sessions whether a report that the DOJ said it would approve AT&T’s proposed takeover of Time Warner only if the latter agreed to sell CNN was accurate. Sessions responded that it wasn't.

“I don’t think I’m able to accept as accurate news reports that have come out,” he said when asked if the president or anyone at the White House had asked him about the acquisition.

The news outraged some Democrats, who accused Trump of improperly using his influence to punish the network, which he has frequently decried as “fake news”. Trump had insinuated during the campaign that he might try to block the deal if he won the presidency.

Sessions refused to say exactly what would be required for the AT&T-Time Warner deal to win approval.

When asked later by another lawmaker if the White House had attempted to interfere, or had reached out to the DOJ about the deal. Sessions said that he couldn't answer questions involving the White House's communications with the Justice Department.

Last night, the Washington Post reported that Sessions had asked prosecutors to look into whether certain prominent Democrats and Obama-era federal law-enforcement officials should be investigated for a range of purported misdeeds.

During the testimony, several Republican reps pushed Sessions to confirm that he would appoint the special counsel, something Sessions declined to do since he said to do so would reveal the existence of an ongoing investigation.

Instead, in a heated exchange with Ohio Republican Rep. Jim Gordon, Sessions  pushed back on the immediate need for a second special counsel to investigate Clinton.

It would take "a factual basis that meets the standard of a special counsel" for the Justice Department to make such an appointment, Sessions said.

"We will use the proper standards and that’s the only thing I can tell you, Mr. Jordan," Sessions said. "You can have your idea but sometimes we have to study what the facts are and to evaluate whether it meets the standards it requires."

It would take "a factual basis that meets the standard of a special counsel" for the Justice Department to make such an appointment, Sessions told Gordon.

Jordan suggested that the Clinton campaign and the DNC broke the law by paying for the infamous “Trump dossier” via Clinton lawyer Marc Elias and not disclosing the true purpose of those funds to the FEC.

"And it sure looks like the FBI was paying the author of that document and it sure looks like a major political party was working with the federal government to then turn an opposition research document – the equivalent of some National Enquirer story – into an intelligence document take that to the FISA Court so they could then get a warrant to spy on President Trump’s campaign."

"That’s what it looks like and I’m asking you, in addition to all the things we know about James Comey in 2016, doesn’t that warrant naming a second special counsel?"

Sessions at first demurred, noting that Comey is no longer the director of the FBI and praising the current director, Chris Wray. But pressed further by Jordan -"He's not here today, Attorney General Sessions, and you are" – Sessions appeared to throw cold water on the immediate need for a special counsel.

"I would say 'looks like' is not enough basis to appoint a special counsel," he said sharply. He added that it would be "wrong" to use the powers of the DOJ for political purposes.

"The Department of Justice can never be used to retaliate politically against opponents. That would be wrong."

Asked early in the testimony about his previous public comments that he was not aware of any contacts between Trump campaign associates and the Russians – comments that have since been proven incorrect because Sessions attended a March meeting with George Papadopoulos where the latter said he could arrange a meeting between then-candidate Trump and Russian President Vladimir Putin.

Sessions said that during his confirmation hearing, Papadopoulos’s comments had slipped his memory.

Furthermore, Sessions said on Tuesday he now recalls the meeting with then-candidate Donald Trump and aides where campaign connections to Russia were discussed.

Sessions, addressing the House Judiciary Committee, said he recalled the March 2016 meeting where foreign policy advisor George Papadopoulos was present, “But I have no clear recollection of the details of what he said during that meeting."

Later, Democratic Rep. Hakeem Jeffries pressed Sessions about an interview he did with Lou Dobbs where he criticized Hillary Clinton for telling the FBI she didn’t remember certain details during its investigation of her alleged mishandling of classified information. During the interview, Sessions told Dobbs that conveniently failing to remember could constitute perjury.

Jeffries asked if he believed the intentional failure can constitute as a criminal act?

Sessions said yes.

He later said the implication that he lied by saying he didn't recall those comments was unfair, and harshly rebuked Jeffries, a Democrat who represents parts of Brooklyn.

Most of the most controversial subjects have been well-trod at this point, but Sessions’ testimony has not yet ended. You can watch along below:

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A Direct Threat to the West, the Bond Between China and Russia Strengthens

Written by Nathan McDonald, Sprott Money News 

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US equities just legged lower – led by tech-heavy Nasdaq – after Ways & Means Committee Chair Kevin Brady confirmed that The House Tax Bill will keep SALT deductions, implicitly lowering tax revenues (and thus a potentially smaller corporate tax cut).

Nasdaq is leading the drop…

Apple most notably extended losses on the headline…

And FANG Stocks are fading..

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