Fortune Magazine

Discussion in 'Economics' started by SouthAmerica, Jun 25, 2006.

  1. .

    “How much will you inherit?”
    A record $45 trillion is being handed down - but not everyone gets a share…
    By Eugenia Levenson
    Fortune Magazine - June 21, 2006

    NEW YORK (FORTUNE) - Coming into money has never gone out of fashion. Just page through the novels of Austen or Dickens or Wharton to see how inheritance shaped social destiny.

    The largest intergenerational transfer of wealth ever is now underway, measuring $45 trillion (the low estimate from the Center on Wealth and Philanthropy at Boston College).

    And many boomers are wondering if a windfall from their parents - the generation whose Depression-inspired frugality collided so spectacularly with post-World War II economic opportunity - lies ahead.

    …The big score

    Enough to provide $7,000 for every man, woman, and child on earth (or build 13 stacks of dollar bills to the moon), the $45 trillion will be transferred over a 55-year period ending in 2052. About a third of the funds will pass to boomers; the rest will flow mainly to their kids.

    The article also had a table with the following information:

    National Debt = $ 8.4 trillion

    U.S. GDP 2005 = $ 12.5 trillion

    World GDP 2004 in U.S. $’s = $ 41.3 trillion

    Intergenerational transfer of wealth from 1998 to 2052 = $ 45 trillion

    Total value of shares trading on world’s stock exchanges 2005 = $ 51 trillion


    June 25, 2006

    SouthAmerica: When I saw the enclosed article on the latest issue of Fortune Magazine I wonder what kind of point they were trying to convey to its readers with the following information: “Intergenerational transfer of wealth from 1998 to 2052 = $ 45 trillion”

    First, why they did not start counting from year 2007 on instead of 1998?

    How much has been already been transferred from 1998 to 2006?

    From 1998 to 2052 we are talking about 55 years – that implies an average transfer of $800 billion dollars per year.

    I don’t know how much inheritance tax will be paid on these transfers – but after tax the money invested it will be less than when the parents had the money. The tax money will be taken out of the table and invested assets will be reduced by that amount.

    This is not new money that will be available for new investments – your parents had the money and now you have the same money.

    The article does not mention what kind of inflation rate will affect this money over the coming years – If we have a major problem in the coming years and the dollar loses its value in the international market after a massive meltdown or if we have inflation like in Germany in the 1920’s then you be able to buy a cup of coffee with the $ 45 trillion in 2052.

    The global economy is changing at the speed of light and everything is being changed as never before. The value of these assets that they are using today to make these calculations will change drastically in the coming years – the foundations of the US economy is changing very fast and just god knows what it will look like in 20 years.

    The baby boomers will be selling all these assets to pay for their retirement life style – and there won’t be enough buyers for all these assets. A lot of expected future earnings also is disappearing in the US like no one could have imagined only a few years ago. (All kinds of retirement benefits are being cut to the bone by corporations and in the near future also to state and federal employees)

    All kinds of costs are being transferred to workers and retirees – health costs and so on….

    I could go on, and on giving in detail all the negative stuff that is in the pipeline that will affect the US economy in the future.

    My conclusion is that that particular article published by Fortune Magazine was very much a worthless piece of information.

    Maybe the author of that article should have been more clear regarding the point she was trying to make.

    Information such as: “Enough to provide $7,000 for every man, woman, and child on earth (or build 13 stacks of dollar bills to the moon)”

    That is pure bullshit.

  2. They said: "Total value of shares trading on world’s stock exchanges 2005 = $ 51 trillion."

    But they neglected to mention:

    Total value of units trading on world’s foriegn exchange market 2005 = $2 trillion * 365-days (presumably) = $7,300,000,000,000.

    Just goes to show ya.

  3. That's child's play. The ISDA estimates that total otc volume last year was over $261 trillion.