Animated: Change in Russian Billionaires’ Wealth Since 2022

When Russia invaded Ukraine in February 2022, many countries retaliated with sanctions targeting Russian billionaires—the oligarchs—and politicians directly.

And as the war has progressed, those sanctions have intensified, with even the relatives and shell companies of these billionaires being targeted over time. The reason? These oligarchs are interconnected to Russia’s government, lending vocal and fiscal support in exchange for sweetheart deals or beneficial government oversight.

This animation from James Eagle shows how the estimated net wealth of the 22 wealthiest Russian billionaires on the Bloomberg Billionaires Index in April 2023 has changed since January 2022, prior to the start of the conflict.

Net Wealth of Top Russian Billionaires

The 22 wealthiest Russian billionaires in April 20, 2023 lost a collective $90.4 billion in net worth since January 5, 2022.

The heaviest hit include Viktor Vekselberg, who holds a stake in UC Rusal, the world’s third largest aluminum producer. Since the start of the war, he’s lost an estimated $11.3 billion or 61% of his net worth from January 2022.

Roman Abramovich, who got his start in the early oligarchy through oil conglomerates, was also hit hard by the sanctions. He lost $10.5 billion or 58% of his net worth from January 2022, and was forced to sell Chelsea Football Club in one of the biggest sports team sales in history.

Notably, the richest oligarchs haven’t lost as much. Mining giant Norilsk Nickel’s largest shareholder, Vladimir Potanin, saw his net worth only drop by 4.8%. After being hit hard at the onset of the war in Ukraine, he quickly rebounded and at many times had an even higher net worth, reaching $35.6 billion in June 2022.

And a few oligarchs, like former Norilsk Nickel CEO Mikhail Prokhorov and phosphate-based fertilizer baron Andrey Guryev, saw their wealth increase since January 2022. Guryev grew his net worth by $2 billion or 26%, while Prokhorov (who formerly owned the NBA’s Brooklyn Nets) saw his net worth even out at a gain of $0.3 billion or 2%.

Oligarch Support of Russia (or Lack Thereof)

As Russia’s war with Ukraine has dragged on, and sanctions have continued to weigh on Russian billionaires, politicians, and companies, their effects have been uncertain.

Oligarchs have lost net worth, relinquished foreign businesses, and even had prized possessions like mansions and yachts seized. At the same time, though Russia’s economy has weakened under sanctions, bolstered trade with countries like China, India, and Saudi Arabia have kept it stronger than expected.

And though some oligarchs have voiced various concerns over the ongoing war, the wealthiest have been careful to toe the line. Russian billionaires and politicians that did vocalize criticism, including Lukoil chairman Ravil Maganov, have been found dead in apparent suicides, heart attacks, and accidents.

The most serious oligarch rebellion wasn’t due to economic hardships, but military operations. Oligarch and mercenary leader Yevgeny Prigozhin launched an attempted coup in June 2023, reportedly retreating after support from within Russia’s military quickly fizzled.

The post Animated: Change in Russian Billionaires’ Wealth Since 2022 appeared first on Visual Capitalist.

Top 10 Countries by GDP Per Capita in 2023

There are many ways to measure different economies against one another, but comparing countries by GDP per capita remains one of the most tried-and-true methods.

GDP per capita attempts to level the playing field by dividing a country’s economic output by its population, effectively giving the average GDP per person. A higher per capita GDP generally corresponds to higher income, consumption levels, and standards of living.

The simplicity of this metric also makes it useful for economists and policymakers to communicate levels of economic well-being to the public.

The above graphic from theWORLDMAPS ranks the top 10 countries by per capita GDP in different regions, using data from the International Monetary Fund (IMF).

Top 10 Countries by GDP Per Capita in the World

Here are the top 10 countries with the highest nominal GDP per capita in the world in 2023, measured in U.S. dollars:

Rank	Country	GDP per Capita	Region
1	Luxembourg	$132,370	Europe
2	Ireland	$114,580	Europe
3	Norway	$101,100	Europe
4	Switzerland	$98,770	Europe
5	Singapore	$91,100	Asia
6	Qatar	$83,890	Asia
7	U.S.	$80,030	Americas
8	Iceland	$75,180	Europe
9	Denmark	$68,830	Europe
10	Australia	$64,960	Oceania

Luxembourg, Ireland, and Norway lead the ranking with more than $100,000 in GDP per capita. Luxembourg is a key financial services center in Europe, Ireland is headquarters to many multinational corporations, and Norway is one of the largest energy exporters in the region, explaining their relative prosperity.

Wealthy countries with smaller populations tend to make up the world’s richest ranks. According to the IMF, Luxembourg only has slightly more than 600,000 people which would be a small city in more populous countries. In fact, in the top 10, only the U.S. and Australia have a population of more than 10 million.

Introducing Purchasing Power Parity

One of the major drawbacks of using GDP per capita is that it doesn’t account for the strength of the local currency versus its exchange rate, the latter of which is heavily influenced by investment flows and demand for the national currency.

Non-tradable goods in a country (haircuts, local transport, schools, etc.) do not get valued when using an exchange-rate conversion. It also doesn’t account for the price differences between countries—for example, fresh vegetables in India are far cheaper than in Canada.

To solve this problem, economists utilize purchasing power parity (PPP) indexes. A key element of these indexes is that they remove these price differences and convert into a common currency in order to show relative economic prosperity. Popular examples are The Economist’s Big Mac index and the Wall Street Journal’s Latte Index.

Nominal vs. PPP-adjusted GDP Per Capita

In the case of GDP, PPP measurements use an “international dollar” which can buy the same amount of goods in any given country as a U.S. dollar could buy in America.

Immediately, there are a few noticeable differences in the top 10 countries by GDP per capita when adjusted for PPP. For one, most countries’ values have increased from their nominal value (except for the U.S. since it is the benchmark).

Rank	Country	GDP per Capita (PPP)	Region
1	Ireland	$145,200	Europe
2	Luxembourg	$142,490	Europe
3	Singapore	$133,890	Asia
4	Qatar	$124,830	Asia
5	Macao	$89,560	Asia
6	UAE	$88,220	Asia
7	Switzerland	$87,960	Europe
8	Norway	$82,650	Europe
9	U.S.	$80,030	Americas
10	San Marino	$78,930	Europe

Some countries have switched ranks in the top 10, such as Ireland and Luxembourg. Others have been replaced all together, with Iceland, Denmark, and Australia falling out of the top 10, replaced by Macao, the UAE, and San Marino.

We can also see how the different calculations of GDP per capita affect the rankings in other regions:

Rank (PPP)	Region	Country	PPP (Intl $)	Nominal ($)
1	Americas	United States	$80,030	$80,030
2	Americas	Guyana	$60,650	$20,540
3	Americas	Canada	$60,180	$52,720
4	Americas	Aruba	$49,630	$33,090
5	Americas	The Bahamas	$43,910	$35,460
6	Americas	Puerto Rico	$43,840	$38,570
7	Americas	Panama	$40,180	$17,350
8	Americas	Trinidad & Tobago	$32,050	$19,860
9	Americas	Saint Kitts & Nevis	$29,660	$17,860
10	Americas	Chile	$29,610	$17,830
1	Africa	Seychelles	$39,660	$19,540
2	Africa	Mauritius	$29,160	$11,550
3	Africa	Libya	$24,600	$6,760
4	Africa	Botswana	$19,400	$7,270
5	Africa	Gabon	$19,200	$9,290
6	Africa	Equatorial Guinea	$18,510	$9,780
7	Africa	Egypt	$16,980	$3,640
8	Africa	South Africa	$16,090	$6,490
9	Africa	Algeria	$13,510	$4,480
10	Africa	Tunisia	$13,270	$4,070
1	Asia	Singapore	$133,890	$91,100
2	Asia	Qatar	$124,830	$83,890
3	Asia	Macao SAR	$89,560	$50,570
4	Asia	United Arab Emirates	$88,220	$49,450
5	Asia	Brunei Darussalam	$75,580	$35,100
6	Asia	Hong Kong SAR	$74,600	$52,430
7	Asia	Taiwan	$73,340	$33,910
8	Asia	Saudi Arabia	$64,840	$29,920
9	Asia	Bahrain	$60,600	$28,390
10	Asia	South Korea	$56,710	$33,390
1	Europe	Ireland	$145,200	$114,580
2	Europe	Luxembourg	$142,490	$132,370
3	Europe	Switzerland	$87,960	$98,770
4	Europe	Norway	$82,650	$101,100
5	Europe	San Marino	$78,930	$52,950
6	Europe	Denmark	$73,390	$68,830
7	Europe	Netherlands	$72,970	$61,100
8	Europe	Iceland	$69,780	$75,180
9	Europe	Austria	$69,500	$56,800
10	Europe	Andorra	$69,000	$44,390
1	Oceania	Australia	$65,370	$64,960
2	Oceania	New Zealand	$54,050	$48,830
3	Oceania	Palau	$16,390	$14,800
4	Oceania	Fiji	$15,730	$5,890
5	Oceania	Nauru	$11,340	$11,830
6	Oceania	Tonga	$7,120	$5,420
7	Oceania	Samoa	$6,320	$4,440
8	Oceania	Tuvalu	$5,800	$6,010
9	Oceania	Marshall Islands	$4,670	$5,160
10	Oceania	Papua New Guinea	$4,520	$3,520

The Americas and Europe

The U.S. leads the Americas in both nominal and PPP-adjusted per capita GDP. However, Canada drops to 3rd place under the new metric, overtaken by Guyana.

In Europe, the usual suspects in the world’s top 10 populate most of the region’s ranks. However, Andorra slides in at 10th in Europe’s richest countries by GDP per capita (PPP). Andorra in particular benefits from its status as a free economic zone—very low or no taxes—and being a tourism hotspot with the sector contributing 80% to its economy.

Asia

Singapore, Qatar, Macao, the UAE, and Hong Kong claim top spots as Asia’s richest countries on both lists. Qatar and the UAE benefit from oil being a key export of the region, while Singapore and are top financial centers of Asia. Macao—where gambling is legal—is a massive tourism draw.

On the other hand, Israel and Japan drop out of the richest countries in Asia when using PPP calculations, with countries like Saudi Arabia and Bahrain edging them out.

Africa and Oceania

The island nations of Seychelles and Mauritius lead the ranks of countries by GDP per capita in both nominal and PPP categories on the African continent, also thanks to their booming tourism industries.

Traditional African economic heavyweight South Africa also features in this list of Africa’s richest. But Egypt, the region’s third largest economy, only makes the top 10 countries by GDP when adjusted for PPP, otherwise weighed down by its large population.

And in Oceania, adjusting GDP for purchasing power doesn’t have much effect on the sizable gap between Australia and New Zealand and their smaller island neighbors. But some local economies are noticeably stronger when adjusting for PPP, especially Fiji‘s, which has a GDP per capita (PPP) three times bigger than its nominal value.

The Drawbacks of GDP Per Capita

GDP per capita is a useful measure, but it also comes with its own set of caveats.

For one, it is a measurement of economic output per person, not individual income or household savings. That gives it clear limitations in certain cases, such as in Ireland, where the presence of multinational corporations obfuscates the general output per person.

Secondly, countries with smaller populations do better in the rankings. Most of the world’s biggest economies (China, India, UK, France) do not find themselves in the top 10 ranks.

Finally, other metrics for a good standard of living, some of them intangible in economic terms—human rights, freedom of expression—are not accounted for at all.

The post Top 10 Countries By GDP Per Capita, by Region appeared first on Visual Capitalist.

]]> https://www.visualcapitalist.com/cp/ranked-countries-gdp-per-capita-2023/feed/ 0 158593 https://www.visualcapitalist.com/most-affordable-us-cities-for-home-buyers/ https://www.visualcapitalist.com/most-affordable-us-cities-for-home-buyers/#respond Wed, 14 Jun 2023 19:37:06 +0000 https://www.visualcapitalist.com/?p=158385 There's more to consider than the price tag when purchasing a house. This ranking reveals the most affordable U.S. cities for home buyers.

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Ranked: The Most Affordable U.S. Cities for Home Buyers

Just before the pandemic, the average home price in the U.S. was $313,000—a figure that has since jumped by 40% to $436,800 today. As home prices and mortgage rates increase, home ownership is becoming an unrealistic dream for some.

In the cities ranked above, however, buying a house is a much more attainable goal.

By looking at factors like the real estate tax rate, median home price appreciation, and cost of living, this study from WalletHub assesses the most affordable cities in the U.S. for home buyers. The scores in the ranking are out of 100 and the higher a score, the more affordable that city is for home buyers.

The Methodology

This ranking considers much more than just the price tag on a house when it comes to affordability. Using 10 metrics, which cover an array of important considerations for home buyers, the overall affordability score is measured for each city.

Here’s a closer look at the 10 categories and how each one was weighted and measured:

The highest-weighted metric is the median price of the home itself divided by the median household income in that area, or house affordability.

Other important metrics assessed include the availability of homes for sale, the average cost of homeowner’s insurance, maintenance costs, and many other vital things people must consider when purchasing a home.

Which U.S. Cities are the Most Affordable for Home Buyers?

Here’s a closer look at the 50 most affordable cities for home buyers in the U.S.:

When it comes to the individual metrics, here’s a look at some cities which had the best scores in a few of the unique categories:

• #1 in Housing Affordability: Springfield, IL
• #1 in Maintenance Affordability: Sunnyvale, CA
• #1 in Rent-to-Price Ratio: Flint, MI
• #1 in Vacancy Rate: Miami Beach, FL

Location, Location, Location

Narrowing down which locations are feasible from a lifestyle and financial standpoint is a critical first step in the home-buying journey. Popular suburban communities and iconic hubs like Los Angeles or NYC hold great appeal, but these places command a higher price point or have housing stock that is incompatible with lifestyle needs.

On the flip side, some of the most affordable cities may have issues that negatively affect desirability. Flint, Michigan (#1), for example, is still widely perceived to have issues with its drinking water. Other places are high in crime or have a narrow range of economic opportunities, like Detroit (#4) or Yuma, Arizona (#9), respectively.

Many of the cities in the ranking are concentrated in Michigan, Arizona, and Ohio. In terms of big cities that are actually affordable, Pittsburgh, Columbus, Philadelphia, and Baltimore are examples of well-known spots to make the list.

There are also a number of ties in the ranking, with makes for interesting juxtapositions. For instance, Las Vegas is just as affordable as Cleveland, Ohio (#22). Here’s a look at some other cities that are equally affordable for home buyers:

• Montgomery, Alabama and Flint, Michigan (#1)
• Springfield, Illinois and Palm Bay, Florida (#9)
• Buffalo, New York and Cedar Rapids, Iowa (#15)
• Fayetteville, North Carolina and Des Moines, Iowa (#19)
• Dayton, Ohio and Erie, Pennsylvania (#25)
• Birmingham, Alabama; Louisville, Kentucky; Fort Smith, Arkansas; and Gilbert, Arizona (#33)
• Indianapolis, Indiana; Joliet, Illinois; and Tuscaloosa, Alabama (#45)

Overall, the home ownership rate in the U.S.—the share of homes that are occupied by their owners—is currently 66%, according to FRED data. While the trend shows a general recovery from the steep drop off that occurred during the pandemic, there is a while to go before the U.S. reaches pre-2020 figures. Perhaps, these affordable towns could offer a solution.

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Charted: Public Trust in the Federal Reserve

Each year, Gallup conducts a survey of American adults on various economic topics, including the country’s central bank, the Federal Reserve.

More specifically, respondents are asked how much confidence they have in the current Fed chairman to do or recommend the right thing for the U.S. economy. We’ve visualized these results from 2001 to 2023 to see how confidence levels have changed over time.

Methodology and Results

The data used in this infographic is also listed in the table below. Percentages reflect the share of respondents that have either a “great deal” or “fair amount” of confidence.

Data for 2023 collected April 3-25, with this statement put to respondents: “Please tell me how much confidence you have [in the Fed chair] to recommend the right thing for the economy.”

We can see that trust in the Federal Reserve has fluctuated significantly in recent years.

For example, under Alan Greenspan, trust was initially high due to the relative stability of the economy. The burst of the dotcom bubble—which some attribute to Greenspan’s easy credit policies—resulted in a sharp decline.

On the flip side, public confidence spiked during the COVID-19 pandemic. This was likely due to Jerome Powell’s decisive actions to provide support to the U.S. economy throughout the crisis.

Measures implemented by the Fed include bringing interest rates to near zero, quantitative easing (buying government bonds with newly-printed money), and emergency lending programs to businesses.

Confidence Now on the Decline

After peaking at 58%, those with a “great deal” or “fair amount” of trust in the Fed chair have tumbled to 36%, the lowest number in 20 years.

This is likely due to Powell’s hard stance on fighting post-pandemic inflation, which has involved raising interest rates at an incredible speed. While these rate hikes may be necessary, they also have many adverse effects:

• Negative impact on the stock market
• Increases the burden for those with variable-rate debts
• Makes mortgages and home buying less affordable

Higher rates have also prompted many U.S. tech companies to shrink their workforces, and have been a factor in the regional banking crisis, including the collapse of Silicon Valley Bank.

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Charting the Rise of America’s Debt Ceiling

Every few years the debt ceiling standoff puts the credit of the U.S. at risk.

In January, the $31.4 trillion debt limit—the amount of debt the U.S. government can hold—was reached. That means U.S. cash reserves could be exhausted by June 1 according to Treasury Secretary Janet Yellen. Should Republicans and Democrats fail to act, the U.S. could default on its debt, causing harmful effects across the financial system.

The above graphic shows the sharp rise in the debt ceiling in recent years, pulling data from various sources including the World Bank, U.S. Department of Treasury, and Congressional Research Service.

Familiar Territory

Raising the debt ceiling is nothing new. Since 1960, it’s been raised 78 times.

In the 2023 version of the debate, Republican House Majority Leader Kevin McCarthy is asking for cuts in government spending. However, President Joe Biden argues that the debt ceiling should be increased without any strings attached. Adding to this, the sharp uptick in interest rates have been a clear reminder that rising debt levels can be precarious.

Consider that historically, interest payments on the U.S. debt have been equal to about half the cost of defense. More recently, however, the cost of servicing the debt has risen, and is now almost on par with the defense budget as a whole.

Key Moments In Recent History

Over history, raising the debt ceiling has often been a typical process for Congress.

Unlike today, agreements to raise the debt ceiling were often negotiated faster. Increased political polarization over recent years has contributed to standoffs with damaging consequences.

For instance, in 2011, an agreement was made just days before the deadline. As a result, S&P downgraded the U.S. credit rating from AAA to AA+ for the first time ever. This delay cost an estimated $1.3 billion in extra costs to the government that year.

Before then, the government shut down twice between 1995 and 1996 as President Bill Clinton and Republican House Speaker Newt Gingrich went head-to-head. Over a million government workers were furloughed for a week in late November 1995 before the debt limit was raised.

What Happens Now?

Today, Republicans and Democrats have less than two weeks to reach an agreement.

If Congress doesn’t make a deal the result would be that the government can’t pay its bills by taking on new debt. Payment for federal workers would be suspended, certain pension payments would get stalled, and interest payments on Treasuries would be delayed. The U.S. would default under these conditions.

Three Potential Consequences

Here are some of the potential knock-on effects if the debt ceiling isn’t raised by June 1, 2023:

1. Higher Interest Rates

Typically investors require higher interest payments as the risk of their debt holdings increase.

If the U.S. fails to pay interest payments on its debt and gets a credit downgrade, these interest payments would likely rise higher. This would impact the U.S. government’s interest payments and the cost of borrowing for businesses and households.

High interest rates can slow economic growth since it disincentivizes spending and taking on new debt. We can see in the chart below that a gloomier economic picture has already been anticipated, showing its highest probability since 1983.

Historically, recessions have increased U.S. deficit spending as tax receipts fall and there is less income to help fund government activities. Additional fiscal stimulus spending can also exacerbate any budget imbalance.

Finally, higher interest rates could spell more trouble for the banking sector, which is already on edge after the collapse of Silicon Valley Bank and Signature Bank.

A rise in interest rates would push down the value of outstanding bonds, which banks hold as capital reserves. This makes it even more challenging to cover deposits, which could further increase uncertainty in the banking industry.

2. Eroding International Credibility

As the world’s reserve currency, any default on U.S. Treasuries would rattle global markets.

If its role as an ultra safe asset is undermined, a chain reaction of negative consequences could spread throughout the global financial system. Often Treasuries are held as collateral. If these debt payments fail to get paid to investors, prices would plummet, demand could crater, and global investors may shift investment elsewhere.

Investors are factoring in the risk of the U.S. not paying its bondholders.

As we can see this in the chart below, U.S. one-year credit default swap (CDS) spreads are much higher than other nations. These CDS instruments, quoted in spreads, offer insurance in the event that the U.S. defaults. The wider the spread, the greater the expected risk that the bondholder won’t be paid.

The US now has higher credit risk than Mexico, Greece, and Brazil pic.twitter.com/je4klBvHZ6

— Genevieve Roch-Decter, CFA (@GRDecter) May 11, 2023

Additionally, a default could add fuel to the perception of global de-dollarization. Since 2001, the USD has slipped from 73% to 58% of global reserves.

Since Russia’s invasion of Ukraine led to steep financial sanctions, China and India are increasingly using their currencies for trade settlement. President of Russia Vladimir Putin says that two-thirds of trade is settled in yuan or roubles. Recently, China has also entered non-dollar agreements with Brazil and Kazakhstan.

3. Financial Sector Turmoil

Back at home, a debt default would hurt investor confidence in the U.S. economy. Coupled with already higher interest rates impacting costs, financial markets could see added strain. Lower investor demand could depress stock prices.

Is the Debt Ceiling Concept Flawed?

Today, U.S. government debt stands at 129% of GDP.

The annualized cost of servicing this debt has jumped an estimated 90% compared to 2011, driven by increasing debt and higher interest rates.

Some economists argue that the debt ceiling helps keep the government more fiscally responsible. Others suggest that it’s structured poorly, and that if the government approves a level of spending in its budget, that debt ceiling increases should come more automatically.

In fact, it’s worth noting that the U.S. is one of the few countries worldwide with a debt ceiling.

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Ranked: The World’s Top 50 Endowment Funds

What do Harvard, the Church Commissioners for England, the NYC Metropolitan Museum of Art, and an entity on behalf of Saudi Arabia’s King Abdullah all have in common? They all have endowment funds.

An endowment fund is the investment arm of nonprofit institutions like universities, charities, and churches. The purpose of the fund is to invest the organization’s assets to fuel future operations and other important projects.

The world’s largest endowment funds have billions in investable assets, making them sizable players in the finance sector. Here, using data from Sovereign Wealth Fund Institute, we take a closer look at the world’s largest endowment funds by total assets.

Types of Endowment Funds

Overall, there are four main types of endowment structures.

• Unrestricted Endowment: A fund structure where assets are used at the full discretion of the institution
• Term Endowment: A fund structure with a fixed term time period before the principal can be spent
• Quasi Endowment: A donation to an endowment with a specific purpose to deploy that capital
• Restricted Endowment: A fund structure where the principal value from donations is held forever and only returns generated on the principal can be used

In addition, each endowment fund has different structures in regards to withdrawals, use of funds, and their general investment philosophy.

The Largest Endowment Funds

The largest endowment funds can be compared on a grand economic scale, in terms of assets.

To put it all into perspective, the largest 50 endowment funds represent over a trillion dollars in assets. Or for a more singular example, look at Harvard’s fund, which has an endowment greater than the entire GDP of countries like Serbia, Bolivia, or Slovenia.

Here’s how the top 50 rank.

The largest endowment fund, Ensign Peak Advisors, is based in Salt Lake City, Utah, and manages the assets for the Mormon Church (officially known as the Church of Jesus Christ of Latter-day Saints). The church itself has over 16 million members worldwide and is the fourth largest church in America.

The Japan Science and Technology Agency (JST) is a national research and development agency that plays a core role in promoting technology, innovation, and science within society. In 1995, Japan’s government passed the Science and Technology Basic Plan and the JST came to life and now has over $80 billion in assets as well as offices in Paris, Washington, Singapore, and Beijing.

Just two funds come from the Middle East. The King Abdullah University of Science and Technology (KAUST) with $23.5 billion and the General Authority of Awqaf. KAUST is ranked 95th amongst universities in the world and made history in the country by being Saudi Arabia’s first mixed-gender university.

The General Authority of Awqaf has $11 billion in assets and was established as a public authority to manage endowments and enhance Saudi Arabia’s various goals for societal development. “Awqaf” in Arabic loosely translates to assets that are donated or purchased for general or specific charitable causes that are socially beneficial.

On the environmental side is the Nature Conservancy, which has $7.8 billion in assets. The charity is estimated to have protected more than 100 million acres of land.

American Universities Dominate

Universities are one leading category from the world of endowment funds, particularly those from the United States. In fact, universities make up 39 of the top 50 endowment funds, with 35 of them based in America.

Historically, Harvard has been the largest, but Stanford has edged ahead in recent years. Stanford has $75 billion in assets compared to Harvard’s $73 billion. These vast amounts of money have not gone unnoticed, and elite universities are facing mounting criticism in some circles.

“When Harvard’s total admitted freshman class is 1,400 people—and they have an endowment that is the GDP of El Salvador—they’re not a nonprofit, they’re a hedge fund educating the children of their investors.” – Professor Scott Galloway

With student debt rising to $1.6 trillion, it’s likely these universities may face greater criticism around how they use the wealth available to them in endowment funds.

Sizable Influence

The top endowment funds carry considerable influence within the world of finance. While they all have billions to invest, each has very different objectives and intentions on how to deploy their capital.

And despite being non-profit organizations, endowment funds are seeing their overall assets exceed those held by many other investment funds, such as sovereign wealth funds, hedge funds, and private equity firms.

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Comparing the Speed of U.S. Interest Rate Hikes

After the latest rate hike on May 3rd, U.S. interest rates have reached levels not seen since 2007. The Federal Reserve has been aggressive with its interest rate hikes as it tries to combat sticky inflation. In fact, rates have risen nearly five percentage points (p.p.) in just 14 months.

In this graphic—inspired by a chart from Chartr—we compare both the speed and severity of current interest rate hikes to other periods of monetary tightening over the past 35 years.

Measuring Periods of Interest Rate Hikes

We measured rate hike cycles with the effective federal funds rate (EFFR), which calculates the weighted average of the rates that banks use to lend to each other overnight. It is determined by the market but influenced by the Fed’s target range. We considered the starting point for each cycle to be the EFFR during the month when the first rate hike took place.

Here is the duration and severity of each interest rate hike cycle since 1988.

*We considered a rate hike cycle to be any time period when the Federal Reserve raised rates at two or more consecutive meetings. The 2022-2023 rate hike cycle is ongoing, with the latest hike made on May 4, 2023.

When we last compared the speed of interest rate hikes in September 2022, the current cycle was the fastest but not the most severe. In the months since, the total rate change of 4.88 p.p. has surpassed that of the ‘04-‘06 rate hike cycle. During the ‘04-‘06 cycle, the Federal Reserve eventually decided to pause hikes due to moderate economic growth and contained inflation expectations.

On the other end of the scale, the slowest rate hike cycle occurred in ‘15-‘18 after the Global Financial Crisis. Inflation, as measured by the Personal Consumption Expenditures (PCE) Index, was a mere 0.30% when the first hike occurred. Meeting transcripts reveal that Federal Reserve officials were concerned they may be raising rates too early. However, they agreed to the small quarter percentage point increase to show unity with Fed Chair Janet Yellen, who believed rising oil prices would eventually lead to higher inflation.

End of a Cycle?

The Federal Reserve’s small quarter-point rate hike on May 3 was influenced by a variety of factors. Below is a look at how select indicators have shifted since the first hike occurred in March 2022.

Source: Bureau of Labor Statistics, Bureau of Economic Analysis. Inflation is measured by the Personal Consumption Expenditures (PCE) Index. GDP growth for March 2022 is for Q4 2021, which is the data the Fed would have had access to when making its first rate hike decision. Employment has since grown by 253,000 in April 2023.

The unemployment rate remains low and job growth remains positive. Labor costs, in terms of wages and benefits, continue to grow. However, they are essentially flat on an inflation-adjusted basis. Inflation is still above the Federal Reserve’s 2% target, but it has slowed over the past year.

There are also reasons to be cautious. Economic growth has slowed considerably, and the Federal Reserve predicted in March of this year that a “mild recession” would begin later in 2023. Turbulence in the banking sector is also cause for concern, as tighter credit conditions will likely weigh on economic activity.

For now, it seems the Fed may have pressed pause on future interest rate hikes. Its latest statement said it would “determine the extent to which additional policy firming may be appropriate” rather than previous statements which anticipated future hikes.

The post Comparing the Speed of Interest Rate Hikes (1988-2023) appeared first on Visual Capitalist.

Visualized: Real Interest Rates of Major World Economies

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Interest rates play a crucial role in the economy because they affect consumers, businesses, and investors alike.

They can have significant implications for people’s ability to access credit, manage debts, and buy more expensive goods such as cars and houses.

This graphic uses data from Infinity Asset Management to visualize the real interest rates (ex ante) of 40 major world economies, by subtracting projected inflation over the next 12 months from current nominal rates.

Ex ante is Latin for “before the event”, and in this case refers to the fact that this data uses projected inflation rates to calculate real interest rates.

Nominal Interest Rates vs. Real Interest Rates

Nominal interest rates refer to the rate at which money can be borrowed or lent at face value, without considering any other factors like inflation.

Meanwhile, the real interest rate is the nominal interest rate after taking into account inflation, reflecting the true cost of borrowing or lending. Real interest rates can fluctuate over time and are influenced by various factors such as inflation, central bank policies, and economic growth. They can also influence economic growth by affecting investment and consumption decisions.

According to the International Monetary Fund (IMF), since the mid-1980s, real interest rates across several advanced economies have declined steadily.

As of March 2023, Brazil has the highest real interest rate among the 40 major economies shown in this dataset.

Below we look at Brazil’s situation, along with the data of the four other major economies with the highest real rates in the dataset:

	Nominal Interest Rate	Real Interest Rate
Brazil	13.75%	6.94%
Mexico	11.00%	6.05%
Chile	11.25%	4.92%
Philippines	6.00%	2.62%
Indonesia	5.75%	2.45%

In general, countries with high interest rates offer investors higher yields on their investments but also come with higher risks due to volatile economies and political instability.

Below are the five countries in the dataset with the lowest real rates:

	Nominal Interest Rate	Real Interest Rate
Argentina	78.00%	-19.61%
Netherlands	3.50%	-7.42%
Czech Republic	7.00%	-7.17%
Poland	6.75%	-6.68%
Belgium	3.50%	-6.42%

Hyperinflation, as seen in Argentina, can lead to anomalies in both real and nominal rates, causing problems for the country’s broader economy and financial system.

As you can see above, with a 78% nominal interest rate, Argentina’s real interest rates remain the lowest on the planet due to a staggering annual inflation rate of over 100%.

Interest Rate Outlook

Increasing inflation and tighter monetary policy have resulted in rapid increases in nominal interest rates recently in many countries.

However, IMF analysis suggests that recent increases could be temporary.

Central banks in advanced economies are likely to ease monetary policy and bring interest rates back to pre-pandemic levels when inflation is brought under control, according to the fund.

The post Visualized: Real Interest Rates by Country appeared first on Visual Capitalist.

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Understanding the Assets and Liabilities of U.S. Banks

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The U.S. banking sector has more than 4,000 FDIC-insured banks that play a crucial role in the country’s economy by securely storing deposits and providing credit in the form of loans.

This infographic visualizes all of the deposits, loans, and other assets and liabilities that make up the collective balance sheet of U.S banks using data from the Federal Reserve.

With the spotlight on the banking sector after the collapses of Signature Bank, Silicon Valley Bank, and First Republic bank, understanding the assets and liabilities that make up banks’ balance sheets can give insight in how they operate and why they sometimes fail.

Assets: The Building Blocks of Banks’ Business

Assets are the foundation of a bank’s operations, serving as a base to provide loans and credit while also generating income.

A healthy asset portfolio with a mix of loans along with long-dated and short-dated securities is essential for a bank’s financial stability, especially since assets not marked to market may have a lower value than expected if liquidated early.

Mark-to-market means current market prices are being used to value an asset or liability on a balance sheet. If securities are not marked to market, their value could be different once liquidated.

As of Q4 2022, U.S. banks generated an average interest income of 4.54% on all assets.

Loans and Leases

Loans and leases are the primary income-generating assets for banks, making up 53% of the assets held by U.S. banks.

These include:

• Real estate loans for residential and commercial properties (45% of all loans and leases)
• Commercial and industrial loans for business operations (23% of all loans and leases)
• Consumer loans for personal needs like credit cards and auto loans (15% of all loans and leases)
• Various other kinds of credit (17% of all loans and leases)

Securities

Securities make up the next largest portion of U.S. banks’ assets (23%) at $5.2 trillion. Banks primarily invest in Treasury and agency securities, which are debt instruments issued by the U.S. government and its agencies.

These securities can be categorized into three types:

• Held-to-maturity (HTM) securities, which are held until they mature and provide a stable income stream
• Available-for-sale (AFS) securities, which can be sold before maturity
• Trading securities, held for short-term trading to profit from price fluctuations

Along with Treasury and agency securities which make up the significant majority (80%) of U.S. banks’ securities, banks also invest in other securities which are non-government-issued debt instruments like corporate bonds, mortgage-backed securities, and asset-backed securities.

Cash Assets

Cash assets are a small but essential part of U.S. banks’ balance sheets, making up $3.1 trillion or 13% of all assets. Having enough cash assets ensures adequate liquidity needed to meet short-term obligations and regulatory requirements.

Cash assets include physical currency held in bank vaults, pending collections, and cash balances in accounts with other banks.

Liabilities: Banks’ Financial Obligations

Liabilities represent the obligations banks must fulfill, including customer deposits and borrowings. Careful management of liabilities is essential to maintain liquidity, manage risk, and ensure a bank’s overall solvency.

Deposits

Deposits make up the largest portion of banks’ liabilities as they represent the money that customers entrust to these institutions. It’s important to note that the FDIC insures deposit accounts up to $250,000 per depositor, per insured bank, for each type of account (like single accounts, joint accounts, and retirement accounts).

There are two primary types of deposits, large time deposits and other deposits. Large time deposits are defined by the FDIC as time deposits exceeding $100,000, while other deposits include checking accounts, savings accounts, and smaller time deposits.

U.S. banks had $17.18 trillion in overall deposits as of April 12th 2023, with other deposits accounting for 74% of the overall liabilities while large time deposits made up 9%.

Borrowings

After deposits, borrowings are the next largest liability on the balance sheet of U.S. banks, making up nearly 12% of all liabilities at $2.4 trillion.

These include short-term borrowings from other banks or financial institutions such as Federal Funds and repurchase agreements, along with long-term borrowings like subordinated debt which ranks below other loans and securities in the event of a default.

How Deposits, Rates, and Balance Sheets Affect Bank Failures

Just like any other business, banks have to balance their finances to remain solvent; however, successful banking also relies heavily on the trust of depositors.

While in other businesses an erosion of trust with customers might lead to breakdowns in future business deals and revenues, only in banking can a dissolution in customer trust swiftly turn into the immediate removal of deposits that backstop all revenue-generating opportunities.

Although recent bank collapses aren’t solely due to depositors withdrawing funds, bank runs have played a significant role. Most recently, in First Republic’s case, depositors pulled out more than $101 billion in Q1 of 2023, which would’ve been more than 50% of their total deposits, had some of America’s largest banks not injected $30 billion in deposits on March 16th.

It’s important to remember that the rapidly spreading fires of bank runs are initially sparked by poor asset management, which can sometimes be detected on banks’ balance sheets.

A combination of excessive investment in long-dated held-to-maturity securities, one of the fastest rate hiking cycles in recent history, and many depositors fearing for and moving their uninsured deposits of over $250,000 has resulted in the worst year ever for bank failures in terms of total assets.

The post Visualizing the Assets and Liabilities of U.S. Banks appeared first on Visual Capitalist.

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Ranked: The Best U.S. States for Retirement

What is the most important aspect of retirement planning?

If you said finances, you’re probably right. But have you ever thought about where the best place is to retire? Being strategic about location can make a big impact on your quality of life, and perhaps help your savings go just a bit further.

To help break it down, we’ve visualized data from personal finance platform, WalletHub, which ranked the best U.S. states for retirement as of 2023.

Data and Methodology

WalletHub ranked each state using 47 metrics across three dimensions.

• Affordability (7 metrics worth 40 points)
• Quality of Life (22 metrics worth 30 points)
• Health Care (18 metrics worth 30 points)

Here are some examples of what each dimension measures:

• Affordability: Cost of living and taxation
• Quality of Life: Quality of elder-abuse protections and crime rates
• Health Care: Number of health professionals per capita and life expectancy

Visit the source for the full list of metrics.

The final scores (visualized as the bars in the infographic above) represent each state’s weighted average across all metrics. See below for more comprehensive results.

According to this methodology, Virginia is currently the best state for retirement. Although the Southeastern state does not excel in any one dimension, it scores consistently well across all three to create a very balanced retirement profile.

This gives it a slight advantage over second place Florida, which excels in quality of life and affordability, but falls further behind in terms of health care. Third-placed Colorado is a mirror of Florida, offering excellent health care but a lower quality of life in comparison.

How to Interpret These Results

It’s important to remember that this ranking is purely based on data and the methodology above, and may not be tailored to your individual preferences.

For example, if you believe that health services will be very important during retirement, you may rank Minnesota (#1 in terms of health care) much higher than eighth place.

You may notice that prioritizing one dimension will often come at a trade-off in others. Looking at Minnesota once more, we can see that the state is also one of America’s most expensive.

Looking to retire outside of the U.S.? Check out this graphic on the top 25 countries to retire in.

The post Ranked: The Best U.S. States for Retirement appeared first on Visual Capitalist.