Wealth Shift

Sacre bleu! Lest there is any lingering doubt, a new study of global wealth confirms Americans' unease about their position in the global economy. The global financial crisis has cost North America its position as the wealthiest region of the world, a designation now held by Europe.

The study conducted by the Boston Consulting Group reveals that global assets under management fell 11.7 percent in 2008 to $92.4 trillion from $104.7 trillion in 2007. The report says it will take six years for global asset levels to recover from the decline, the first since 2001. North America took the biggest hit, a punishing 21.8 percent decline to $29.3 trillion in assets. European assets fell 5.8 percent to $32.7 trillion, which is the largest concentration of wealth in the world.

The sharp decline in North America may mask an underlying strength of the regional economy, though. North America, and the U.S. in particular, tends to be quicker to confront bad news and write down bad assets. "Europe’s status is expected because of the EU and its more aggressive government support for industry," says Phil Phan, vice dean for faculty and research at the Carey Business School at Johns Hopkins University. "There have been fewer write-downs of European asset values, or the write-downs have been slower. I am not sure if this means that asset values are higher or that they simply have not been realized on the books," Phan said.

That doesn't mean that the U.S. won't emerge from the financial crisis as a powerful yet diminished player. But the transfer of wealth is likely to favor Asia, not Europe, according to Wasif Latif, vice president of equity investments at financial services company USAA. "I think the really interesting point is that the financial sector, the economy, the governments, the consumers of Asia, and to some extent Latin America, are in much better shape than their counterparts in North America and Europe," Latif said.

The trend is only partly evident in the Boston Consulting numbers. Assets in Asia, excluding Japan, fell 6.2 percent to $11.5 trillion, and assets in Japan fell 7.8 percent to $13.5 trillion. The Middle East and Africa declined 6.9 percent to $3 trillion. Only one region gained: Latin American assets rose 3 percent to 2.5 trillion.

But Latif says that a young and growing population will boost wealth in Asia over the longer term.