The asset bubble is now ‘worth’ £12 trillion, driving grotesque inequality

The ‘value’ of global assets has leapt from £3 trillion in 2008 to £12 trillion, according to a new report from the parliamentary Financial Services Regulation Committee. In the UK, this so-called asset bubble is worth £138 billion.

Asset ownership is extremely concentrated. The richest 0.001% own three times more assets and capital than 50% of humanity

Post-financial crash: caused by economic inequality

Overall, it was inequality that led to the 2008 financial crash because banks tried to patch the system of high house prices with larger mortgages. In other words, the fact that the system makes people too poor to afford the basics led to too much credit.

As the committee notes, the crash led to less lending to people or businesses with less money or securities (‘assets’ to use as borrowing collateral):

Reforms introduced after the Global Financial Crisis – particularly bank capital and liquidity regulatory requirements – have, as intended, encouraged the banking system to retreat from riskier lending, leaving certain segments of the economy, including SMEs, less well served by banks.

So lending to the super rich to facilitate purchases has accelerated further, rather than to small or medium businesses and people. This inflates the price of the pre-existing ‘assets’ because it increases demand for those assets, within a bubble. Alternatively put, as private credit expands within finance, asset prices go higher and higher until another potential crash. As 50 economists and experts warned in a letter to Rachel Reeves in 2024:

Lending to the real economy has consistently made up around just 10% of bank lending in recent decades. The vast majority – around 80% – of bank lending goes towards inflating the price of pre-existing property and other assets.

The UK’s asset bubble is also reflected in the fact that, from 2000 to 2023, private credit has averaged 160% of GDP.

According to research by Allica Bank, there is a £65bn gap in funding credit for small and medium businesses. What’s more there’s been a collapse in overdraft lending to such enterprises, from £18bn in 2000 to £2.7bn in 2024.

The solution to the asset bubble

Interest-free loans with long payback periods would be the best way to solve the lack of funding – and burst the asset bubble. From a small business perspective, it would be a great way to address inequality. As Your Party’s Zarah Sultana has said, banks should come under public ownership to facilitate such usury-free lending. Or, at least, the argument should drive some form of settlement.

Featured image via the Canary