Friday, June 10, 2005

Increase in 1929-Style Millionaires - an Ominous Sign?

According to a recent Wall Street Journal article, the ranks of millionaires in the US and Europe has gone up in 2004, all of 21% in the US, according to a survey released by Spectrem group of Chicago. It also says that the rich earn only about 1/3 of their wealth from their salary and compensation. 1/3 comes from investments, and 1/3 from "businesses, inheritances and other sources." (The word "speculation" isn't used, although it might be appropriate in the present economic climate.)

I can't seem to find out whether these figures take inflation into account. (See my article here about how inflation is very poorly defined and measured today.) For that reason, I suggest this warning: Watch out before you throw any stones at these 'nouveaux riches,' because you just may be among them within a few years through no particular effort of your own.

Inflation does that. It DEFLATES our purchasing power, diminishes our dollar, and makes paper millionaires out of us all sooner or later - though 'lotta good it does us. Remember those photos of early 20th Century Germans pushing their German marks around in wheelbarrows just to buy a loaf of bread? - I'm serious!

The price of a German stamp in 1923 - that's right, 5 billion marks. No joke. Copyright by R. Lingens at

On the inflation front, there are those who believe the real estate market bubble will burst some time in the not too distant future. I personally do not have that good of a crystal ball; but I do find it interesting to read the bears' thoughts on the subject. Some say the central governments are manipulating the price of gold, that by now an ounce should be worth $750 or so. See this article here and those linked therein for some interesting reading. Who knows how much weight to give to their contentions? I certainly am not in a position to pooh-pooh them. Are you? Goodness knows history won't contradict them.


Anonymous franko said...

no matter what asset class one is discussing, you can rely on two facts:

1. trees do not grow to the sky
2. nothing can be priced below zero

much prognostication on the future misses the fact that we (in the G7) reside in a fiat money system, so determining "value" is inherently relative, and it is based on what a significant number of players agree on - as well, for most of MainSt, they'll never get to a point where there wealth will yield returns anywhere comparable to their income - how could it?? how can a majority of the citizenry own investments/assets that return wage-dwarfing amounts ?? it defies logic, and yet it is a mainstay of the american dream - it certainly IS a dream

12:50 PM  

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