TEXT OF INTERVIEW
Scott Jagow: Today, we found out exactly how many people on this planet are millionaires. 9.5 million people. About a third of them live in the United States.
Last year, the U.S. saw a 9 percent increase in the number of millionaires over the year before. And those people control a lot more money.This came out in a report from Merrill Lynch and CapGemini today.
Joining us to talk about it is Robert Frank. He writes the Wealth Report column for the Wall Street Journal. Thanks for being here, Robert.
Robert Frank: Thank you.
Jagow: The rich getting richer. Pardon me for being brusk, Robert, but tell us something we don’t know?
Frank: The rich are getting richer, and what’s happened that we really don’t know, or that we underestimated, was the speed with which the rich are getting more numerous. The number of millionaires has been the real story over the past 10 years, and we saw that continue in 2006. In the U.S., as you mentioned, 9 percent growth. Worldwide, 8 percent growth. These growth rates are two and three times the growth rates of those economies.
Jagow: Yeah. I was reading that China, of course, Russia, India — that’s where we’re seeing the most growth in the number of millionaires.
Frank: The growth rate for each of those countries is astounding. You know, 20 percent, and in China also strong, 8 percent or so. But when you look at the U.S. compared to those countries, the U.S. is still far and away the leading producer of millionaires in the world. You know, China has 345,000 millionaires, India about 100,000. The number of millionaires in India is about the same as the number of millionaires in the state of Ohio.
Jagow: So, where are they making their money?
Frank: Well, we certainly have some tips on how they’re investing. And over the past year, they made some significant shifts in their investments that the rest of us might want to take notice of. For instance, they moved money out of hedge funds and private-equity funds — so-called alternative investments — and they put more and more money into real estate.
Jagow: So, yeah, that sort of flies in the face of all we’re hearing about private equity, hedge funds — that’s all we hear about these days.
Frank: That’s right, but it’s possible that the wealthy are getting better information than the rest of us. They may understand that private equity and hedge funds . . . returns are slowing, fees are increasing, the lending markets are getting so where private equity and hedge funds are having a difficult time leveraging. And real estate may actually be a good long-term play. So they may know things that you and I don’t.
Jagow: So, what is good about having this many millionaires?
Frank: Well . . . I have to think about this for a minute, what’s good about it . . . I mean, one of the impacts of having all this wealth is more and more trickle-down. Now clearly, this hasn’t been enough trickle-down to address inequality issues in America . . .
Jagow: That’s a dangerous term there, Robert.
Jagow: No, trickle-down.
Frank: Oh, trickle-down, that’s right. But what we are seeing is a growing economy built around the wealthy. There is in America today a shortage of yachts, a waiting-list for Ferraris, for gulf-stream jets. The starting salary for a butler today is $80,000. There’s so much demand at the high end for services and products that serve the wealthy that it is creating jobs and economies for the rest of America.
Jagow: OK, Robert Frank. He writes the Wealth Report column for the Wall Street Journal. His book is called, “Richistan.” Thanks for joining us.
Frank: Thank you.