KEY POINTS:
Looking for a nice Monet to hang on the wall? Or a property in one of the better parts of London? Or just assembling a decent wine cellar?
No matter how much money you are making right now, many of the things you covet most remain tantalisingly out of reach.
While central bankers around the world fret about the menace posed by inflation, the people they mostly talk to - the bankers, traders and hedge-fund managers - have their own personal cost-of-living issues to grapple with.
There has never been a better time to get rich, but there has also never been a worse time to actually be rich.
The World Wealth Report, published annually by Cap Gemini SA and Merrill Lynch & Co, last month showed that extraordinarily large sums of money are being made by the wealthiest people. It also showed the things they like to buy are getting more expensive all the time.
Citing Forbes magazine's Cost of Living Extremely Well Index, which covers a basket of luxury items (designer handbags, a case of Dom Perignon, sending the kids to Harvard, that kind of stuff), the report noted that the cost of luxury goods last year rose about twice as fast as the cost of everyday consumer products.
That index advanced 7 per cent, while New Zealand's consumer price index, which measures the value of products that ordinary people buy, climbed 2 per cent in the year to June.
That, of course, is just one example.
Property prices in London, and other places where the super- rich congregate, are going through the roof. The average price of a luxury house in the monthly index compiled by the real-estate broker Knight Frank, which measures seven of London's most expensive districts, is now about £5 million ($13 million). An average apartment costs £2.5 million. A typical house has appreciated by at least £100,000 each month since September.
And even if you get the house, what about some art to go with it? At a recent London auction, an Auguste Rodin sculpture went for seven times the top estimate, while a painting by Eric Bulatov fetched six times its appraised value.
Or how about a wine cellar? According to the Liv-ex.com index, the benchmark for the price of fine wine, prices are soaring: The index surged 9.2 per cent in April alone, and 57 per cent in 12 months. A 2003 bottle of Lafite Rothschild rose to £5200 in April from £4275 in March.
Even lunch with Warren Buffett is getting pricier. The annual charity auction for sharing a meal with the Sage of Omaha this year fetched US$650,100 ($819,651), compared with US$620,100 last year (and at that price, you might as well break open two bottles of the Lafite).
So what's going on? The answer is that there is an awful lot of money out there. "Wine is the ultimate play on wealth creation," James Miles, the London-based director of Liv-ex, said. "We can all look at the lists and see the number of billionaires that are being created. The top stuff has gone up by 120 per cent in the past two years, but I think we are still only at the early stage of the bull market in wine."
The rich aren't just getting richer. They are also growing in numbers.
That much is clear from the Cap Gemini report. The number of US dollar millionaires rose 8.3 per cent in the past year, and now totals 9.5 million people worldwide. That's enough to fill a small country.
The super-wealthy face two problems. First, new money likes to emulate old money, so the things the rich want to buy have been around for a long time. They aren't making any more stucco-fronted houses in Belgravia; Monet has long since hung up his paintbrush; and even a few gallons of Lafite Rothschild can take a while to knock out. It doesn't matter how much demand rises, the supply can't be increased.
Next, after the first US$300,000, which is surely enough to satisfy most human desires, what the rich are really interested in is what economists call "positional goods".
They want things that prove just how wealthy they are. Inevitably, they end up bidding against all the other newly rich people for a relatively small number of items.
You don't need to be much of an economist to know that prices will continue to rise.
It doesn't make much difference how hard you work. You will probably never be rich enough.
- BLOOMBERG
