What should be the definition of a millionaire? [Archives:2008/1169/Community]
By: Ivan Simic
Millionaires, millionaires. Day after day, we watch and read about millionaires – actor millionaires, singer millionaires, heiress millionaires and others. Every day, the number of the world's millionaires increases with lightning speed.
This “millionaire” phenomenon has become very important in our global society. In fact, millionaires and billionaires sometimes are front-page news, ahead of even domestic or global issues. In relation, large numbers of companies, newspapers and television stations are conducting detailed research on these treasured assets ut are they all really millionaires? According to the encyclopedia, a millionaire is an individual who resides in a household whose net worth or wealth exceeds a million units of any currency. However, it also may be one who owns a million units of any currency in cash, bank or savings accounts.
Because the world has faced rapid development in its global economy from the 19th century to today, it's come to the point where being a millionaire isn't prestigious like it was before. Now that there are plenty of millionaires and billionaires around the globe, they need a new expression in order to distinguish themselves.
Thus, today we have multimillionaires (a net worth of two or more million), hectomillionaires (a net worth of a hundred or more million) and billionaires (a net worth of one or more billion).
In the past 10 years, with the enormous growth of hectomillionaires and billionaires, millionaires and multimillionaires with just a few million are considered middle class millionaires. In contemporary language, they just aren't super rich.
Looking at the 2007 World Wealth Report (a report on individuals with a net worth of at least $1 million in all assets except their primary residence) – Annual World Wealth Report from Merrill Lynch compiled by Capgemini, we can see that the world's High Net Worth (HNW) population grew to 9.5 million, with their assets increased to $37.2 trillion.
Merrill Lynch also reports that there are 9.5 million HNWI millionaires worldwide and 95,000 multimillionaires (UHNWIs with more than $30 million). In 2007, Forbes Magazine reported 946 billionaires in the world, with total accumulated wealth of $3.5 trillion. Looking at private banking, a High Net Worth Individual (HNWI) is one with a net worth of $1 million or more in investable assets (not including primary assets). An Ultra High Net Worth Individual (UHNWI) refers to those individuals or families with at least $30 million in investable assets.
According to the previously mentioned definition, a millionaire is any individual owning a million units of any currency, but according to private banking, a millionaire is one who owns a million U.S. dollars. Thus, those with $800,000 aren't counted as millionaires in their countries.
No one, including beneficiary banks, recognizes these individuals as millionaires, but if we exchange this amount for U.S. dollars, these individuals become millionaires, so can this report on the number of the world's millionaires be true? There's no definition or internationally recognized model for the U.S. dollar being the currency to identify or count the world's or individual wealth. Yes, the United States dollar has been the “de facto” world currency since the 20th century, and even as of 2007, the dollar still had the largest share at 63.3 percent of foreign reserve holdings, while the euro had some 26.5 percent.
However, since 2000, the dollar's share has been falling and the euro's has been rising. As of December 2006, the euro surpassed the dollar in combined value of cash in circulation. The value of euro notes in circulation has risen to more than $610 billion, equivalent to $800 billion; therefore, the euro has become the currency with the highest combined value of cash in circulation in the world.
A million U.S. dollars exchanged in other currencies doesn't always make a millionaire. For example, $1 million at the May 23 exchange rate was equivalent to $634,698.99, GBP505,114.98 or 265,450.01 Kuwaiti dinars.
Looking at the above example, we can see that the Kuwaiti dinar was the strongest currency unit. In fact, the Kuwaiti dinar is the world's highest valued currency unit, having been re-pegged to a host of currencies since May 20, 2007. However, the Kuwaiti dinar isn't so called “hard currency,” isn't of very much use outside of Kuwait and is tied to that nation's economy. On the other hand, Britain's pound sterling and the euro are hard currencies. They are reserve currencies and currencies with good buying power that are widely accepted as a reliable store of value, yet we don't see them as a model for counting world wealth.
The U.S. dollar isn't the strongest currency unit, especially now, when even the Cuban convertible peso and the Azerbaijani manat are stronger than the dollar! Therefore, using U.S. dollars as the currency unit or as a model to identify millionaires is giving the wrong picture of who is a millionaire in the world.
It's very simple: companies that conduct research and others should conduct their research based upon the highest valued currency – if not the Kuwaiti dinar, then the euro or the British pound sterling, those higher currencies that remain so.
Thus, what should be the definition of a millionaire? Perhaps a millionaire is an individual whose net wealth exceeds a sufficient amount of units of any currency when exchanged at a million units of the world's highest valued currency unit or the world's highest anchor currency unit. It also may be one who owns enough units of any currency when exchanged worth a million units of the world's highest valued currency unit or the world's highest anchor currency unit in cash, bank or savings accounts.
If an individual has enough currency to buy a million of the world's highest valued currency unit or the world's highest anchor currency unit, then that person should be counted as a millionaire. This way, we'd have only around 100 billionaires and much fewer millionaires, which would make some sense and bring back the original meaning of being a millionaire or a billionaire.