Europeans Getting Steadily Wealthier Compared To Americans

Europeans Getting Steadily Wealthier Compared To Americans
Posted by Bill Bonner on May 28th, 2007
Asia may be growing like a weed, but at least America still has a lead against its closest competitors in Europe, right? The old world is a rigid, socialised, slow, expensive, dull, snobby museum, right?

But what’s this? For the first time in six years, says the OECD, Europe will grow faster than the United States. Last year, US GDP grew at a 3.3% rate. OECD economists say it will do only about 2.1% this year - thanks largely to the slow-down in housing. Europe is expected to grow by 2.7% this year.

Usually, American GDP grows faster than Europe simply because the US population is increasing more rapidly. Many countries in Europe have little - or even negative - population growth. So, a slower rate of GDP growth in Europe still could represent a higher rate of individual wealth gains.

Another thing to remember is that European growth seems to be healthier growth. Industries expand, wages go up, people make money. Automobiles from Germany, perfume from France, chocolates from Belgium, handbags from Italy - Europe has well-established brands that give it a positive balance of trade with the rest of the world.

American growth, by contrast, has largely been a consequence of consumer spending…and the money consumers have been spending has often been borrowed - from overseas. Each year, Americans go further and further into debt in order to keep their economy growing.

The real, net effect of these trends is hard to gauge. Our guess is that Europeans are steadily getting richer compared to Americans.

Meanwhile, the rich from all over the world are boarding trains, planes and automobiles to Europe. Some come as tourists. But many come to live. They buy houses in London…or villas on the Cote d’Azur. The International Herald Tribune tells us that prices where F. Scott Fitzgerald used to hang out have been going up by about 15% per year…from Menton to Saint Tropez.

One of the most desirable locations is St. Jean-Cap-Ferrat, where you should “expect to pay USD$30 million or more for a decent property,” according to a real estate agent.

If that’s too much, you can go up into the hills, where you can get a villa for as little as USD$1.3 million.

On the same page of the IHT we are given an opportunity to buy a “tropical lifestyle” on the island of Mauritius! “Elegant, plantation-style villas” are for sale for USD$800,000 to USD$2 million.

Yes, dear reader, all over the world, the rich are splashing out. Warhol’s can of Campbell’s soup sold for USD$5.5 million. Houses in the middle of nowhere sell for millions. What next?

Bill Bonner
The Daily Reckoning Australia