A recent Wall Street Journal has an article about states that mint new millionaires. The article indicates which states had the greatest percentage increase in new millionaires between 2012 and 2013. The leaders were not a surprise: North Dakota followed by Maine, Maryland, New Hampshire, Louisiana, South Dakota, Delaware and Nebraska. The study states that there were 53,000 more millionaires in 2013 than a year earlier for a total of about 6.15 millionaires in America, about 2% of the general population.
North Dakota’s rise is related to the Bakken Shale reserve royalties (mostly from fracturing shale to access oil and gas which is known as fracking) which jumped quite a bit last year. The economies of Maine and Louisiana had huge turnarounds. Louisiana may be related to the harm caused by the BP oil spill and the time lapse before the BP payments started to be felt.
More interesting is that Maryland has led the US with more millionaires since 2006 and this is probably due to its proximity to Washington DC and the fact that taxes are lower there than in neighboring Virginia. New Jersey and Connecticut followed Maryland, which is related to those states proximity to New York City and the fact that their tax system is lower than New York’s. Hawaii is also a large contender and that is probably related to the fact that many Asians make their millions and then move to the US, Hawaii and California being the closest two states to Asia.
What does all this mean for us and the economy in general? Well first, wealth creation in general is good for the economy. Think, 2004 through 2006 rather than 2008 through 2009. Creation of new millionaires shows the economy is growing overall. The fact that certain states are creating more millionaires than other states probably reflects the unevenness of this economic recovery. Recoveries seem to be uneven in the earlier stages of their recovery and this recovery appears to be still in the earlier stages.
There are articles concerning the financial collapse that occurred in most of Latin America in the late 1980s and 1990s. Those economies took many years to recover and when they did, their recoveries were very uneven. However, the recoveries appeared to eventually lift most of the area’s residents financially and the recovery period seemed to be longer. It is our belief that the US collapse in 2008 was also financial and as a result it will be slower and longer to recover and when it does it will last longer than prior recoveries.
We see that type of pattern when we look at the US as a whole and then look at the states that seem to be struggling the most. The following states are losing the greatest percentage of millionaires: Nevada, Arizona, Florida, Idaho and Michigan. All of these states (Rhode Island lost fewer as a percentage than these states but it is the only New England state still struggling) have struggled to recover from the 2008 downturn. All of these states except for Michigan and Idaho had huge building bubbles that collapsed in 2008. Idaho does not have the shale reserves that its neighboring states have and Michigan has been in decline for 40 years along with the automotive industry.
Although it is unfortunate that the US has such an uneven recovery, it does fit a pattern we witnessed in Latin America. And let’s face it, many of their politicians are just as incompetent as ours and all of those economies eventually recovered, although the ones led by better politicians recovered faster than those saddled with the kind we have in Washington! So, there is hope for the US and it may be less painful if we could elect a more competent bunch in Washington!
