Posted in Commentary on the Investment Environment.

The billion dollar question

In the great US of A a billion is a thousand million yet in good old nanny Britain it is a million million. Whichever, it is either nine or twelve zeros after the number on the left before the decimal point. And it is a big heap of money – if you either are lucky enough to own it or unlucky enough to loose it.

What am I driving at? Well, in recent times a dropping of the zero’s in financial accounts. Millions or billions are recorded as nice neat little bunches of figures - no noughts! To me this is wrong, it desensitises folk to the enormity of the real wealth in our world.

It not only desensitises folk to the wealth of our country, our wealthy individuals and the total world of finance but it also deadens or removes the understanding of us mere mortals when failure occurs. To hear or see of a billion or two dollars lost some how it just takes on the feel of monopoly money – so what.

Consider a US billion. Pile a billion kids one upon top of the other and they would reach to the moon and a billion seconds ago it was 1966. It is a big number which ever way you count it.

When our politicians refer to a billion they intend to spend on our various social services, and now we have folk calculating the real cost of our very own crime wave in the multi billions, I wonder if anybody really cares.

The effort required to accumulate these vast sums is similarly lost to the masses. In a recent article I asked where had all the money gone? I received a number of comments that suggested I was unfair in suggesting we had seen a sustained period of wealth increase of the average working Kiwi. Wage increases (or lack thereof) were the target of most comment. I answer by saying that generally wages have increased every year in the last five or six or so. Just ask any employer (and I am one) if this is not so.

Maybe ‘ten dollar Tauranga’ is still alive a kicking in some sectors and costs have increased but with a shortage of skilled folk some sectors wages are sure to rise. Others, agreed, may find it harder to make headway and agreed, many just do not have anything left at the end of the week (which will be interesting when KiwiSaver is imposed on us all next April whether we wish or not).

One letter, to the Sun editor suggested that a sample of 20 folk of which 19 earned $30,000 and one $180,000 made an average income of $75,000. My arithmetic suggests that the simple average is $37,500 – and I guess, rightly or wrongly, that is about the average wage locally, plus or minus. It’s more than a guess – Statistics NZ will confirm it for you – with 4.00% average growth per annum since 1997 thrown in.

 

Original Article published July 2006