Billions And Trillions Of Dollars Are Hard To Comprehend

It has been said that when skyscrapers are being planned and built everywhere it is generally a sign the market is topping and about to crash. I would like to suggest another sign the economy is no longer linked to reality is when those covering financial matters begin to mix up the amount of money they are reporting in news stories and nobody notices or cares. Today the confusion is between billions and trillions, years ago it was millions and billions but we have moved on. The link between what is real when it comes to the cost of living and the numbers we see and hear is becoming strained.

Trillions and billions are numbers that both represent huge quantities, however, we hear them so often we forget the difficulty of internalizing the true magnitude and massive amount of money they really represent. Adding to the confusion is that many of the stories we see still refer to far lesser amounts such as millions. Please don't get me wrong, a million still represents a very large number but pales next to its much larger brethren a billion which in fact is a thousand times larger. This is all linked together by the fact it is insane to think governments spending far more than they take in each year sooner or later will not affect the value of assets.

Real Assets At All-Time Lows Relative To Financial Assets

Debt and inflation have an interesting relationship and share an almost elastic sort of bond with the perceived value of tangible assets. I remember being appalled to see what I considered to be an outlandish and massive number as to the cost to rebuild New Orleans after Hurricane Katrina. Over the years the cost to repair damage from natural disasters has skyrocketed in relation to the actual damage. The chart to the left shows real assets at an all-time low relative to financial assets at the end of 2015 and I contend things have only gotten worse.

One million dollars (100 packets of $10,000)

These visual aids are from an article several years ago titled; "An Ugly Math Primmer On American Debt" where I attempted to show the relationship between these numbers and the amount of money each represents.  At one time a billion dollars was a massive amount of money and it still is. Most people that have not thought about it might not think so considering how modern media and politicians throw the "B" word around. On several occasions, I have heard a billion dollars accidentally confused with its much smaller sister the million marker. This drives me crazy. When someone misspeaks and says " the cleanup effort for Superstorm Sandy may run as much as 60 million dollars."  With a billion dollars being a thousand times larger this confusion is undefendable.

Believe it or not, the little pile next to the man on top is $1 million dollars (100 packets of $10,000). You could stuff that into a grocery bag to walk around with it. Start talking about a $1 BILLION dollars... now we're really getting somewhere...

A Billion Dollars Is A Great Deal Of Money!

Internalizing the magnitude of the difference!

A million is a large number. To put it in perspective think in terms of someone working every year from the age of 20 until they are 60 making $25,000 a year. Their total income over their life would be one million dollars. The magnitude of the difference between billion and million is important. Another way this difference can be illustrated is with the example below that uses time as a scale or measuring stick:

• A million seconds is 12 days.
• A billion seconds is 31 years.
• A trillion seconds is 31,688 years!

Now back to our topic. Making these numbers real so we can understand how it interrelates with our economy is no easy task, but let's have a go at it. In an effort to keep this simple I have chosen to focus on America. A similar formula can be created for almost any country. To make things easy lets us do a bit of rounding off and work with easier to manage numbers. Not lying about the numbers to arrive at a clear picture of reality is important.

We will start by placing the population of the United States at 333 million people, (this number is reasonably close) and includes every man women and child. What makes this important is that it includes infants, children, teenagers, the nonworking both self-sufficient and those on government assistance, the retired, and the elderly in nursing homes. How marvelously simple and convenient that this number goes into 1 Billion dollars roughly 3 times.

This means that every 1 billion dollars spent by our government represents an outlay of roughly $3 for every person in America!

Taking the number of people and placing them into other groups is more challenging. Those groups can include; households or families--- for ease we will call the average household  3.4 people. When we look at "workers" we are looking at according to government figures in 2008, 120 million people were employed out of an estimated 330 million citizens. However, unemployment increased after that date. Last but not least how many taxpayers exist in America? This is very complicated,  many taxpayers get back more in a refund than they pay in and there is a huge difference in the amount people pay, also do we consider a joint return as two payers? Bottom line, whatever it means,  nearly half of households do not pay taxes. This we must remember!

Back to simplicity: So $100 billion represents or equals $300 per person and $1,020 per family,

Unfortunately, we are not talking about a $100 billion federal deficit but six or eight times that amount. One trillion dollars is ten times the $100 billion multiplied out above. That would represent a staggering $3,000 per person and $10,200 per family being spent each year, year after year, it adds up very fast! Again we must remember nearly half of American households do not pay taxes, and if they don't this means someone else must pay their share for them.

Sadly, these are the numbers propelling the economy forward, and it is not sustainable when compared to wages and incomes. Please note; Massively compounding the problem is the realization that most people such as infants, children, the disabled or unemployed could not pay their share if their life depended on it, this transfers the burden to the remainder of society. The bottom-line is that the numbers we see and hear are mind boggling and crazy. When you start talking about these numbers in multiples of thousands, tens of thousands, and even more the task of comprehending and understanding them becomes nearly impossible.

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Footnote; If you found this post interesting or informative please look at my recent posts. Also, nothing is as sobering as looking at the National Debt Clock, that link is also below. Other related articles may be found in my blog archive, thanks for reading, your comments are encouraged,
http://www.usdebtclock.org/