Friday, April 9, 2010

Elementary Economics - How Much Is A Trillion?


An editorial in “The Mercury” of 28 January 2010 under the heading” FREEZE IS A HOT IDEA” recorded aides to US President Barack Obama, announcing he would target the enormous Federal deficit. His budget would call for a three year freeze on so-called “non-security discretionary funding” which would result in $250 billion less than initially projected, being spent over the next ten years.

The editorial also noted that sceptics were concerned how small the proposed saving was in comparison to the $6 trillion USA Federal Government expected deficit. The laudable conclusion was reached that although the proposed cutback was a mere gesture, it would send the right signals that mild belt-tightening by the USA would not stall the recovery of the World Economy.

The well- known American writer Bill Bryson, who was a business newspaper Editor for many years, contends that sums as large as this are seldom appreciated and understood. Big numbers are completely beyond of what the average person is capable of grasping and they get confused when confronted with terms like billion and trillion. The American sense of billion (1,000,000,000) has almost completely supplanted the British sense(1,000,000,000,000) To complicate matters in South Africa, the term billion is a “miljaard”in Afrikaans.

Expressed in full numbers $6 trillion is $6 000 000 000 000 or at the current exchange rate represents R45 600 000 000 000 – but what does a trillion really represent?

Imagine you are in a vault with the whole of the USA`s Federal debt and invited to keep each dollar bill you can initial. Assuming you could initial one dollar bill each second and that you continued doing so without stopping. How long do you think it would take to accumulate a trillion dollars, Six months? Five years? If you were heard to say 10 years –then dream on!

It would take you 17 minutes to accumulate $1000 and 12 days of non-stop effort for your first million dollars. After slogging away for 32.7 years you will eventually become a billionaire. If you have aspirations of matching the wealth of Carlos Slim, Warren Buffett or Bill Gates you are going to have to initial those dollar bills for almost a thousand years and after 31 709.8 years you will be a trillionaire.

Now you know what a trillion is!

Pieter Rautenbach

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