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A Trillion Here, A Trillion There...
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In England, home of the English language, the word "trillion" is rarely used. Instead, the phrase "a thousand billion" is used instead. I recommend that the US follows suit. It is not that I am an anglophile, but rather that I believe we have reached the point where the number "one trillion" simply fails to capture just how big it (and the financial crisis that causes us to use this number on a regular basis) really is.
A thousand billion is, I think, a far better means to express just how big this number really is. After all, the famous phrase allegedly uttered by Senator Everett Dirksen about "a billion here and a billion there and sooner or later you're talkin' about real money" was his way of expressing the same concept - about a number that is one thousand times smaller than the trillion dollar number that is increasingly being used to express our current predicament.
Try this out - Economist Nouriel Roubini, who correctly forecast the scale of the current crisis, recently estimated that total losses on loans made by US financial firms and the fall in market value of the assets they are holding will be about $3.6 trillion, with US banks and broker-dealers exposed to about half that amount - or $1.8 trillion.
Based on his calculations, approximately another $1.4 trillion will be needed to restore banks to the level of capital they had before the crisis. Are you still sitting down? You shouldn't be. These are enormous numbers that imply enormous problems. But the size of these figures is just not easily internalized by our brains.
Now see if this makes a difference - the total market capitalization of Citi, is now around $5 billion, while that of Bank of America is around $15 billion and Morgan Stanley is around $19 billion. The total fall in value of assets held by the US banking sector is around $3,600 billion creating a hole of about $1,400 billion. See what I mean.
As we increasingly read about TARP, stimulus, rescue packages and the rest, it is important to constantly remind ourselves that each trillion is actually a thousand billion dollars. Or, if you want to really put it in perspective, each trillion is a million million dollars (1,000,000 x $1,000,000).
I am sure that mathematicians and psychologists could explain why the numbers do what they do and the brain does what it does, but what is important to me is that we not lose sight of the size and scale of the world's current economic and financial woes. The numbers are big - really big. So big that I simply don't think that the word "trillion" does it justice.
So I, for one, will no longer use the word "trillion" but rather will revert to the "thousand billion." It's my tiny contribution to fostering a better understanding of the size and scale of the current problems confronting us all.
-- Douglas Rediker
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Reader Comments (12) - post a comment
Use of "thousand billion" is the result of a
historical trap.
It started with the fact that 100 years back,
"billion" in the UK, France, and most other
European contexts meant 1,000,000,000,000, which
is to say what Americans called "trillion".
Similarly, "trillion" meant
1,000,000,000,000,000,000, what Americans would
call "quintillion".
To get around the fact that "billion" meant a much
larger number in Europe than in the USA, the
French invented the word "milliard" for
1,000,000,000 while the English talked about
"thousand million".
However the numbers used in everyday life (amounts
of money) started rising, and there arose a need,
on a daily basis, to refer to things like
"400,000,000,000 euros", the popular press, at
least, threw in the towel, and gave in to American
usage of "billion" (1,000,000,000 instead of
European 1,000,000,000,000) and started referring
to "400 billion euros" or "400b euros" for short.
So far so good -- until they needed to refer to
1,000,000,000,000 which used to be "billion" in
their terminology, except that "billion" has been
stolen for another purpose, and "trillion" in
their terminology is a much bigger number (see
above) -- hence the awkward "thousand billion".
Finally, note that Chinese is also facing a
linguistic ambiguity concerning 1,000,000,000,000.
There is no native word for "million" in Chinese.
Instead you say in Mandarin (using pinyin)
yi1 bai3 wan4 = one (times) hundred (times) ten-
thousand
Similarly there is no native word for American
"billion", but there is a (somewhat uncommon) word
(yi4, a different tone than the word yi1 for
"one") for 100,000,000 and so an American
"billion" is 10 of these.
Finally, although there is a word (zhao4) for
"1,000,000,000,000", since (as noted) there is no
native Chinese word for "million", this
(previously very obscure) word has long since been
"borrowed" to translate the western prefix "mega".
Therefore, the phrase yi1 zhao4 (this word) could
mean 1,000,000 or 1,000,000,000,000. In practice,
therefore, this word is frequently avoided but
instead American trillion is translated as "yi1
wan4 yi4" (ten thousand times 100,000,000), to
avoid the double meaning of "zhao4" caused by
importing American terminology, closely analogous
to the use of "thousand billion" in Europe.
Trillion v. something else? "A wink's as good as a nod...to a blind horse."
First, we fire all the bankers.
A modern updating of Shakespeare's Henry VI.
Where is all the money going?
AIG owns a company in Israel called Ezer Mortgage Insurance (EMI). EMI will insure/finance up to 95% of a private Israeli mortgage. Below is EMI’s nifty ad gizmo with some of the relevant text copy underneath the link. I’ve adjusted the figures to reflect current money values. Please alert me if you spot any problems with the math. (Warning - very annoying music):
It’s so simple to purchase a house in Israel when EMI (a member of AIG, American International Group) makes up to 95% financing possible!
FAILED institutions, FAILED management bruting FAILED modeld FAILED miserably, and now must pay the price for that FAILURE.
Quoting Stiglits in a must read article linked in the New America Foundations Daily Brief: http://www.thenation.com/doc/20090323/stiglitz("There is a basic principle in environmental economics called "the polluter pays": polluters must pay for the cost of cleaning up their pollution. American banks have polluted the global economy with toxic waste; it is a matter of equity and efficiency that they must be forced, now or later, to pay the price of cleaning it up. As long as the banking sector feels that it will be bailed out of disasters--even ones it created--we will continue to have a moral hazard. Only by making sure that the sector pays the costs of its actions will efficiency be restored.")
Nationalization is inevitable. Call it conservatorship, intermediation or whatever you want, but the bad banks must be nationalized, their entire management fired, (and many prosecuted for financial malfeasance and perfidy) and shareholders will be wiped out. That's the price they must pay for concocting, pimping, and selling PONZI schemes and toxic assets and FAILING to account for risk.
Forgive the double post, but here is the correct link
http://www.thenation.com/doc/20090323/stiglitz
I hope the "hole" is $1,400 billion. I have read that it is closer to $50,000 billion.
Well hey, Steve, the next time you see Dov, do us all a favor and ask him what the hell he did with our two thousand billion, will ya?
The total household wealth of the US was in excess of $50 trillion in 2007. I'm guessing that adding public and corporate wealth probably gets you well past $100 trillion.
Finding a few $ trillion to fix our financial system should not break the United States.
I'm glad this article is reminding us how much one trillion dollars is. I thought the first post explaining where the phrase 'a thousand billion' comes from was very interesting! I take a different view than what was expressed in the original article. I believe it does not show how much trouble we are in, but rather how much trouble we are getting into! I've never addressed financial difficulties in my home by increasing our debt to a level way past our ability to pay. I always decrease spending, take some small loans to take care of emergencies and wait for a better day. I don't understand how the government can get by with spending so much money.
to bob h - if the total household wealth in 2007 was $50 trillion dollars, why are we in so much trouble now? The government taxes us like crazy. Why does the government never have enough money? An article that tells a completely different opinion about the possibility of the stimulus package/budget being paid for is at:
www.openmarket.org/2009/03/07/90-percent-tax-rate-proposed/
This afternoon at TargetI bought my five year old grandson a hand calculatorfor $2.50--not a kid's one a little smaller than a 3x5 card. It can only go to 100 millions. And I had one in desk that is about 20 years old can only go to 10 millions.
He can count to a thousand and act and subtract up to about 20--but really was fascinated by putting in the biggest numbers and subtracting from them.
I don't know if his parents told him about googol when he asked some months ago about what is the biggest number--probably not because he already knew that google is what you do on the computer to find things.
I just checked dictionary.com and loved the origin of googol:
Origin:
1935–40; introduced by U.S. mathematician Edward Kasner (1878–1955), whose nine-year-old nephew allegedly invented it
Anyhow some months ago his parents taught him the symbol for infinity. When he made Valentines recently on my card, he wrote, "I love you" followed by the symbol for infinity. And for his mother it was "I love you followed by three symbols for infinity.
His generation better get used to very big numbers.
Maybe next week I should teach him $$$$$$$.
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