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Is a "Billion Dollars" a Meaningful Number ?

 
 
Reply Sun 1 Mar, 2009 01:04 pm
i spent most of my working life dealing with numbers - usually in accounting and related work for government and financial (insurance) enterprises .
$ 100,000 was a fairly big number in those days - even dealt with $ million numbers - but i can't really do much with billions and now trillion dollar numbers .
i am familiar with germany's inflation in the early 1920's when banknotes for
billion marks were eventually issued . of course , "the end" came quickly thereafter - the papermoney with those numbers became worthless - those "bills" can still be cheaply bought from dealers .
the BBC has an article that i found pretty interesting - it tries to give some understanding what the new numbers mean in our economy .
(i will have to update my financial knowledge , no doubt) .
hbg

complete article ;
http://news.bbc.co.uk/2/hi/programmes/from_our_own_correspondent/7914572.stm

Quote:
America's trillion dollar question
The US economy has suffered a sharp nosedive. Plunging exports and the biggest fall in consumer spending in 28 years has meant that the decline was much worse than analysts had expected. Kevin Connolly in the US looks at why we are now talking trillions as well as billions.

In the world of American government, the trillion is the new billion.

There was a time when only astro-physicists and accountants practising in Zimbabwe had any use for a word which means a million millions.

Barack Obama is not the only extraordinary phenomenon to rise to prominence in this country in the last year or so - the trillion is right up with him. Suddenly it is popping up in newspaper headlines with extraordinary frequency, even though it is surely a number so far beyond our everyday conceptual grasp that it conveys practically nothing.

America's budget deficit for example - the amount by which what the government spends exceeds what it earns - is now $1.75tn, and its national debt - the total of those deficits accumulating from year to year - is nudging $11tn.

Incomprehensible

If it helps to view it as a figure then here is America's annual budget deficit as it stands now: $1,750,000,000,000. And the national debt: $11,000,000,000,000.

Does that help? No, I rather thought it would not.

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so may want to go to the link above ... ...

an example of a german "inflation" bank note - shortly before the old mark was declared worthless .

http://www.linkezeitung.de/cms/images/stories/LZKoeln2/inflationsgeld.gif
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spendius
 
  2  
Reply Sun 1 Mar, 2009 01:21 pm
Quote:
Is a "Billion Dollars" a Meaningful Number ?


A financial expert on the BBC said that the bail-out (800bn.) was a pile of new dollar bills 8,000 miles high. So one billion would be 10 miles high.
hamburger
 
  1  
Reply Sun 1 Mar, 2009 03:20 pm
@spendius,
when the currency reform took place in germany on 1 november 1923 , "one billion" was worth exactly "100 pfennig (pennies) = ONE rentenmark " - enough to mail ten local letters !
in the last stages of the inflation people used to attach whole panes of stamps to a letter to make up the postage .
hbg
cicerone imposter
 
  2  
Reply Sun 1 Mar, 2009 03:41 pm
@hamburger,
Several thoughts on huge numbers when talking about "money."

I remember some years ago when I traveled quite extensively, and found some currency exchange with the US dollar were thousands this and thousands that. If my memory serves, I remember the Italian money was 3000 to US $1.

I also remember when I visited Poland many years ago when the inflation rate was astronomical, and their currency was increasing by digits almost every month. They finally issued new Zlotys (I think that's what they were called) to replace the zeros.

I also worked with companies where I had to estimate the monthly sales and net profit. My first management position was with Florsheim Shoe Company where monthly sales were always in the millions, and I really had to adjust for cost difference for the holiday season, because sales were the highest during those months, and payroll took a smaller percentage of sales.

As for the current stimulus plan with spending in the trillions, IMHO, is a necessary evil. The government must do all they can to save our economy which was worth about 14-trillion/year. I only disagree with how they are allocating those funds heavily favoring too many social programs over the creation of jobs. Without jobs, the tax base will stay too low to pay for any expansion of social services, and creates an unnecessary handicap for future growth.

I also believe Obama's belief that he can cut the deficit in half by 2013 is a pipe dream. Without the increase in jobs and tax base, it's going to be impossible to pay for all those expansion of social programs.

Another interesting observation; our county will be hit by Obama's new taxation policy to tax those making $250,000 and more. We have the highest percentage of those making that income in the US.

It's interesting to note that during this time of deflation, our government will be adding those trillions into our economy. How that will impact the short-term and long-term inflation will be an interesting study.

One more personal opinion on the price of gold. It's nearing $1000/oz, and some financial pundits are saying they are a good investment now. I disagree; when cash is king, investing into any metal is a bad idea. What can you do with one oz of gold? How about $1000 in cash?
hamburger
 
  1  
Reply Sun 1 Mar, 2009 04:11 pm
@cicerone imposter,
c.i. wrote :

Quote:
What can you do with one oz of gold? How about $1000 in cash?


my father received a little "moneypurse" with twelve GOLD one pound pieces from some british chap for a favour done (a/t my dad) during the height of the german inflation in the summer of 1923 .
my brother was born in february 1923 and the gold pounds were enough to buy the finest baby clothes , baby carriage etc .
two pieces were left over and my brother and i , each received one of those pieces - i also got the leather purse . we kept the pound and the purse - more as a piece of nostalgia .
had my dad changed all the gold pieces to german marks immediately , it would have been worthless within days .

so the gold was worth a lot - the banknotes were a/t my dad used by some people to paper the walls - they'd become worthless !

btw having a goldcoin was a heavily punishable offence at that time - and again from the 1930's to the end of the war - it was well hiden !!! - and sits now in the safe deposit box - to be looked and marvelled at once a year .
again after WW II gold and cigarettes were the "currency" that would buy you literally anything - hope those days will NEVER come back !!!
hbg

ps still can't helping looking back at the years of the "black market" (1945-1948) without some nostalgic feelings - saying : "i lived through them ! " .
three chesterfields or camels would buy me a mars bar or similar <GRIN> .
those "black market" marsbars tasted particularly good !
cicerone imposter
 
  1  
Reply Sun 1 Mar, 2009 04:26 pm
@hamburger,
Our parents were never in the "investment" class, and we own now was earned by us; even our college education. I don't regret or resent that our parents were not wealthy; we were just lucky that my grandfather and grandmother came to the US in the late 1800s.

Warren Buffett has lost over 50% of stock value during the past 52 weeks. We're not even close to his acumen in investing in the market, but at least we're still way ahead of what we invested even today. And this is after we "invested" about $100,000 into the renovation of our home last year.

cicerone imposter
 
  1  
Reply Sun 1 Mar, 2009 04:52 pm
@cicerone imposter,
Quote:
White House Poised for Budget Fight

By BRIAN KNOWLTON
Published: March 1, 2009

WASHINGTON " The Obama administration this weekend pursued a vigorous offensive to sell its economic program, counterattacking strongly against Republicans who call the new budget plan “mind-boggling” in its numbers and ambition.

The latest on President Obama, the new administration and other news from Washington and around the nation. Join the discussion.

In his weekly radio talk on Saturday, President Barack Obama had called for the passage of a plan that would invest heavily in expanded health care, cleaner energy and education, but do so partly through taxes affecting the wealthy and polluters. He predicted fierce opposition from the insurance industry, oil and gas companies, student lenders and banks, saying: “I know they’re gearing up for a fight as we speak. My message to them is this: So am I.”

On Sunday, top White House advisers amplified on those comments, defending the breadth of the $3.6 trillion budget plan and sharply rejecting Republican arguments that it would cost, not create, jobs, and send energy costs up.

Rahm Emanuel, the White House chief of staff, said he was confident the budget would be passed by April, though he accused Republicans of “scare tactics” in trying to arouse public opposition. Mr. Emanuel, speaking on CBS’s “Face the Nation,” said that it was time for the country to move away from “a culture of rising deficits and more and more consumer spending,” and toward one that invests and saves.

Peter Orszag, the White House budget director, said it was wrong to suggest, as Republicans have, that the administration would be raising taxes at a time of deep recession, because those measures would take effect only in 2011, when the administration presumes the economy will be growing. “We face big problems and we’ve got to tackle them,” he said on ABC’s “This Week With George Stephanopoulos.”

At the same time, Mr. Emanuel and Mr. Orszag indicated that the president would not pick a fight over the estimated 9,000 “earmarks,” or special provisions inserted by individual lawmakers, in the omnibus spending bill passed last week.

Mr. Obama had frequently voiced his distaste for such costly provisions.

But Mr. Orszag indicated that the president would sign the legislation, needed to keep this year’s governmental programs running for the next several months. “This is last year’s business,” he said. “We just need to move on.”

A major legislative fight over the budget is certain. Republicans expressed shock at the size and radical change implied by some White House proposals, even if some conservatives appeared to quietly relish the issue as a rallying point useful as they try to begin their political recovery.

“I think it’s terrifying in the policy implications as well as mind-boggling in the numbers,” Senator Jon Kyl, Republican of Arizona and a Finance Committee member, said on “Fox News Sunday.” “You’re directly punishing job creation with this kind of huge tax policy.”

Representative Paul Ryan, a Wisconsin Republican, called the $3.6 trillion budget proposal “breathtaking.”

“What surprises me most about this budget is that they would bring it out in the middle of a recession,” said Mr. Ryan, who serves on both the Budget and Ways and Means Committees. The proposed fee for manufacturers who pollute would amount to an energy tax on all Americans, he said on Fox.

But Senators Kyl and Ryan said it would be difficult for Republicans to block the budget.

“I hope that we can, but that means that all of us will have to be together on this,” Kyl said. “We have to be absolutely united.”

This would be especially true if the majority Democrats employed a parliamentary maneuver that would require only 51 votes in the Senate for passage of budget legislation, not the usual 60.

Democrats control 58 seats in that chamber. Republicans’ best hope is that some conservative Democrats " uneasy over cuts in agricultural subsidies, or a drop in the amount the wealthy can deduct for charitable contributions " might join them.

“You can’t stop this in the House,” Mr. Ryan said. “If you can get a few Democrats to turn then I think you can slow this thing down.”

Mr. Emanuel said on Sunday that the Obama administration wanted to “continue to reach out” to Republicans, even though only three congressional Republicans supported the White House stimulus plan. But when asked on “Face the Nation” who now speaks for the Republican Party, he offered a view that might surprise many mainstream Republicans.

“It was Rush Limbaugh,” he said, referring to the conservative talk-show host who has said he hopes that Mr. Obama fails as president. “He is the voice and the intellectual force and energy behind the Republican Party. And he has been upfront about what he views.”
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