How much is a billion anyway?
Say you have 1001 friends and one thousand of them have one million dollars each. Suppose your remaining friend has a billion dollars. Your billionaire buddy has as much money as all of your other friends combined. In short, one thousand times one million equals one billion ($1000.00 times $1,000,000.00 = $1,000,000,000.00). To personalize this, if everyone in the country gave you three or four pennies, you would have about a million dollars. To get a billion dollars the same way, everyone would have to give you about $33.00.
How much will we have to collect from each person in the country to raise the seven hundred billion dollars ($700,000,000,000.00) Secretary of The Treasury Paulson asked for in his original proposal to congress to cover losses to financial institutions and to stabilize markets? Each and every woman, baby, child, teenager, and man in the country has to chip in $2,295 to meet the original request.
Let’s ask about the losses. Is the situation in Washington and Wall Street like when you lose your wallet in a house fire and the money is burned and gone forever? Or, is it more like when you lose your wallet on the street, somebody finds it and keeps the money—the money is lost to you but the money itself isn’t lost, it has a new home in an unknown stranger’s pocket? Or, is it like losing money in a casino? Again, the money itself isn’t lost, it’s not in your pocket anymore, but you know where it went.
There was no big fire; the seven hundred billion did not burn to ash. So, where did it go? In what pockets does the money currently reside and by what path did it get there? Finding the answers may not be easy for Washington, but, it won’t be easy for each of us to take a $2,295.08 cash hit.
Washington might respond to our question about where the money has gone. There is another question we should ask. Honest answers to this other question are so embarrassing, so self-incriminating, that Washington and Wall Street will hope that we don’t insist on an answer. How did we get into this financial mess?
Some might answer with a sports’ analogy to say that, “they dropped the ball.” It’s actually much worse. Washington didn’t “drop the ball”. Together, Republicans and Democrats gave the ball away and then turned their backs on the game. Big banks and big brokers took the ball to play games that violated nearly every principle and rule of financial prudence. Main Street charges Washington and Wall Street with the responsibility to maintain fair, transparent, and stable markets. Obviously, Main Street wasn’t well served. Leaders in government and finance demonstrated little concern for the maintenance of the common ground required for a viable and prosperous democracy. They didn’t bet with dollars, they bet with Main Street’s vision of the world our children and grandchildren would inherit.
Is this criticism too harsh? Is this criticism just an angry strike at people we unjustly blame for circumstances over which they truly had no voice, responsibility, or potential to influence? Was the financial attack upon our common ground the equivalent of an economic Pearl Harbor—a surprise attack that no one could have foreseen? Was the attack so vicious and so powerful that we should be consoling our leaders for “fighting the good fight”? “After all”, we might say, “they’re only human”.
To decide if the criticism is too harsh, we can compare the performance of our leaders in government and in finance with the financial performance of another group of people. Like people on Main Street, this other group has lived and operated in the same economic climate and times as our leaders.
Each year, Forbes, a business magazine (forbes.com), publishes a list called the “Forbes 400”. This list is the magazine’s estimate of the wealth of the 400 richest Americans. Most of the people on the list get there through their personal success at establishing and growing businesses. Some are there because of inheritance. The list is not static. Each year some new people prosper enough to knock others off the list. In 1997, the “Forbes 400” had a reported combined net worth of 624 billion dollars. In 2008, the reported combined net worth for this group was 1.57 trillion dollars (1,570 billion dollars).
How does the personal financial performance of 400, for the most part, hard working Americans compare to the financial performance of our leaders in government and finance? How did the 400 do looking out for themselves do compared to how well did our leaders do with our National Treasury? Since 1997, 400, for the most part, hard working Americans increased their combined net worth by a total of 946 billion dollars. Over the same period, leaders in government and finance guided the Our Nation through a period of budget surpluses to a financial meltdown. 700 billion dollars, the initial government request for a “bailout”, is 246 billion dollars less than the amount of the increased net worth accumulated by 400 of us.
We assign both implicit and explicit fiduciary responsibilities to our leaders in Washington and finance. Do the math. You decide if the criticism of our leaders’ performance is too harsh.
Copyright 2008
Will Champlin
