Las Vegas, NV

Monday, November 24, 2008

Millions, Billions, Trillions: Reality Check on the Financial Crisis

Perspective on the Numbers from a Lottery Expert

By Gail Howard

We've been reading less about "millions" lately, and more about "billions" and "trillions," concerning the Federal government's bailout of the financial system. As a former stockbroker and now as a stock investor and professional lottery numbers cruncher, I am a numbers devotee. When it comes to money, everyone knows that billions and trillions of dollars add up to a lot of money. To illustrate:

-- A thousand thousands is one million: 1,000,000.

-- A thousand millions is one billion: 1,000,000,000.

-- A thousand billions is one trillion: 1,000,000,000,000.

Big numbers make most people glassy-eyed unless numbers are placed in perspective.

Say that you won a billion-dollar lottery that paid you one million dollars a day, 365 days a year. Lucky you! You would collect your daily million for just a bit over two-and-a-half years until the entire billion dollars has been paid.

However, if you won a trillion-dollar lottery that paid you one million dollars a day, every day 365 days a year, you would be dead long before you collected your entire trillion-dollar lottery jackpot because it would take 2,739 years to pay the trillion dollars.

Another way of looking at millions, billions and trillions is if you were to count one number per second, 24 hours a day. It would take 11 days to count to a million, but it would take 30 years to count to a billion. And it would take 31,710 years to count to a trillion.

In a March 23, 2006, New York Times column, Bob Herbert described millions, billions and trillions more graphically: "Imagine a stack of bills worth $1 million that is roughly six inches high. (Think big denominations -- a mix of $100 bills and $1,000 bills, mostly $1,000s.) If the six-inch stack were enlarged to the point where it was worth $1 billion, it would be as tall as the Washington Monument, about 500 feet. If it were worth $1 trillion, the stack would be 95 miles high"

-- One million = Six INCHES high.

-- One billion = 500 FEET high.

-- One trillion = 95 MILES high.

If your 401K retirement account has been decimated lately, you are not alone. In just one year, more than eight trillion dollars has been lost in the stock market, which has fallen 43.5 percent since its October 2007 high.

To bail out the financial system, the Federal government has pledged $7.4 trillion of our taxpayer money. For point of comparison, consider these numbers:

-- The entire Gross Domestic Product of the United States is about $14 trillion.

-- The entire U.S. money supply is about $15 trillion.

-- The Gross Domestic Product of the entire world is $50 trillion.

-- The real estate of the entire world is valued at about $75 trillion.

-- The world stock and bond markets are valued at about $100 trillion

Credit default swaps, which provide insurance on loan defaults but are not backed by any asset, were bundled and sold all over the world as highly rated investment vehicles. The amount outstanding of these and other unregulated financial derivatives is $1,144 trillion (or $1.144 quadrillion), which is 22 times the total output of goods and services (Gross Domestic Product) of the entire world, according to the Bank for International Settlements (BIS) in Basel, Switzerland -- the central bankers' bank.

"This financial crisis is not about sub-prime mortgages or credit swaps," says Tom Foremski of the Business Network. "The geniuses of Wall Street have managed to create a bubble that is way beyond any real values"

I wonder how the banking and derivatives crisis will ever be resolved. Will we replace the dollar with a new currency and get one unit of the new currency for every $100 of our current dollars? That would reduce a $100 million lotto jackpot win to $1 million. We are living in risky and uncertain times.

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© 2008 Gail Howard. Use and distribution of this article must include the author's information and copyright. ( books@smartluck.com)

Gail Howard is the author of "Lottery Master Guide" and other quality lottery books as well as lotto software with scientific strategies and easy-to-use systems to help the lottery player bet smarter.

books@smartluck.com)

Gail Howard

Smart Luck Publishers & Software

Las Vegas, Nevada

800-945-4245

Gail Howard

Las Vegas, NV

800-945-4245