Fun with gigantic credit-crisis numbers.

Fun with gigantic credit-crisis numbers.

Fun with gigantic credit-crisis numbers.

Gossip, speculation, and scuttlebutt about politics.
Oct. 9 2008 6:50 PM

Fun With Bailout Numbers

The financial pages discover the word quadrillion.

Illustration by Robert Neubecker. Click image to expand.

You know the economy is in trouble when economists start bandying around numeric terms previously associated with astronomy and particle physics. You can't open a newspaper these days without seeing the phrase "trillion dollars" placed in disturbing proximity to the word losses. According to the Nexis database, these terms appeared together in 1,774 English-language news reports between July and October 2008. During the same three-month period in 2007, they appeared in only 541, and during the same period in 2006, they appeared in only 316. Those were the good old days!

You may not even remember from grade-school arithmetic what comes after trillion. It isn't kajillion. (That's just a whimsical slang term for "unimaginably high number.") It's quadrillion. The phrase "quadrillion dollars" and the word losses appeared together in only two English-language news reports between July and October 2008, so no need to panic just yet. During the same three-month periods in 2007 and 2006, they appeared in one.

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After quadrillion, you get quintillion, sextillion, and septillion. I'm relieved to report that the phrases "quintillion dollars," "sextillion dollars," and "septillion dollars" have yet to appear together with the word losses in any English-language news reports that I can find in Nexis. After septillion comes octillion, nonillion, and decillion. The phrase "octillion dollars" appears only once in Nexis (in a Sept. 27 snippet from the blog the Volokh Conspiracy). The phrases "nonillion dollars" and "decillion dollars" appear not at all, which suggests that even at this late date they defy human conceptualization. According to Slate's search engine, I am the first person ever to use any numeric terms above quintillion in this magazine. (Eat my dust, Chris Suellentrop, Daniel Engber, Emily Bazelon, John Dickerson, and Dahlia Lithwick!)

What are these large numbers that the financial pages throw around as they describe the credit crisis, and what relation do they bear one another? Allow me to attempt a crude summary.

The $700 billion potential price tag on the just-passed bank bail—ahem, rescue package—constitutes roughly one-quarter of the annual total cost of operating the U.S. government, which by last year had reached $2.9 trillion. The $2.9 trillion that went out exceeded by $276 billion the $2.6 trillion that came in, mostly from income taxes. Ten months later, the Congressional Budget Office today puts the budget deficit at $438 billion. To cover the difference between spending and revenue, the Treasury borrows money, which leaves the government in debt. Right now, the national debt is $10.2 trillion. That number is so big that a National Debt Clock in Times Square had to eliminate its dollar sign last month to make room for an extra digit. The national debt is approaching the size of the entire U.S. economy. According to the Commerce Department's Bureau of Economic Analysis, the U.S. gross domestic product for 2008 is $14.3 trillion. Of that, $10.1 trillion went to personal consumption. If everybody in the United States decided that starting today they wouldn't consume anything for one year and that instead they would set all that money aside in a piggy bank the size of the Houston Astrodome, that still wouldn't be quite enough money to pay off the national debt.

(Forgive me if I'm starting to sound like the rector who describes eternity in James Joyce's Portrait of the Artist as a Young Man—"and imagine that at the end of every million years a little bird came to that mountain and carried away in its beak a tiny grain of that sand").

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The U.S. economy constitutes roughly one-quarter of the world economy. That is to say, the U.S. GDP of  $14.3trillion accounts for one-fourth of the GDP of all nations, which the World Bank calculated at $54.3 trillion for 2007. Have you ever said you wouldn't do something "for all the money in the world"? What you meant literally, probably without knowing it, was that you wouldn't do that thing even if somebody paid you $54.3 trillion. Want to reconsider?

As of last month, bank losses on subprime mortgages for homes in the United States totaled $518 billion. The alchemy of finance doubled that into $1.4 trillion in losses on U.S.-based loans and securities, according to the International Monetary Fund. These losses, which may well grow—the IMF keeps recalculating as the financial crisis worsens—constitute 50 percent of the annual total cost of running the U.S. government; 10 percent of the entire U.S. economy (as expressed in GDP); and 3 percent of the entire world economy (as expressed in GDP). This mess was made in the USA, but in today's globalized economy it is now every nation's problem.

One interesting difficulty, though. As the numbers get bigger, the opportunities for misunderstanding among nations increase exponentially, because of a peculiar and most annoying cultural difference. Human civilization has advanced to the point where it can split the atom and put a man on the moon, but it hasn't advanced far enough to arrive at a common understanding of what the word billion—and therefore the words trillion, quadrillion, etc.—actually means. It's a little bit like the international split between countries that use the Metric system of weights and measures (almost everybody) and countries that stick to the English system (the United States; the United Kingdom gave up on it in 1965). In this instance, however, the confusion is greater because the same terminology is used to describe different quantities.

It all goes back to the 15th century, apparently, when the French worked out a system for describing numbers above 999,999,999. At first, they decided that 1 billion would be 1 million to the second power (i.e., what Americans today call 1 trillion); 1 trillion would be 1 million to the third power (i.e., what Americans call 1 quintillion); and so on. What I would call 1 billion they called 1 milliard. Then, two centuries later, they decided that terms like "1 thousand billion" and "1 thousand trillion" were unwieldy and therefore redefined all numbers above 999,999,999 as multiples not of 1 million but of 1,000. This was inelegant, because the actual numbers designated—billion, trillion, and so forth—were now inconsistent with their Latin roots (bi, tri, etc.). But language's loss was arithmetic's gain; the new designations were much easier to use.

Unfortunately, the earlier, inferior system had taken hold throughout Europe—with the Enlightenment due any minute numbers were getting a lot of use—and many of these countries were unwilling to submit to the inconvenience of an upgrade. Today, the antiquated system is used just about everywhere except the United States, the United Kingdom, Italy, Russia, Turkey, Greece, Portugal, and Brazil. Even France eventually reverted to the old system. In a nice reversal of the Metric system story, in which the United States plays the role of know-nothing villain, here the United States is the sensible hero trying in vain to peddle a superior quantification system to its hidebound, impractical fellow nations.

Astronomers and other big-number scientists have learned to steer around the varying-definition problem by avoiding terms like billion and trillion altogether, instead designating them as powers of 10. But economists and government officials around the world, having only recently become big-number users, still say billion and trillion and, increasingly, quadrillion. When they do so, there's no telling what they mean. This tower of arithmetic Babel has some potential to create a farcical scene when the G-7 finance ministers gather this Saturday at the White House.