Friday, November 16, 2007

How Much is "A Lot?"

Back in 1962 Senator Everett Dirksen reflected a national attitude about being reckless with large amounts of money when he made his "a billion here, a billion there" remark. (That hyperlink provides an interesting sidebar of the history of that remark, by the way. It is best known in the sentence, "A billion here, a billion there, pretty soon it begins to add up to real money." However, the first documented instance of that sentence is in a New York Times column by William Safire on August 28, 1975. Safire attributed the sentence to Dirksen, but the attribution was never validated.) 35 years after the presumed origin of Dirksen's remark, I realized how casual we had become about the quantity of a billion dollars when I discovered that Silicon Valley success stories were about self-made billionaires. Thus it should be no surprise that this was the week when the order of magnitude of a lot of money should get bumped up again.

The first sign came in the aftermath of the attempt by the Congress to assess the "hidden costs" of the war in Iraq. The result was that these hidden costs were just as large as the costs being quoted by the White House; in other words the "official" cost estimates were off by a binary order of magnitude. Taking those hidden costs into account, the total costs came in around the range of $1.5 trillion; and that seemed to cross a line to get tongues wagging. (For my money, so to speak, the most interesting of those tongues belonged to mathematician John Allen Paulos, who anticipated the trillion-dollar mark back in February and prepared a post for the ABC News "Who's Counting" column entitled "How Iraq Trillion Could Have Been Spent." Paulos has written many entertaining and informative books about mathematics, the most relevant these days probably being Innumeracy.) Having taken our first hit in the trillions, we received our second blow this morning from Reuters in their latest report about the mortgage crisis:

The impact of the U.S. mortgage market crisis on the underlying economy could be "dramatic" as leveraged investors may need to scale back lending by up to $2 trillion, according to investment bank Goldman Sachs.

Are we now in an age where we can start talking about trillions without worrying about when they "add up to real money?"

I was born in 1946. Like many kids of my generation, I had a stamp collection; and just about everyone of that generation remembers two kinds of stamps from Germany: the ones with pictures of Hitler and the ones with incredibly large numbers on them. It was only many years later that I learned about the connection between those two designs. Now I think of it in terms of that bimodal distribution of wealth and its relationship to the War Against the Poor. While cooler heads like Paul Krugman keep explaining the virtues of a "Great Compression" (narrowing the distance between the modal points), those who dominate the "upper mode" seem hell-bent on making the distance even wider, perhaps even to a point where the numbers no longer "add up to real money." This is when we need to remember the other German stamp design, which serves as a reminder of the consequences that can ensue from such a strategy.

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