A piece from marketplace.org has this visual, displaying a huge number.
The huge number is the current national debt of the United States government. How big is this number? It is essentially 20 followed by 12 zeros (ignoring the digits 555,465… for now).
One followed by 6 zeros is one million. One thousand millions make one billion. So one followed by 9 zeros is one billion. One thousand billions make one trillion. So one followed by 12 zeros is one trillion.
So the national debt is currently over $20 trillion.
The 2016 population count in the United States is about 323 millions. The per person share of the debt would be almost $62,000 for each man, woman and child in the United States.
The headline numbers in the news in the last several days are not about the national debt. Instead the focus is on the volatility in the stock market, both here and abroad. The Dow had the largest single day drop yesterday in its entire history. The plunge in the stock market is the likely the result of a domino effect.
The plunge is partly due to the potential interest rate hikes anticipated by investors. Why interest rates are expected to increase? The US government is expected to borrow about a trillion dollars this year, up 84 percent from last year. The increased borrowing is to pay for the tax cut enacted at the end of 2017.
Borrowing this much more money means that the government will pay more in interest. The Congressional Budget Office estimates that the government will spend at least $5.6 trillion on interest in the next decade. This means that the government will have even less money available for things that improve the economy, for example, infrastructure projects.
The huge appetite in borrowing by the government will jack up the interest rate. The US government needs to sweeten the deals by paying higher interest rates. With the government competing for funds, the costs of borrowing for consumers and businesses will increase. Businesses may find it harder to acquire needed capital for expansion. Consumers may have to pay more interest for financing car and house purchases.
The recent stock market drops are partly due to the government having to borrow more money. The plunge may also be fueled by indication of higher inflation in the horizon, as a result of employers having to pay more for workers and having to increase prices for their products (the rosy report on wage gain came out last Friday). Hence the stock market turmoil.
The number that is 20 followed by 12 zeros is hard to comprehend. Learning how to appreciate such numbers can help us better navigate our economic lives. One place to keep track of the going on in the market is www.marketplace.org. The visual for the national debt is a screen shot from this piece.
See this piece from the Peterson Foundation on the national debt.
Dan Ma math
Daniel Ma mathematics