Follow The Bottom Violation
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Feb
28
What is the Value of a Dollar?
This is a United States dollar. Turn it on its side and stack another dollar on top of it. Then another. Then another. Keep going…
When you’ve made a stack 67 miles high, you will have used one-trillion dollars. That should give you some perspective.
Here’s a little more perspective: the United States Government has borrowed $55 trillion. Want to see it another way? $55,000,000,000,000.
Are you having trouble grasping the magnitude of what I’ve just told you? How about this: $55,000,000,000,000 divided equally into every single United States citizen is just about $183,000. I’m not just talking about working adults. Every single U.S. citizen — from two-year-olds, to 122-year-olds, to people in comas, to brain-dead crack addicts each owes about $183,000. Everyone.
Welcome to Keynesian economics. Class dismissed.
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Disclosures: Paco is long TBT, UCO, and gold. He also holds U.S. dollars by necessity, pending the advent of private gold-backed currencies.
You can buy his novel Discipline wherever books are sold.
5 Comments so far
Partners
This is the best representation I've ever seen on what a trillion dollars looks like. Really puts it into perspective. Just describing it doesn't really do it justice.
http://www.pagetutor.com/trillion/index.html
Hey Paco, what do you think about the Euro? will it collapse completely?
I think every major fiat currency is doomed. You can't print and ease forever. Currency is everywhere, and the end result is going to be catastrophic for every economic power.
I believe you have it wrong about a stack of $1 bills being 67 miles high. Its $1000 bills being 67 miles high!!!!!! One dollar bills would be 67,000 miles high.
A stack of $1000 four inches thick is one million dollars.
Another thing : If you spent $1million dollars a day from the day Christ was born you would have spent less then 3/4 of a trillion dollars as of today.
But my favorite is this: One million seconds takes 11.5 days. One trillion seconds takes 31 709 years. Think about that one.
I have a question regarding a scenario where the world reserve currency were to collapse. In your opinion, what would happen in poor developing nations such as Cambodia, where the economy is heavily dollarized. There you’ll find the greenback to be heavily favored. Transactions are almost always in dollars. ATM’s withdraw in dollars. Groceries are priced in dollars. The only exception seems to be for local markets outside the cities. In such rural places, income is very low, and most purchases are in lower denomination national currency.
Despite what you may or may have not heard, the country is actually not as backwards as it is often portrayed in our media. True, infrastructure is weak, and goods are pricey (by regional comparison) due to lack of industrialization and heavy reliance on imports, along with other factors. But the people here still are very close their agricultural roots and commerce is still prevalent at a local level. Agriculture is a dominant industry and has been the focus of development policy in recent years. Saving is a very common attitude, and the value of gold, precious metals, and jewelry along with cash are very well understood among the people spanning all classes (perhaps effects from years of war and post war turmoil). I'm almost positive that almost all families have some measure of gold, silver, or jewelry in possession. Gold exchange rates are printed daily in local papers. Physical gold is highly accessible for purchase though quality must be examined carefully. Loans even with large banks have very high interest rates. Banks have only recently begun to establish themselves there in the past 5 years. Broadly speaking, transaction is usually executed on cash basis. Despite the country's many shortcomings, the country shows future prospect as the population is young and small (14mil) and resources have still yet to be fully harnessed. The country has maintained a decade of good political stability and focus on infrastructure development (though admittedly at a slow pace). Of course there are a ton of problems, but they are no different from any other nation at the same stage in development, so I won't go into them as I'm sure you’ve read about them all the time. I don’t know if you know much about that country. I just wanted to share some descriptions that wouldn't normally make it in our media.
Having said all that, I'm just interested in your opinion about the effect of a world reserve currency collapse on this country in light of what I described. Globally, the country has an almost negligible economic even political impact. But the use of the dollar must signal something. What are the implications of this heavy dollarization? Your opinion is highly valued.