Trillions to the Moon
Written by Julen Madariaga on December 11th, 2008
I was thinking last night of the stimulus package and of how, since the beginning of the crisis, economy has invaded every conversation, and we all go about speaking of Billions and Trillions like nobody’s business.
And I have decided to write this little post to explain to my readers what is a Billion and what is a Trillion. Now, don’t get me wrong, I am not taking you for an idiot, we all know that a T is a thousand B and a B is a thousand M (this is the generally accepted convention in English today, and the one I will use).
But when we hear that the Chinese are going to spend 4 trillion RMB to stimulate their economy, or in general when we discuss such large quantities of money, do we really understand what they mean? Do we have even a notion of what they can do?
I am going to give you first a quite surprising calculation from an Engineer. Based on the empiric observation that a 万 (100notes of 100RMB) stacks up to about 15mm, and supposing that 1RMB notes are about as thick as 100RMBs, I have come to the following results for the 4T RMB stimulus:
- In 100RMB notes it would stack up as high as the Earth’s Radius.
- In 1RMB notes it would stack up to the Moon and back.
Considering that a large part of the population spends not much more than 1RMB for a lunch in China, now perhaps you can visualize a bit better the significance of the money we are talking about.
Hospitals and Factories
For those serious business readers who are not impressed by the magic of numbers. As a blogger whose -attention, disclosure!- day job is advisor to direct investments in China, I can use some figures to reposition our currency. I will not support these estimates here, but if you want you can easily find examples in many corporate websites on the announcements section.
These are my figures:
- One average city hospital, about 400 beds: 250 MRMB
- One average size factory, 2000 workers: 400 MRMB
This is a fairly average state-of-the-art plant in capital intensive industries, not the toy sweatshops in the Pearl Delta River, nor the monsters like Foxconn Shenzen.
So now we can convert our currency to Hospitals and Factories and look back at some of the quantities that we have been speaking about these last days in the light of this conversion:
- The Stimulus plan is worth 16,000 Hospitals or 10,000 Factories.
- The Shanghai tower is worth 60 Hospitals or 40 Factories.
And speaking of the Shanghai Tower, I have some friends in Shanghai working for Gensler and I wish them the best for this beautiful building. But one can only hope that by 2014 the situation will have changed, because right now it looks like empty offices are flying in the sky.
Note: Europeans: divide all numbers by 10 for Euro. Americans: divide all by 7 for Dollar.
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This is a pretty cool post, I studied Econ in college, and I think you’re dead on about the sheer magnitude of government spending and the subsequent need to sort of rationalize those numbers into figures us normal people can understand. As a private citizen I have no conception of how much a trillion dollars really is nor how much it could buy yet if I read about macroeconomics right now it’s hard to avoid reading about how many trillions of dollars have been spent on this and that.
I think it’s also pretty interesting that you compared the bailout to the cost of other social infrastructure. Here in America we’re bailing out the automakers and I can’t help but wonder if that money wouldn’t be better spent on things like hospitals.
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