No 149: Of billions, trillions and debts

I'VE been looking for some ways to visualise the huge amounts of money that governments owe.

Remember that "budget deficit" refers to the money a government borrows over a year, wheareas "national debt" is all of the money a government owes from borrowing in the past.

I've already posted about the UK debt clock (see Post 67 and http://www.debtbombshell.com/) and the Billionpoundagram visualisation (see Post 67 and billion-pound-gram).

Here's an article about current UK government borrowing: uk record borrowing. This is the key information:

"TheUK's budget deficit rose to the highest level since at least 1993 reaching 15.3 billion pounds in August....

"...economists expect the deficit to be .... 149 billion pounds in 2010."

This sounds a lot but it's hard to imagine. Economists usually compare these big numbers with the total value of all production in the country. On this measure, the deficit for 2010 will be equivalent to about 10% of UK GDP. In other words, the government borrowing for this year will be the same value as 10% of all the goods and services made in Britain.

However, a billion of something is hard for us to imagine. This video may help....



Trying to find visualisations of a billion then led me to trying to do the same about a trillion. Whenever I hear the word "trillion", I often think about the US national debt, currently about $13 trillion!

Here is the debt clock for the USA: http://babylontoday.com/national_debt_clock.htm.

I am now going to pause writing this blog and see how long the clock will take to increase by $1 million.....





Right, back again, it took 22 seconds. Therefore, US national debt is increasing by $1 million every 22 seconds!

Much of this is interest payments, calculated to be around $383 billion this year. Of course, this leads to an enormous opportunity cost where money that could have been spent on providing government goods and services is spent on interest payments. But also remember that if a government doesn't pay its debts (known as "defaulting") it won't be able to borrow money in the future, or if it can, it will be at even higher levels of interest. And then it won't be able to pay back the interest so they can borrow more money to make the interest payments.......

There is a clock in New York which shows the US National Debt. A couple of years ago there was a problem with it:



If a billion is hard to imagine, a trillion must be even more difficult.

These 2 visualisations may help:





One last number to draw attention to: the total cost of the government spending caused by the credit crunch so far has been .... $10,000,000,000,000 (10 trillion).

Although actually this is only up July 2009 (see this BBC article).

Recently, some economists have been arguing that the Bank of England needs to put even more money into the economy to make sure we do not fall back into recession (time for more QE?).