Extreme Prefixes and Hyperinflation: On Yottadollars and Bernadollars
In reference to my 2002 LRC article Extreme Prefixes, Stephen Fairfax sent me this guest post:
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The CNN Bailout Tracker presently shows total commitments of 11 trillion dollars and total spending (not "investments") of 2.8 trillion dollars. The Inspector General for the TARP program tallied total government exposure of 23.7 trillion dollars in a worst-case scenario.
In a world where there is already hyperinflation in the monetary base, just awaiting the proper moment for the fed's dam to burst (or be deliberately breached) and bring on the full-fledged crack-up boom, I've been advising anyone who cares to listen to get comfortable with the SI prefixes, particularly the larger ones. Looking at all those zeros is hard, and a simple mistake in counting the number of zeros can lead to a 10x or even 1000x error.
I think most people have heard the term megabucks, it's used as the name of several state lotteries.
Here's how International System of Units (SI) prefixes can be applied to dollars:
1 megadollar = ten to the 6th power Federal Reserve Notes = $1,000,000
1 gigadollar = ten to the 9th power Federal Reserve Notes = $1,000,000,000
1 teradollar = ten to the 12th power Federal Reserve Notes = $1,000,000,000,000
1 petadollar = ten to the 15th power Federal Reserve Notes = $1,000,000,000,000,000
1 exadollar = ten to the 18th power Federal Reserve Notes = $1,000,000,000,000,000,000
1 zetadollar = ten to the 21st power Federal Reserve Notes = $1,000,000,000,000,000,000,000
1 yottadollar = ten to the 24st power Federal Reserve Notes = $1,000,000,000,000,000,000,000,000
See what I mean about reading those zeros?
It wasn't so long ago that a gigadollar was a lot of money even for free-spending congressmen. Now the government tosses around teradollar budgets, proposals, and deficit estimates daily. The global GDP, the total value of all goods and services produced on the planet in a year, is about 70 teradollars (PDF). How long before we see the first petadollar figure? The notional value of all derivatives presently comes closest, about 0.6 petadollars. (PDF)
A yottadollar may seem unthinkable, but the Zimbabwe hyperinflation took their currency well past that point, as the accompanying image from the Wikipedia entry on the Zimbabwe dollar hyperinflation shows.
Mr. Kinsella's article notes that the term xenna is unofficially used for ten to the 27th power, but to fully describe the Zimbabwe hyperinflation one needs a term for 10 to the 30th power, which is presently undefined. Shall we call them Bernadollars?
Comments (8)
Obamageddon
What about the Obama prefix ?
Obamadollars is measured as 10 to the 666th power !
Published: September 17, 2009 2:01 PM
matt
I can't remember where I saw this, perhaps on this blog, but I remember seeing a comment recently by an economist about how the term "astronomical" used to be applied to very large numbers, but now it's so common to hear people talking about trillions and tens of trillions of dollars, so perhaps the saying should now be "economic numbers."
Some astronomical numbers (source: wikipedia)
orbit of Pluto at its furthest extent: 7.4 times 10 to the 12 meters
speed of light: 6.71 times 10 to the 8 miles/hr
number of stars in the Milky Way Galaxy: 4 times 10 to the 11
age of the universe: 1.37 times 10 to the 10 years
compare with:
US Federal Budget: ~3.2 times 10 to the 12 dollars
Estimated budget deficit for 2009: ~2.0 times 10 to the 12 dollars
US government debt: depends how far out you're looking...
Published: September 17, 2009 4:48 PM
punter
What is with the Mises Institute and hyperinflation? We do not have a cash system but a credit one - central bankers have not been printing lots more federal reserve notes but simply creating more digits on computers. For all the so called hyperinflation and images of people running with wheelbarrows full of money there is only around $3- 4000 of actual cash for every American in existence. How exactly will this translate to Weimar hyperinflation?
None of this is to refute Austrian economics of course, but the Mises Institute would be wise to be more open to the idea of massive deflation. Central bankers are evil but they don't directly control the amount of credit as we have seen from their lowering of interest rates to zero with virtually no effect on overall credit levels.
Money is created by taking on more debt - it goes without saying then that we are not going to reduce our debt burden by creating more money.
Rather than talk about wheelbarrows full of money we should be talking about penny candy.
Published: September 18, 2009 1:22 AM
USA Today
"How exactly will this translate to Weimar hyperinflation?"
How, well you said it yourself earlier:
"but simply creating more digits on computers."
Now, it's even easier to "print" money, you simply create digits on computers. At least back in the weimar republic you had to bear the cost of paper and ink, but now there is no limits.
Those digits on computers will then spread from bank to bank to loans to consumers and there will be no way to call them back.
And when that happens, we won't have enough notes to heat our homes like back in Weimar Republic, we are in a worse situation than back then.
Published: September 18, 2009 7:38 AM
USA Today
Punter,
Massive deflation is wonderful for those who actually hold cash.
And if the commodities you hold will sell for less and less money in the future, that money however will buy more and more.
Deflation is your friend, inflation is your enemy.
Published: September 18, 2009 7:40 AM
punter
You misunderstand USA Today, I agree that deflation is good and I am an Austrian economist. What I am saying is that that is what we will have regardless of the mendacity of central bankers. My point about the Mises Institute is that by tying themselves to the mast of hyperinflation they will look very stupid when we get massive deflation and thereby (unfairly) lose credibility in the eyes of the masses. Obviously individuals there can have whatever views they lik would have thought it were better for them to stick to explanations rather than making wild predictions.
As for creating digits on a computer being easy this is true but not the point. These digits on a computer rely on someone else having faith (faith they will be paid back). Granted the value of FRNs require faith too, but at the very least they exist (and in relatively small quantities) without requiring someone to be able to pay back a particular debt. All the digits on computers are worthless if people stop believing that others will be able to pay them back in the future. When the economy turns sour (which it will) that faith will be lost. People will scramble for dollars (particularly US dollars).
I am not saying that nobody at mises.org should be talking about the stupid actions of Bernanke, but some people should also point out the futility of central banks at the moment. (Hyperinflation will probably come later, but not until our debts have been liquidated).
Published: September 18, 2009 3:47 PM
HayeksHeroes
If the banks diminish the money supply by cutting credit line and raising the loan threshold, then no matter how much cash is in their vault, it should have little or no inflationary effect. The temptation seems to be that if the banks begin to loan the money out, then we are in for a rocket ship ride up the inflationary stratosphere. It appears that the Feds and the top banks have made a deal. Look, we'll get you out of the this liquidity crisis by giving you a freshly printed dollars as long as you only use it to pay off bad debts and not to make new loans with the fresh cash. (If the bank pays off $100 in bad debt, it can use the Fed money to pay off the debt. Then the bank would be able to use another $100 dollars to loan out. But the bank could not loan out $100 of fed money before paying off the bed debt.)
I know this is rather simplistic. Perhaps convoluted. But how else do you explain banks sitting on cash and at the same time contracting credit in the marketplace?
Published: September 18, 2009 7:13 PM
Havvy
I would think Zimba- would be a better prefix.
Published: September 19, 2009 4:29 AM