How You Can be Mislead by the Way Numbers are Written

A billion dollars doesn’t sound like much these days now that we are throwing around trillion dollar deficits for as far as the eye can see.

One of the main reasons it doesn’t sound so bad is because of the way we present the information. A billion dollars sounds like a trillion dollars, which isn’t that much different than a million dollars. And when we write it out, it doesn’t get much easier to understand. $1.4 Million or $1.4 Billion or $1.4 Trillion still just feels like $1.4.

But if we write it out completely, the impression changes as we rarely see the numbers on our bills or paycheck go into four digits, except for maybe a house payment, which feels like a huge amount per month. We may look at our investment statements and see number up to five, maybe six digits, but we don’t see those numbers regularly.

But compare that to the federal deficit just announced $1,400,000,000,000.00. And this is just the money we are borrowing to pay our bills for one year! The total federal debt for all the money we owe based on our borrowing of the past is $11,948,722,543,849.95 according to Doesn’t that feel like a far bigger deal?

Another example of where writing numbers impacted impressions of them was in the recent debacle over bonuses for AIG after the government had bailed them out. We put over $750 Billion at risk to get and other banks through this. While there was some uproar, it was sparse compared to when we found out that there were $165 Million paid to AIG employees in bonuses. If we look at those numbers in full, $750,000,000,000.00 vs. $165,000,000.00 it’s pretty easy to see which should have garnered the loudest screams.

To take that one more step and bring it down into relative terms for the average person, simply chop off the zeros. In relative terms we loaned the banks $750.00, but were screaming about $0.16. Sane people lending $750 don’t scream about 16 cents. They worry about the $750.

Which brings up this question: Which is more likely a) people are insane and care more about the 16 cents or b) that most people can’t tell the difference between a million, a billion and a trillion?

If we want to take control our of fiscal situation, we can start by simply understanding how deep of a hole we are in. And the best way to do this is to always write out the complete number so we really see what’s going on.

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Originally posted October 21, 2009

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