Sunday, August 7, 2011

ONE TRILLION


As posted by Dr. Mahathir Mohamad at Che Det on August 05, 2011

1. Obama, according to their own news reports, is trying to raise the ceiling for borrowing by the US Government.

2. The US Government is in debt to the tune of US$14 trillion. He wants to borrow more in order to repay the loans. If he cannot repay he will be in default. When a country fails to repay loans, it will be declared bankrupt just like anyone else.

3. What is one trillion dollars? We write it down as one billion with three additional zeros after it. Thus 1,000,000,000,000. It is not such a big figure. You add three zeros or three nothings and the figure increases by 1,000 times. But if we write down one billion as 1,000,000,000 one thousand times, we will have a better idea of what one trillion means. We would be horrified at the size of one trillion if we write the figure 1, one trillion times, which really is what one trillion means.

4. We now talk about these huge sums of money without really appreciating the real amount. Even in Malaysia we talk of billionaires now, not millionaires who are dime a dozen. We are losing our sense of proportion.

5. Just consider $14 trillion in Rupiahs or even in Yen. The figure would spill over the edge of a million sheets of A4-sized paper.

6. Malaysia is one of the countries which lent money to the US. When we buy US bonds we are in fact lending money to the US. Now the US dollar has depreciated from 3.8 Ringgit to one US Dollar to 3 Ringgit per US Dollar. We have lost 80 Malaysian sen for each dollar we lent to the US, if we redeem our bonds. Incidentally we will not be allowed to redeem all our bonds as the US has no money.

7. However, if we keep gold we would be rolling in wealth. Gold was fixed at US$35 per ounce by Bretton Woods in 1943. Now it is US$1,400 per ounce. Even at the depreciated US Dollar of 3 Ringgit we would have 4,200 Ringgit worth of gold for every ounce. Even if we had bought gold say 10 years ago we would have made a pile.

8. A US report says that the US war in Iraq, Afghanistan and Pakistan has cost the US more than US$3 trillion. This is being financed by the loans given by other countries through buying US bonds.

9. The US shows no signs of cutting back on military expenditure. Billions of Dollars are spent on researching, developing and producing more efficient means of killing people. Some 60 military bases are maintained all over the world.

10. By all accounts the US is a debtor nation which will never be able to settle its US$14 trillion debt. In other words the US is a poor debtor country, unable to discharge its loans. And it will remain a poor debtor country unless it is willing to cut back massively on its expenditure, particularly its military budget. When one is poor one lives like a poor men.

11. I remember reciting Humpty Dumpty when I was a child. That is the US today. And not all the Nobel laureates in finance, economics and accounting can put it back together once it falls.

12. Far better to admit you are poor and behave like a poor man than to wear flashy suits and throw your weight around. People will soon learn what you really are.