By: DanielXX

Not a lot if it is in Zimbabwean dollars (maybe could buy a loaf of bread), but really, are we getting numbed by billions being thrown around, being lost here, being written off there? Is this *gulp* an inflation phenomenon?

I guess it is a matter of context. For example, for a bank to write off $1B in the midst of the bull market last year would have been one hell of a shocker, as did indeed happen when banks started writing off amounts of that magnitude when the subprime crisis started and turned the bull market. But clearly people have become numbed as the crisis stretched and now the markets rally because banks “only” wrote off $1B.

It is also partly a psychological thing. Just as a $1 loss on a $20 blue-chip sounds more impressive than a $0.005 loss on a $0.05 penny stock (even though the percentage loss on the latter is double that of the former), $1 billion dollars just does not have the same aura as $500 million even though it is double that amount. Perhaps, it is because common people have always strived for that magical MILLION, and hence they can be impressed by SEVERAL HUNDRED MILLION. One billion, on the other hand, is something not many can intrinsically warm to unless it is framed in the context of ONE THOUSAND MILLION — which we are seldom impressed upon.

How much is one billion also rests on the context. I am not going to go into the classic demonstrations of how many houses or cars or egg sandwiches that $1 billion can buy, but rather I will highlight three factors that would affect both perception and real impact. Read more…