Interesting idea for a 20 trillion dollar economy

I just heard the president’s current chief of staff refer to the US economy as a twenty trillion dollar economy.   That would be $20,000,000,000,000.   I have no reason to doubt that almost unimaginably gigantic number.   Let’s take it as fact.  Divide that number by ten thousand.   You get two billion dollars.   

When you have very large sums of money, a tiny fraction invested at even a moderate interest rate for a ten year term can yield a mountain of money.   Here is a little math to illustrate this:

The stock market, over the years, pays about 10% a year.   When I was a kid savings banks used to pay 4% for what they called passbook savings accounts.  Let us take 1/20,000th of the value of the US economy or $1,000,000,000.   The average billionaire has at least one of these.   What happens if you just leave a billion dollars in a bank account for a year at 4%?

$1,000,000,000 would yield $40,000,000 in interest the first year if in a 4% passbook account at an old fashioned savings and loan bank.   If you let the money ride, that $40,000,000 gets added to the principle, which becomes $1,040,000,000 which the following year is $1,081,000,000.   After three years that number becomes $1,124,264,000.  At five years that account has $1,214,229,120.   The interest in the seventh year would be $52,532,408.   After ten years the account would have $1,477,295,382, some time in the eleventh year you’d have 50% more than you started with.

I read about a fascinating idea for funding solutions to longstanding social problems. It is called a Social Welfare Fund.  If the will is there to solve social problems, this idea would provide the funds.  The model has apparently already been used successfully in several places around the globe.  The article at the link above is very readable and makes a clear and convincing argument for Social Welfare Funds.

A Social Welfare Fund invests a large sum of money and the money it generates can be spent to ensure housing for all, a living wage, environmental protections, health care, job training, elimination of deadly diseases of despair, the elimination of poverty, providing dignity for elderly citizens, etc.  

If you took the first trillion dollars spent overthrowing Saddam Hussein in the lead up to perpetual war and put it into a social welfare fund, managed by a conservative who keeps the money in a 1960s savings bank at 4%, you would generate $40,000,000,000 the first year.   The fund would generate that annually, at the modest return of 4%.

Of course, few investors would be content with a 4% return.  If the trillion dollar Social Welfare Fund, more shrewdly invested, made 10% that’s $100,000,000,000 a year.   You could do a lot with that kind of money.

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