Big numbers are hard to put in perspective. We hear millions, billions and trillions thrown around a lot in finance, but it requires a real effort to think about how much that actually is.
A useful way of gaining perspective is to turn it into time periods (helpfully calculated by NASA, so you know it’s accurate*).
If you went back in time for one million seconds, it would be Friday, 23rd June. 12 days.
If you went back in time for one billion seconds, it would be Sunday, 27th October, 1991. Nearly 32 YEARS.
But the really mind blowing one is this…
If you went back in time for one trillion seconds, you’d be 32,000 years in the past. Days of the week would be irrelevant, you’d be more worried about the fact that ice sheets covered most of the UK, and your closest friend was this guy:
Source: National Geographic
So, when we hear that the UK currently has a national debt of around £2.5 trillion**, we can acknowledge that is a LOT of debt.
But we shouldn’t panic too much.
Because when you put what the UK has borrowed up against what the UK is worth, things look a little better.
And that’s what the debt/GDP ratio below does (all the way back to the reign of King James II).
UK National Debt as % of GDP
Source: Deutsche Bank/GFD
In 1815, after the Napoleonic wars, UK debt was £854 million – 1/3000th of today’s level. But that represented nearly 250% of GDP!
Today the debt/GDP ratio is 100%. Similar to most other developed nations, and not exceptional vs history.
Perspective is everything!
I hope you have found this interesting but, if you have any questions about this piece or any other finance related matter, please do not hesitate to get in touch.
Yours sincerely,
Graham Ponting CFP Chartered MCSI
Managing Partner
