When Numbers Stop Making Sense

A few months back – Rogue trader Jerome Kerviel hit the headlines when he made massive trading losses (about 3.5 billion pounds) for his employer – Societe General Bank.

The hearing for his case has not yet begun and he was interviewed recently, here are some things that he said:

“There is a certain disconnection from reality when you are trading.”

“The huge numbers stopped meaning anything any more and I let myself get sucked into a self-perpetuating spiral. With hindsight I can see that I went a bit too far and got carried away.”

In another interview he said:

“I stopped recognising the vast sums I was dealing with and started taking insane risks.”

“And sometimes when I made enormous amounts of money, it gave me an almost orgasmic pleasure. It was all a bit like playing a video game, winning or losing millions in just a few seconds.”

This reminds of me of a political scientist who was analyzing the victory of an Indian politician just after the politician perpetuated a scam worth thousands of crores of rupees (a few billion dollars).

Basically, the analyst said that while news channels are flashing the large numbers on their screens to drive home the enormity of the scam, the numbers are so large – that the electorate doesn’t have any frame reference to understand them.  And since public memory is quite short, they will very soon forget about it, as something that happened in a distant world.

I face the very same problem that the Indian electorate faced or the French trader faced, while thinking about the current stimulus and bailout packages. The numbers are so large that there is absolutely no frame of reference to understand them.

It is hard to visualize what will happen if Citigroup – with its balance sheet of about 2 trillion dollars (slightly larger than the Russian GDP) goes bust.

It is equally hard to comprehend where 2.5 trillion dollars (only slightly less than the GDP of UK) will come from for rescuing the financial sector.

789 billion dollars (a figure easily remembered) seems a trifle to stimulate the economy, when seen next to the rescue package. Is an amount slightly higher than the GDP of Turkey enough to do this?

Why eliminate a paltry 16 billion dollars sought for school construction from the stimulus package, when you are talking of trillions?

It looks really paltry when you compare it with the whole package.

A few billion here and another few there; and pretty much all of this has stopped making sense.

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