I have been interested in the inflation phenomena for a long time; however my fascination with inflation and its influence on our economy seemed disproportionate to the interest of others. When I discussed the topic with the average person or the average investor, they often knew of inflation, but were often ignorant of the fact that inflation present a significant tax on a person’s or a nation purchasing power.
The relative disregard for this phenomenon can be tied back to Dr. Albert Allen Bartlett's famous assertion:
The greatest shortcoming of the human race is our inability to understand the exponential function.
It does indeed seem that humans are unable or not wired to accept the fact that relatively minor changes in a given trend over a number of years can lead to substantial impact on their environment. Inflation is no different from the subject of population growth, resource limitations or overall liner economic growth in an ultimately finite world.
So with this idea in mind, I wanted to find a simple way to gauge the creeping presence of inflation in our culture. For this I turned to Google (Nasdaq:GOOG). Google has a simple news search function, allowing the user to search for a combination of words and the frequency of their appearance in the press over decades.
Thus I decided to search for the following:
- Million + Dollar
- Billion + Dollar
- Trillion + Dollar
The results were quite fascinating;
Here is the result for Million + Dollar:
We can see from the above that the first appearance in the Google news search was in 1880. It is not clear if this is due to the limitations of how far back Google news search goes, or whether is the first use of the word. Wikipedia mentions that the first use of the word "millionaire" in reference to a person's fortune was in1843. Thus it is likely that the million dollar combination exited well before 1880. Nonetheless, what is interesting in the above graph is the steady growth of the usage of that combination from the 19th century to the early 21st century.
Follow are the results for the search for Billion + Dollar:
Here we see the first usage starting in 1890; however, at first it was quite few and scattered, but gradually increased over the years to peak in the early years of the millennium.
And finally, perhaps the most interesting result of all the three searches, the combination of Trillion+ Dollar:
We notice that the first usage of this combination was in January 1970, where it was mentioned that the US will have a trillion dollar economy in that year. What is different about the combination of “trillion+dollar” is that the usage seems to have been more or less steady up to the mid-90s, after which is started to grow rapidly, but significantly accelerated after the start of the recent financial crisis.
Based on the above graphs we can see the continued introduction of ever larger numbers in reference to the economy, and certainly more than can be justified by economic growth alone. There is an average of 1000 folds jump in the numbers roughly every 100 years. If we were to assume the first use of the combination “million+dollar” took place in the early 1800s or late 1700s, followed by the introduction of the “billion+dollar” combination in1890, and finally the move to “trillion+dollars” by 1970; we can expect the introduction of the combination “quadrillion+dollars” by around 2070.
Perhaps one day we will reach the combination of dollar followed by 100 zeros; interestingly, a number followed by 100 zeros is called “googol” from which the word Google was derived. Anybody care for a googolian dollars?
Disclosure: The author is long commodity stocks, and would recommend energy stocks (such as China Northeast Petroleum (Amex: NEP), gold stocks (such as Eldorado gold (AMEX: EGO) and international real estate stocks (such as H&R Reit TSE: HR.UN) as an inflation hedge.