Halloween and holiday money spent | 万圣节及其他节日的花费

Today in class Emma asked how much money people spent on Halloween every year.   So, the class went on doing research on this question.

Here are what the children have found out:

People spent about $6.9 billion on Halloween each year. That’s a lot!   But why do people spent so much money on Halloween?!

The wisest answer among us may actually be children, whose uncluttered minds spoke the following super impressive and honest words (credit to Vickie, our little teacher and author):

If people didn’t spend so much money on Halloween, then we could use all that money to improve buildings, roads, the Navy, Army, Air Force etc.  Plus, why don’t the people save the money for retirement or to just to pay off their college student loan or mortgage.

Later in the class Jonathan asked how much do people spend on other holidays. We started making a list of Holidays and about how much dollars they spend each year.

  • Halloween: 6.9 billion
  • St.Patrick’s day: about 4.6 billion
  • Valentines day: about 19.7 billion
  • Mothers day: about 21.4 billion
  • Fathers day: about 16 billion
  • 4-Day Black Friday Weekend: 5.7 billion
  • Christmas: 465 billion
  • 4th of July: 6.7 billion

That’s a lot of money spent on holidays!!  We will discuss more in the next class.

Debt | 债务

Exactly two years ago, we wrote about national debt.  It was close to $20 trillion at that time.  Now it is $22 trillion.

We are  presenting  very large numbers.

But large is only a relative term, depending on the unit we are using, and relative to what.

According to the Institute of International Finance, global debt, as of 3Q2018, is close to $244 trillion.
About one third of the debt was added in the last ten years or so. So that means that over the last ten years the total global debt grew by a half.

You can see it from the Global Debt Monitor January 2019 Report.

This probably does not mean much to you or me, unless we have some comparisons.

Visuals can help you see the numbers, but it stops short of helping us to understand the number, since money in dollars is just money in dollars unless we compare it with something.

How about we compare it with GDP (gross domestic product)? GDP in dollar is the value of all the things people produce or service for a period of time in dollar.

So debt to GDP ratio is like the amount of money you owe at the end of the year relative to the amount of money you have made over the year.   When the ratio is over 1, it means what we owe is more than what we have made in a year.

Now hopefully we can understand the ratio a little bit.

For a great narrative of history of US debt to gdp ratio, see “The Long Story of U.S. Debt, From 1790 to 2011, in 1 Little Chart” from The Atlantic by Matt Phillips.

The article was written on Nov 13, 2012. But history does not go away.

You can connect the dots to the following chart, which you can find from Federal Reserve Bank of St. Louis.  It seems that we have debt to GDP ratio getting close to historical highest level.

That was right after World War II.

So what is in the US debt?

The total US debt now is about $22 trillion.

The U.S. debt to China is $1.138 trillion as of October 2018. That’s 29 percent of the $3.9 trillion in Treasury bills, notes, and bonds held by foreign countries.

The rest of the $22 trillion national debt is owned by either the American people or by the U.S. government itself. China has the greatest amount of U.S. debt held by a foreign country.

Domestically, the total US household debt as of 4Q2018 is at $13.54 trillion (New York Fed). For a fantastic and fascinating visual account of the numbers, see the report by New York Fed.

You can find the numbers and reports easily from different federal reserve banks and government office such as the Congressional Budget Office, and the US Treasury.

These numbers, ratios and time series by component are a lot more interesting and tell a whole lot more than everyday noisy news.

What is collateral | 什么是抵押 dǐ yā

Collateral is something you use to secure money borrowed. That answer is not clear to children.

So, how about this:

If your aunt just bought a house with a mortgage (i.e. with money borrowed from a bank or some other places), if your aunt does not pay back the money borrowed, what will the lender do? The lender (for example, a bank) will take over the house and sell it to get the money back. The house is the collateral for the money borrowed.

Recall in Shakespeare’s play “The Merchant of Venice”, Antonio borrowed money from moneylender Shylock. If Antonio were unable to repay it at the specified date, Shylock would have taken a pound of Antonio’s flesh according to their agreement. Wow. That’s unthinkable in today’s world. But in 16th century, a pound of human flesh could be conceived as “collateral”.

How much money you (your parents) have borrowed relative to your collateral is called “loan-to-value”, also known as “LtV”. It is an important metric in credit risk measure.

Herstory of money-1 | 钱的历史

This is the first installment of a series of post about money, cryptocurrency and credit scoring, accompanied by Python Jupyter Notebook in our GitHub repo on credit scoring.

In this post we talk about paper money 纸币.  The reason why we keep it in the practical math category is because the herstory of money is also the herstory of math.  In God we trust and in math we trust.  God made the universe with beautiful math.

Did you know that paper money 纸币 was first used in ancient China around the 11th century 北宋朝?

Paper money was used broadly during those days due to shortage of copper and the convenience of paper money. However, the convenience combined with the unlimited power of the government to print money lead to inflation, subsequently the loss of credibility of the government, and its eventual downfall. So, even though the Northern Song dynasty had an advance monetary system, its credit failed due to long and costly wars.

Did you know that the Chinese Southern Song 南宋 dynasty government printed money in no less than six ink colors to prevent counterfeiting?

They printed notes with intricate designs and sometimes even with mixture of unique fiber in the paper to avoid counterfeiting. That was in 1107!

Backed by gold or silver too?

Isn’t it amazing that their nationwide standard currency of paper money was backed by gold or silver?! That was in between 1265 and 1274.

In the 13th century, Chinese paper money of Mongol Yuan 元 became known in Europe through the accounts of travelers, such as Marco Polo

“All these pieces of paper are, issued with as much solemnity and authority as if they were of pure gold or silver… with these pieces of paper, made as I have described, Kublai Khan causes all payments on his own account to be made; and he makes them to pass current universally over all his kingdoms and provinces and territories, and whithersoever his power and sovereignty extends… and indeed everybody takes them readily, for wheresoever a person may go throughout the Great Khan’s dominions he shall find these pieces of paper current, and shall be able to transact all sales and purchases of goods by means of them just as well as if they were coins of pure gold”
— Marco Polo, The Travels of Marco Polo

Kids making money and building things 小孩也能赚钱

In his youth, he sold coke at stadium, chewing gum door to door and then delivered papers, knew how buy, sell and short stocks. He bought his own car, and a farm with his own money and investments.  He became the most successful investor in the world.


Math for our national debt 国债数学

$20 trillion debt divided by American population is over $60k per person (that includes babies and the elderly).

  • We want to be responsible and we teach our children to be responsible.

Estimated $100 trillion unfunded liabilities of our nation equals about $300k per person.  Think about what we are leaving for our children?!

  • To be responsible, let’s pay off our $60k per person existing national debt and deal with how we will fund the $100 trillion unfunded liabilities before (or while) we want to solve all the problems in the world.   If we don’t fix our problems, how can we help others, right?

National debt at end of 2016

The math part:

What is $20 trillion?  It is 20,000,000,000,000.   Have you ever seen a number this big in real life?  This is our national or federal debt.  Where is $20,000,000,000,000 in this picture?  It is rounded from “$19,947,304,555,212”.

Source: TreasuryDirect https://www.treasurydirect.gov/NP/debt/current

$60K is $60,000.  That’s more than what an average American make for a whole year before tax.

Calculation: money owe by each person=  divide debt by number of people = $20,000,000,000,000/323,425,550 number of people = over $60,000 debt per person, even for a kid.

  • Next time when someone tells you he/she is saving the world,  you can ask “would you like to pay off your share of national debt? And how many more shares if you can?”

The economics part:

What is debt?  It is the money we owe.  It is money we did not have  we borrowed from somewhere, including to foreigners, and we spent already.

What is unfunded liability?  It is the money we have to pay but do not have the money for, including money for the elderly, the disabled, those on welfare, and other promises the government made.


Financial literacy for the young | 理 财知识 从小开始

I volunteer at a financial literacy program jointly sponsored by PBS and HSBC.  The program is catered to high school students.   The experiences with the high school seniors reinforced my focus on financial math for children.

These seniors are very close to 18 years of age, which means they would be legal to vote soon.   We talked about getting money for college and finding jobs.    But none of them knew how social security tax worked.   None of them knew the two ways the US government raised money: tax and borrowing.   It is not their fault.  They had not been taught somehow.  So we have to do something about that!

Below is a video of a series of interviews with college students.  They know pop trivia very well but not at all about their financials.  Quite a few mention their parents take care of the finances (and therefore they don’t have to know).  The young urgently need to learn about financial math.   We need to make financial math plain, simple, fun and everywhere.