Was purchasing Alaska worth the almost $11 Trillion Dollar National Debt that the US of A has today??? I know, I know, some of you are thinking – ‘What the heck is Eric on today?” What does Alaska have to do with our National Debt? Well let me give you a little bit of insight, not on what I’m on today, but on today’s edition of Reflection Sundays.
Disclaimer: I am not hating on the Great State of Alaska. (I actually have always wanted to visit.) I am merely comparing figures and projecting what could have been. That is why it’s called Reflection Sundays anyway.
The National Debt: (National Debt Clock: http://www.brillig.com/debt_clock/.) The United States total public debt is the amount of money owed by the United States federal government. Public debt is the amount owed by the government to its creditors, whether they are nationals or foreigners. On September 30, 2008, the total U.S. federal debt passed the $10 trillion mark, for the first time. Of this amount, debt held by the public was roughly $5.3 trillion. If we add the unfunded Medicaid, Social Security, Medicare, and similar obligations, this figure rises to a total of $59.1 trillion. What a deficit! Such a downer right? Now lets look at Alaska.
The Great State of Alaska: derived from the Aleut alaxsxaq, meaning “the mainland”, or more literally, “the object towards which the action of the sea is directed.” – More like “the object towards which the increase of debt is directed”. What did Alaska cost us? Here is a little history for those who forgot: The U.S. Senate approved the purchase of Alaska from the Russian Empire on March 30, 1867, for $7.2 million. If we used that $7.2 million back in the day towards proper financial planning our great nation would not be experiencing any deficits in todays world.
Whats the connection?
The connection lies in the Rules of 72. If we took the $7.2 million back in 1867 and placed it in a savings vehicle that averages 12% annually… well you will see….
What is Rule of 72?
Rule of 72 is nothing more than a method for estimating an investment’s doubling time. The number 72 is divided by the interest percentage to get the approximate number of periods needed for doubling. In this Example the doubling period is 6 years. That’s because 72 / 12% = 6. Every 6 years the value doubles, like this:
1867 + 6 year = 1873
$7.2 mil x 2 = $14.4 mil
next double:
1873 + 6 years = 1879
$14.4 mil x 2 = $28.8 mil and so on until you get to the current year.
The hard and long way of doing this would be get the interest, add it to the original value and repeats until the current date:
$7.2 mil x 12% = $0.864 mil
$7.2 mil + $0.864 mil = $8.064 mil
That was for Year #1… now do it 143 more times to go from 1867 to 2011.
If the USA did not purchase Alaska, we won’t have the Ice Road Truckers show on the History Channel nor we would never see the ever so popular Governor Sarah Palin on SNL. BUT as you can see in the chart, in about three more years, in 2011, we would have eliminated the problems of National Debt, Social Security, Medicaid, Medicare, also add in there the recent Bail Out, AND we would still have extra to give every tax paying American a stimulus package worth about $500,000 each. Amen.
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{ 2 comments… read them below or add one }
Interesting take on it. One premise that you have overlooked is that when politicians see that much money, they are bound to (which is in their blood), put their dirty, greedy hands into the coffers. They will make every excuse in the books to take money out of it, such as buying a recent election!
I agree Ken. Some politicians should be looked at under a microscope. Greed destroys everything.