Saturday, October 10, 2020
Silly expectation
This episode of Can You Imagine That features a long-term bet. In 1932, two Louisiana dudes made a bet about the newly built state capital in Baton Rouge. One said it wouldn't hold up, the other went along with the public promise that it would last 500 years. Each of them put down $2.50, and went to the trouble of registering the bet formally in an escrow account at the bank. The bet was to accumulate interest at 4%, and would be payable to the heirs of the winner in 2432.
The bank figured out that the winner would theoretically receive
$2,084,495,605.22 in 2432.
First, the typical interest on savings in previous years is surprisingly hard to find. I've often looked in various bank and census publications, but it's not listed. So this provides a useful datum that 4% was standard and expected at the low point of the Depression. Many of those publications implied that interest had hit zero around then.
Second, of course interest DID hit zero in 2008, and will never rise above zero again. The dudes and their banker and the program's writers automatically assumed that interest on savings was a necessary and permanent part of banking. Wrong.
So the real payoff would have stopped gaining in 2008, and would have stuck at 91 dollars from 2008 to 2432. Assuming the two dudes were about 20, there's a slight chance that they were still alive in 2008, and their sons or daughters would very likely be alive in 2008. They should have canceled the bet and collected the 91 dollars.
(The building is still serving as the state capitol now. 90 years down, 410 to go.)
Labels: Alternate universe, storage, the broken circle
¶ 10:31 AM
