Best of the Week
Most Popular
1.Stock Market in DANGER of Strangling the Bears to Death - Nadeem_Walayat
2. Germany Pivoting East, Exit US Dollar, Enter Gold Standard - Jim_Willie_CB
3.Flight MH17 – Kiev Flash Mob's Last False Flag? - Andrew_McKillop
4.Stock Market Crash Nightmare! - Nadeem_Walayat
5.Gold - The Million DOLLAR Question... - Rambus_Chartology
6.Gold And Silver – BRICS And Germany Will Pave The Way - Michael_Noonan
7.The Jewish Selfish Gene, People Chosen by God, Everyone Else is Goyim to Kill - Nadeem_Walayat
8.The Israeli Promised Land Dream - The Criminal Roadmap Towards “Greater Israel”? - Felicity Arbuthnot
9.Which Way is Inflation Blowing? Watch Commodities - Gary_Dorsch
10.U.S. Economy Quarterly Review and Implications for 2014-2015 - Lacy Hunt
Last 5 days
Stock Market Parabolic Collapse - Sowing the Seeds of the Next Depression - 30th July 14
How to Profit from the Russia Ukraine Conflict - 30th July 14
Greenspan: U.S. Economy Running Out of Buffer; Stock Market to See Significant Correction - 30th July 14
Rogue States And Loony Tunes - 30th July 14
Anne Elk’s Theory On Brontosauruses - 30th July 14
Our Totalitarian Future - Totalitarianism NOW! - 30th July 14
Stocks Bear Market Formation Revealed - 30th July 14
We Just Found “The Future” - 30th July 14
What the “Steak Bandit” Says About Asset Values - 30th July 14
Designer War By Default - Seven Types of Elite Madness - 30th July 14
Death of the U.S. Dollar? Gold an Inflation Hedge? Really? - 29th July 14
We’re Ready to Profit in the Coming Gold Price Correction—Are You? - 29th July 14
Their Economy Will Collapse, Including Ours - 29th July 14
Silver Prices – Megaphone Patterns - 29th July 14
Real U.S. Interest Rates - Fed Exit a Blue Pill? - 29th July 14
Why Israel Should NOT Exist, Just Like Any Other Rogue State - 29th July 14
Gold Still Looking Good - 29th July 14
Silver Price Set To Star - 29th July 14
Our Population Growth Totalitarian Future - 29th July 14
World War 1 Cause and Consequences - The Planned Destruction of Christendom - 29th July 14
Will Crashing Commodities Crash the Stock Market? - 29th July 14
Ukraine MH17 - Washington Thinks Americans Are Fools - 29th July 14
Stock Market Bubble Warning - 29th July 14
Gold Price and U.S. Dollar’s July Rally - 28th July 14
Second Quarter Corporate Earnings: Marching Toward a Strong Economic Recovery - 28th July 14
Time to Put a New Economic Tool in the Box - 28th July 14
Mossad in Gaza, Ukraine and the Cult Of The All-Powerful Elite - 28th July 14
Elliott Wave Gold Price Projection Since 1970 - 28th July 14
Investors Remain Uncertain As Stock Fluctuate Near Long-Term Highs - Will The Uptrend Extend? - 28th July 14
The Mass Psychology Of Decline - 28th July 14
Will the US Destroy the World? - Don’t Expect to Live Much Longer - 28th July 14
GDM and GDXJ Gold Stocks In-depth Look - 28th July 14
Stock Market One FINAL High? - 28th July 14
What It Means - Paradigm Collapse And Culture Crisis - 27th July 14
Wall Street Shadow Banking: You Can’t Taper a Ponzi Scheme: “Time to Reboot” - 27th July 14
6 Tips for Picking Winning Gold Mining Stocks - 27th July 14
Israel's War on Children, Exterminating the Palestinians Future - 27th July 14
Guilt By Insinuation - How American Propaganda Works - 26th July 14
Surprise Nuclear Attack On Russia To Liberate Ukraine - 26th July 14
Use "Magic" Of Gold/Silver Ratio To Greatly Increase Your Physical Holdings - 26th July 14
Derivatives Market Species Origins - Abuse, Props and Risks - 26th July 14
Stock Market Manipulation and Technical Analysis - 26th July 14
China’s Stock Market Finally Looks Like A Buy - 26th July 14
Ed Milliband Fears Israel Jewish Fundamentalist Gaza War Massacres Backlash - 26th July 14
The Big Energy = Power Battle Is Coming - 25th July 14
USrael - Zionists in Control of America's Goyim Brainwashed Second Coming Slaves - 25th July 14
More Weakness Ahead for Gold Miners - 25th July 14
Gold Price Strong Season Starts - 25th July 14
Geopolitics and Markets Red Flags Raised by the Fed and the BIS on Risk-taking - 25th July 14
Gold Lockdown Until Options Expiry - New Singapore Gold Contract Threatens Price Manipulation - 25th July 14
The Bond Markets, Black Swans, and the Tiny Spirit of Santo - 25th July 14
No Road Map For Avoiding The Future - 25th July 14
Israeli War Machine Concentrating Women and Children into UN Schools Before Killing Them - C4News - 25th July 14
Israeli Government Paying Jewish Fundamentalist Students to Post Facebook Gaza War Propaganda - 25th July 14
Why the Stock Market Is Heading For A Fall - This Time Is Not Different - 25th July 14
An Economic “Nuclear Strike” on Moscow, A “War of Degrees” - 25th July 14
BBC, Western Media Working for Israeli Agenda of Perpetual War to Steal Arab Land - 25th July 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Biggest lie in Stock Market History Revealed

Compound Interest and the Debt Bubble

Personal_Finance / Debt & Loans Jul 11, 2012 - 03:32 PM GMT

By: BATR

Personal_Finance

Best Financial Markets Analysis Article"Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it." Albert Einstein

Without a comprehensive understanding in this axiom of the financial universe, much of public policy and finance is incomprehensible. The different positions of the borrower and the lender is obvious, but the notion that one can earn enough interest on savings to maintain the purchasing power of the principle is a bygone fantasy in the era of low interest rates.


Here is how compound interest works for the depositor.

An amount of $1,500.00 is deposited in a bank paying an annual interest rate of 4.3%, compounded quarterly. What is the balance after 6 years?

The balance after 6 years is approximately $1,938.84.

Contrast the difference between being the lender to that of the debtor and you get a very different result.

A Dr. Cabler provides this account.

"If someone came up to you on the street and said they would give you a crisp, new $20 bill, and the only stipulation is that you give them back $40 tomorrow, you’d probably tell them just what they could do with that $20 bill.

Anyone you ask would say that’s a bad deal, but when you demonstrate that borrowing money by using credit cards and consumer debt is exactly the same thing, these same people (who are in debt) give a puzzled look, and for some a light turns on and they begin to understand. But for others, they just refuse to see that debt, and the compound interest that comes with it is a major drag on your finances and ends up making your poorer ever single time."

Therefore, the simple distinction between earning next to zero interest on your bank deposits, while paying usury rates on your consumer debt charge cards or lines of credit, is a guaranteed formula for personal bankruptcy.

Now deepen this dilemma with the insights learned from the national Ron Paul effort to educate the public on the horrors of the privately owned Federal Reserve System.

Eric Padden clarifies the sham that underpins the monetary fraud that enslaves the entire planet, in Inflation explained - Dollar Bubble - Government Debt Bubble.

"Most people do not understand that we don’t just print the money via the Fed. We borrow it at interest and it is that compounding interest that is the root cause of the enormous government debt bubble we have today.

The most frustrating part of this to me is that it is completely unnecessary. Our currency should simply be created through our treasury as described in our constitution without interest. In this way we could pay off our deficit in no time and build a healthy economy.

Every since the Fed ( a private banking cartel with its roots in Europe ) hi jacked our economy in 1913 the dollar has lost 98% of its purchasing power due to the constant, systematic increase in our money supply. Ever increasing Inflation is the only possible result of the Feds monetary policy."

This simple and accurate explanation goes unknown to the average indebted serf who is desperately carving out a meager existence. This strangle hold burden built upon debt created fiat money is an engineered system of theft and subjugation. The obligation bubble that grows exponentially without any prospects of paying the interest without the infusion of higher levels of new Federal Reserve debt is the fundamental mechanism that guarantees an ultimate default.

The eternal debate is between the natural deflationary forces seeking to cleanse the excessive leverage and the hyperinflation urges to keep infusing the next fix of liquidity to band-aid a terminal Ponzi scheme of larceny. In either case, the underpinning objective is to get out of paper debt obligations or claims on loans that can no longer be serviced.

Transferring out of accounting ledger entries into solid assets requires a foreclosure on the entire financial debtor economy. Do not be fooled that a recovery is possible. Rational people intuitively struggle to pay off or down their debt. However, the dramatic forces of fractional reserve banking provide the financial power to throw the system into receivership.

Michael Hudson in Productivity, The Miracle of Compound Interest and Poverty, makes a case why the poor always gets poorer.

"And indeed today, markets are shrinking in many countries. But not because people are saving out of prosperity. The jump in reported "saving" in the National Income and Product Accounts (NIPA) in recent years has resulted from repaying debts. It is a negation of a negation – and hence, a statistical "positive."

Paying off a debt is not the same as building up liquid savings in a bank. It reflects something that only a very few economists have worried about over the past century: the prospect of debts rising faster than income, leading to financial crashes that transfer property from debtors to creditors, and indeed polarize society between what the Occupy Wall Street movement calls the 1% and the 99%.

"Wealth creation" by debt leveraging – that is, asset-price inflation – was celebrated as a post-industrial economy, as if this were a positive and natural evolution. But in reality it is a lapse back into a rentier economy, and even into a kind of neofeudalism. The post-2008 bailouts have vested a new rentier elite to lord it over the 21st century, thanks to the fact that most gains since 1980 have gone to the 1% – mainly the financial sector, not to the 99%."

This is not simply a class struggle equation that blames the much-maligned 1%. The basic banking racket is the cause of the continuous bust cycles. During each of these designed implosions, the international banksters consolidate their control over the finances of their indentured customers.

As the final bubble approaches, an eruption of volcanic propositions is poised to realign the entire monetary structure of world commerce. Face facts, the banks are ready to foreclose on the assets they do not already dominate.

James Hall – July 11, 2012

Discuss or comment about this essay on the BATR Forum

http://www.batr.org

"Many seek to become a Syndicated Columnist, while the few strive to be a Vindicated Publisher"

© 2012 Copyright BATR - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014