Best of the Week
Most Popular
1.UK General Election BBC Exit Polls Forecast Accuracy - Nadeem_Walayat
2.UK General Election 2017 Seats Final Forecast, Labour, Conservative Lib-Dem, SNP - Nadeem_Walayat
3.UK General Election 2017 Forecast: Conservative 358, Labour 212 Seats - Nadeem_Walayat
4.Theresa May to Resign, Fatal Error Was to Believe Worthless Opinion Polls! - Nadeem_Walayat
5.UK House Prices Forecast General Election 2017 Conservative Seats Result - Nadeem_Walayat
6.The Stock Market Crash of 2017 That Never Was But Could it Still Come to Pass? - Sol_Palha
7.[TRADE ALERT] Write This Gold Stock Ticker Down Now - WallStreetNation
8.UK General Election Results Map 2017 vs 2015 vs Opinion Polls - Nadeem_Walayat
9.Orphaned Poisoned Waters,Severe Chronic Water Shortage Imminent - Richard_Mills
10.How The Smart Money Is Playing The Lithium Boom - OilPrice_Com
Last 7 days
Mainstream Media Feeding Frenzy in the Echo Chamber - 28th Jun 17
The Fed Has Undermined the US Economy’s Ability to Grow - 28th Jun 17
“Secular Stagnation” Is Nonsense… Here’s the Real Reason Behind the US Downturn - 28th Jun 17
Sheffield Broomhall Hanover Flats Tower Block Cladding Could Take Months to Remove! - 28th Jun 17
Shrinkflation In UK – Real Inflation Much Higher Than Reported - 28th Jun 17
Are the UK Elections a Forgone Conclusion? - 28th Jun 17
Is the Tech Stock Market Bloodbath is Finally Here? - 28th Jun 17
Crude Oil Sinks 20%: Why "Oversupply" Isn't the Half of It - 28th Jun 17
Important Money Management Tips For Teenagers - 28th Jun 17
The Coming Battery Bonanza - 28th Jun 17
Overlooked Stock Investments To Keep An Eye On in 2017 - 27th Jun 17
The Federal Reserve And Drug Addiction – A Prediction - 27th Jun 17
Charts Show Why Emerging Markets Will Be an Essential Part of Your Portfolio Going Forward - 27th Jun 17
Former Lehman Brothers Trader: I Bet My Reputation That Stocks Bubble Will Pop In A Year - 27th Jun 17
US Bonds and Related Market Indicators - 27th Jun 17
Stocks At Record Highs: Market Sentiment Still Bullish - 27th Jun 17
Stock Market Running Out of Steam - 27th Jun 17
Gold Back With A Vengeance As Bitcoin Bubble Bursts - 26th Jun 17
Crude Oil Trade & Nasdaq QQQ Update - 26th Jun 17
Gold and Silver Ongoing Consolidation May End Soon - 25th Jun 17
Dollar May Become “Local Currency of the U.S.” Only - 25th Jun 17
Sheffield Great Flood of 2007, 10 Years On - Unique Timeline of What Happened - 24th Jun 17
US Stock Market Correction Could be Underway - 24th Jun 17
Proof That This Economic Recovery Narrative is False - 24th Jun 17
Best Cash ISA for Soaring Inflation, Kent Reliance Illustrates the Great ISA Rip Off - 24th Jun 17
Gold Summer Doldrums - 23rd Jun 17
Hedgers Net Short the Euro, US Market Rotates; 2 Horsemen Set to Ride? - 23rd Jun 17
Nether Edge By Election Result: Labour Win Sheffield City Council Seat by 132 Votes - 23rd Jun 17
Grenfell Fire: 600 of 4000 Tower Blocks Ticking Time Bomb Death Traps! - 22nd Jun 17
Car Sales About To Go Over The Cliff - 22nd Jun 17
LOG 0.786 support in CRUDE OIL and COCOA - 22nd Jun 17
More Stock Market Fluctuations Along New Record Highs - 22nd Jun 17
Understanding true money, Pound Sterling must make another historic low, Euro and Gold outlook! - 22nd Jun 17
Green Party Could Control Sheffield City Council Balance of Power Local Election 2018 - 22nd Jun 17
Ratio Combo Charts : Hidden Clues to the Gold Market Puzzle - 22nd Jun 17
Steem Hard Forks & Now People Are Making Even More Money On Blockchain Steemit - 22nd Jun 17
4 Steps for Comparing Binary Options Providers - 22nd Jun 17
Nether Edge & Sharrow By-Election, Will Labour Lose Safe Council Seat, Sheffield? - 21st Jun 17
Stock Market SPX Making New Lows - 21st Jun 17
Your Future Wealth Depends on what You Decide to Keep and Invest in Now - 21st Jun 17
Either Bitcoin Will Fail OR Bitcoin Is A Government Invention Meant To Enslave... - 21st Jun 17
Strength in Gold and Silver Mining Stocks and Its Implications - 21st Jun 17
Inflation is No Longer in Stealth Mode - 21st Jun 17
CRUDE OIL UPDATE- “0.30 risk is cheap for changing implication!” - 20th Jun 17
Crude Oil Verifies Price Breakdown – Or Is It Something More? - 20th Jun 17
Trump Backs ISIS As He Pushes US Onto Brink of World War III With Russia - 20th Jun 17
Most Popular Auto Trading Tools for trading with Stock Markets - 20th Jun 17
GDXJ Gold Stocks Massacre: The Aftermath - 20th Jun 17
Why Walkers Crisps Pay Packet Promotion is RUBBISH! - 20th Jun 17

Market Oracle FREE Newsletter

The MRI 3D Report

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.


© 2005-2017 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

Catching a Falling Financial Knife