Best of the Week
Most Popular
1.Will UK Interest Rate Rises Crash House Prices? - Nadeem_Walayat
2.Full on Crash Alert for Major World Stock Markets... - Clive_Maund
3.Gold And Silver Market Bottoming? Big Rally Imminent? Reality Check Says NO - Michael_Noonan
4.The Coming Silver Price Rally Will Outperform All Previous Ones - Hubert_Moolman
5.The Trigger For The Upcoming Stock Crash - Harry_Dent
6.Imploding Department Store Results - James_Quinn
7.Dr. Copper is Speaking, are you Listening? ... - Rambus_Chartology
8.Pandemonium in the Stock Market, Dow falls 1,000 points in a week - EWI
9.Asia's Whirling Dervish of Devaluations Has Encircled China's Exports - Keith_Hilden
10.China Weakens the Yuan; Rattles Global Stock and Financial Markets - Gary_Dorsch
Last 5 days
Aging Stocks Bull Market - 29th Aug 15
Economic Destabilization, Financial Meltdown and the Rigging of the Shanghai Stock Market? - 29th Aug 15
The Stocks You Should Be Buying After the Market Drop - 29th Aug 15
How I Learned to Stop Worrying and Love Market Fluctuations - 28th Aug 15
China's Yuan Devaluation: Why It Was "Expected" - 28th Aug 15
Stocks Go Nuts But the Question Remains – Will the Rally Stick? - 28th Aug 15
Fed’s Stock Market Levitation is Failing - 28th Aug 15
The Eight Energy Systems Driving The Stock Market Rout - 28th Aug 15
Silver Sold, then Squeezed - 28th Aug 15
U.S. Economic Fundamentals 'Look Good' - Bullard of St. Louis Fed - 28th Aug 15
Stock Market Margin Calls Mount - 28th Aug 15
Einstein, Physics, Gold and The Formula To End Economic Decay - 28th Aug 15
The 10 Best Stocks for Options Trading Plays in This Market - 28th Aug 15
Economics of a Stock Market Crash - 28th Aug 15
Currency Wars Detonate; Gold Refuses to Budge - 28th Aug 15
UK Immigration Crisis Hits New Record, Trending Towards Becoming a Catastrophe - 28th Aug 15
The Ultimate Cash-Management Guide - 27th Aug 15
Why a Fed Rate Hike Could Be a Blessing for Gold Prices - 27th Aug 15
Why Devaluing the Yuan Won't Help China's Economy - 27th Aug 15
Stock Market Trend & Trade Signal Of the Decade - 27th Aug 15
Keep Your Eye On the Gold and Silver Bear - 27th Aug 15
Refugees Expose Europe’s Lack Of Decency - 27th Aug 15
How to Profit from China's Currency War - 27th Aug 15
How China's Currency Policies Will Change the World - 27th Aug 15
Chinese Medicine not Impressing Dr Copper - 27th Aug 15
Novel Biotech Novel Technology Platforms with Dramatic Growth Potential - 27th Aug 15
China Stocks Bear Market Crash, Are We Near the Bottom Yet? - 27th Aug 15
Stock Market Crash Black Wednesday Rally Crushes the Bears - 26th Aug 15
VIX Shorts Being Squeezed While SPX Prepares for Another Decline - 26th Aug 15
Why China's Economy is Deteriorating - 26th Aug 15
Citizenship as a Weapon: Travel Controls and What You Can Do About It - 26th Aug 15
Gold and Silver - How To Manipulate a Market - 26th Aug 15
How to Make a Quick 20% When the Stock Market Crashes - 26th Aug 15
Why We Can’t Handle A Stocks Bear Market - State Budgets Will Implode - 26th Aug 15
Stocks Bear Market, Is This 1929 All Over Again? - 26th Aug 15
The One Trading Strategy You Needed for Stock Market Crash - 26th Aug 15
Second Chance To Buy Cheap Gold Mining Stocks - 25th Aug 15
Gold Facts and Gold Speculations - 25th Aug 15
The Stock Market Crash Season is Here… - 25th Aug 15
Liftoff Setback Leads to U.S. Dollar Pullback - 25th Aug 15
The Stock Markets Are Extraordinarily Volatile, Here's What to Do - 25th Aug 15
Israel: The Case Against Attacking Iran - 25th Aug 15
Saudis Could Face An Open Revolt At Next OPEC Oil Meeting - 25th Aug 15
How to Calmly Weather This Stock Market Downturn - 25th Aug 15
Stock Market Sound the Alarm - 25th Aug 15
Stock Market Meltdown - Dow Monday 1000 Point Crash then Rebound, What's Next? - 25th Aug 15
El-Erian: Stock Market Sell off Is Not 1998 or 2008 - 25th Aug 15
Gold the Ultimate Financial Crisis Insurance - 25th Aug 15
Stock Market Black Monday Crash Fizzles Out, Next Black Tuesday? - 25th Aug 15
Black Monday - Rolling A Wheelbarrow Of Dynamite Into A Crowd Of Fire Jugglers - 24th Aug 15
Playing the Chinese Trump Card - 24th Aug 15
Gold and Silver: Heading for a “Blue Screen of Death” Event? - 24th Aug 15
Japan Economy Clear Conclusions Concerning QE - 24th Aug 15
Stock Market Blockbuster Right From the Open... - 24th Aug 15
Silver And The Petrodollar - 24th Aug 15
Why the Stock Market Sell-Off Happened – and How to Make Money on It - 24th Aug 15
Stocks Correct, Panic Ensues. The End Of The World? - 24th Aug 15
Stock Market - The Sky IS Falling - 24th Aug 15
SP500, DAX, FTSE - When Stock Markets Talk, Pay Attention - 24th Aug 15
Stock Market Black Monday - Full Crash Alert! - 24th Aug 15
Stock Markets Implode as China Literally Explodes - 23rd Aug 15
Stock Market Bloodbath - The Feds Gonna Need A Bigger Balance Sheet - 23rd Aug 15
Stock Market Due For A Breather (But More To Go) - 23rd Aug 15
Stock Market 20% Bear Market in the Works - 23rd Aug 15
Ankara: the New Capital of Jihad, U.S. Policy for Strengthening ISIS - 23rd Aug 15
Will Rising Interest Rates Crash UK House Prices? - Video - 23rd Aug 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Global Stocks Slide

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.


© 2005-2015 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

Biggest Debt Bomb in History