Posted by Jim Bradley to The Truth Will Set You Free at 11/17/2005 01:12:45 PM
A lender gets a return for deferring consumption as deferring consumption is a cost (it's painful to save). Since you propose giving lenders zero return, I submit the utopia you envision will not be possible without a massive exercise in state enforced lending with punitive fines, jail, etc. -- a reduction of liberty, not an expansion of it.
The exponential rise in debt is from the central bank holding interest rates artificially low and thus encouraging borrowing to offset inflation, while defending the banking system with a currency that can be expanded at will (and shifting risk to depositors with the depreciation of their savings). Since banks don't have much "savings" of their own, they bear little of the risk. That's an outcome of the structure, not of the illegitimacy of compound interest.
Further, compound interest and simple interest are the same ... i.e. one can be mathematically transformed into the other. For instance, 6% simple annual interest yields $60 from $1000 over one year. Monthly compounded interest of 5.841 because (1+.05841/12)^12=1.06 or 6% additional.
Clearly there are serious problems with these views. Join up, but be right.
Posted by qrswave to The Truth Will Set You Free at 11/17/2005 04:07:37 PM
It's apparent that we disagree on a fundamental issue.
You think there's nothing wrong with interest and I insist that it is at the heart of our economic woes.
At least we agree that the private monopoly by the Federal Reserve Bank is catastrophic.
Let's leave it at that, for now and see what other people believe.
Posted by Jim Bradley to The Truth Will Set You Free at 11/17/2005 04:51:43 PM
qrswave - OK we can discuss that part. Please specify why it is wrong that a person (you as well) earn a positive return in exchange for the cost of deferring consumption.