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Forum Post: Compound Interest: Power to Concentrate Wealth

Posted 2 years ago on Jan. 13, 2013, 10:01 a.m. EST by agkaiser (1416) from Fredericksburg, TX
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“How is the interest compounded on the money lenders' and other investments? The profit on last year's investment with a manufacturer was added to the cost of production and the price of the goods produced. Next years dividend reflects the cost of service to this years debt or capital financing. The interest or 'vigorish' becomes an exponentially increasing part of the cost of doing business. That is: compound interest to the lender/investor who finances the production and cost increases on the merchandise we must buy to live. The pattern of exponential growth of finance costs to the real economy must hold true for profits on all investment and trade, not just the banking and capitalization [non] industries. The damage investment must do to the real economy of production and consumption is minimized when the community finances its industries of by and for itself on a non profit basis.”

  • PV = Present Value
  • FV = Future Value
  • t == compounding periods
  • i == APR / (# of periods per year)

  • FV = PV(1+i)^t

  • logFV = logPV + t*log(1+i)
  • t = (logFV – logPV)/log(1+i)

  • doubling time:

  • 2PV = PV(1+i)^t
  • t = log2/log(1+i)

Earlier in the day the professor had visited the supermarket to make copies of the formulas above. As he was speaking he handed them out to the pros. “For the future value to be 10 times the present value, at 6% compounded daily, it takes 38 years, 138 days and 16 hours. From 1970 to 2010 the price of hamburger has gone from $0.39 per pound to at least $3.99: higher since then. A compact car was $2000 or less at the start of Nixon's second year. Today it's $20,000 for the same kind of compact. Wages have fallen way behind prices in the past forty years for at least ninety percent of us. In 1970 one income per family could afford the American dream of home, cars and kids in college. Today it takes at least two incomes to barely get by. Does anyone have another way to say that the profit of investors is the loss of everyone else? You can track concentration of wealth over the same period and see for yourself the dead end course we're on.”

Excerpt from: How Does That Work? https://www.createspace.com/3852916</