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Do you know compound interest? It’s like this: in the first month you receive the money you’ve given plus 3%, in the second it is the money plus 3% plus 3.03% (3% of 3%), and in the third 3% + 3.03% + 3.0303% and so on. This all seems stupid, but only before you do the Maths. I actually recommend you to stop it right now and learn the formula for calculating compound interest and then try some examples. [If you have 3% interest rate over $1000, how much will you have in 3 years? In 10? In 6 months? And starting with $100? And if you start with $100 and add another $50 every single month? Now 3% interest is a bit of a cheating, so try more, say “normal” rates, like 1%, 0.8%, 1.2%. What did you get? How long do you need to become rich with 3% interest rate?] That is capitalism. Compound interest is like magic, and capitalism is just this, and it is not news at all, it does not include a “morality of money”, it does not include “consumption”, it does not include “greed”, it does not include “the Market™ will steal your soul”, it is just compound interest. It becomes easier with complex financial mechanisms, yes, but those can exist in a Monarchy as well as in a Dictatorship (like they have in the US) as in any other government system. Heck, it even works in Democracies!

2 Comments

  1. Look a little deeper to see that compound interest is inflationary. It also tends to concentrate a system’s resources in the hands of those who have more to start with, with utter disregard for the value of work. Compound interest only cares about time, principal and rate. It cares nothing for supply and demand, scarcity of resources, or honest work and honest pay.

  2. Um… i’ve never seen compound interest expressing itself, so i have no idea what compound interest “cares” about. I think it does not care about time. I think it does not care about the ozone layer or whether it is going to rain or whether his mother is having cancer.

    Now, i do understand what you say, but i do not see why “compound interest” should “care” about any of this stuff. Compound interest is just an idea, expecting it to “care” about, like, “honesty of work” is like expecting a rock to care about “moral issues” or the sun to care about the financial crisis…


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