In Living within limits: ecology, economics, and population taboos, Garrett Hardin has a great anology for compound interest.
It goes a little something like this:
“In chapter 27 of the book of Matthew we are told that when Judas regretted betraying Jesus for thirty pieces of silver, he brought the money to the chief priests saying, “I have sinned,” and cast down the pieces of silver as he left the temple. ...
“...[S]uppose some rambling Rothschild has persuaded the priests that they should “make their money grow” so the temple would be able to do more good at a later date? Had this happened, Matthew 27 might have been written along the following lines:
Taking counsel with certain wise men called economists, the priests converted the thirty pieces of silver into gold, which they used to open up an account in the People’s Perpetual Gold Bank of Jerusalem, saying, “Let this wealth purify itself by quietly drawing interest at 5 percent per year for two thousand years. Then let both principal and interest be withdrawn from the bank and divided among all the people then living who regret the death of Jesus.”
“...Let’s suppose that the original thirty pieces of silver were equivalent to two grams of gold, which the priests deposited in the bank. That’s about one-fourteenth the weight that could be carried in a one-ounce letter. Not much, you may say: but watch the account grow!
“Presumably those who regret the death of Jesus would include both Jews and Christians, who comprise about 20 percent of the world’s people. ... For simplicity, let’s assume that the population of the earth has fallen back to five billion by Regretters Pay Day, 2026 A.D. That would produce about one billion claimants to the account. On that wondrous day, how much would each beneficiary receive from the People’s Perpetual Gold Bank?
“At 5 percent compound interest the total sum would, in two thousand years, grow to the equivalent of 4.78 X 1042 grams of gold. How great a mass is that?
“...To pay off the beneficiaries, the Jerusalem bank would have to remove from its vaults ... 800 trillion earths made of solid gold. ... With a billion petitioners to be paid, each one should receive 800,000 solid gold earths. If advance news of the payoffs persuaded all the earth’s people suddenly to regret the death of Jesus, every man, woman and child would be entitled to only (!) 160,000 earth-masses of gold.”
Wow. just wow.
Here’s the book:
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Reading this a year later, I’m left bewildered at the notion of compound interest.
Shortly out of college, I had some credit card debt that I missed a lot of payments on. Soon, the interest rate climbed to roughly 30%.
What a sham! How it ever became legal for banks to charge citizens 30% interest for any reason disgusts me. I know I was irresponsible, but Congress is failing us by not doing something to prevent this kind of abuse.
I was young and stupid, and I paid for it dearly. An injustice, in my opinion.
by Sean McCambridge on January 03, 2010 at 4:10 pm