Total Posts:3|Showing Posts:1-3
Jump to topic:

The ponzi-scheme of interest

Naturalmoney.org
Posts: 25
Add as Friend
Challenge to a Debate
Send a Message
2/27/2016 10:07:11 AM
Posted: 9 months ago
Interest accumulates, and this causes problems. Lenders may spend the interest and borrowers may default so that it doesn't always happen, but on aggregate it does happen. The following example to illustrate it.

Assume that Jesus' mother put a small gold coin weighing 3 grammes in Jesus' bank account at 4% interest in the year 1 AD. Jesus promised to return. Suppose that the account was kept for this eventuality. How much gold would there be in the account in 2015? The answer might sunrise you. It is an amount of gold weighing 10 million times the mass of the Earth. The yearly interest would be an amount of gold weighing 400,000 times the mass of the Earth.

Some would say that an increase in economic output can pay for the interest. Even if output has grown much faster, for example at 15% per year, that still doesn't make the ponzi-scheme of interest on loans work, simply because you cannot turn economic output into gold. Central banks print currency to keep the ponzi-scheme of interest from imploding.

Hence, without interest, there is less need for central banks.
slo1
Posts: 4,361
Add as Friend
Challenge to a Debate
Send a Message
3/4/2016 7:16:12 PM
Posted: 9 months ago
At 2/27/2016 10:07:11 AM, Naturalmoney.org wrote:
Interest accumulates, and this causes problems. Lenders may spend the interest and borrowers may default so that it doesn't always happen, but on aggregate it does happen. The following example to illustrate it.

Assume that Jesus' mother put a small gold coin weighing 3 grammes in Jesus' bank account at 4% interest in the year 1 AD. Jesus promised to return. Suppose that the account was kept for this eventuality. How much gold would there be in the account in 2015? The answer might sunrise you. It is an amount of gold weighing 10 million times the mass of the Earth. The yearly interest would be an amount of gold weighing 400,000 times the mass of the Earth.

Some would say that an increase in economic output can pay for the interest. Even if output has grown much faster, for example at 15% per year, that still doesn't make the ponzi-scheme of interest on loans work, simply because you cannot turn economic output into gold. Central banks print currency to keep the ponzi-scheme of interest from imploding.

Hence, without interest, there is less need for central banks.

Surely you jest. There is so much wrong here that it is impossible to start.
Naturalmoney.org
Posts: 25
Add as Friend
Challenge to a Debate
Send a Message
3/5/2016 9:44:26 AM
Posted: 9 months ago
At 3/4/2016 7:16:12 PM, slo1 wrote:

Surely you jest. There is so much wrong here that it is impossible to start.

It is a teaser. I hope it makes you think.

Economics is more complicated than needed because the obvious is ignored.