Broad Oak: your emotional support animal

Saturday, December 29, 2012

Why moneylenders MUST be busted

The equivalent of one US dollar invested on the night of Christ's birth at less than 4 per cent per annum, would today be worth more than the Earth's weight in gold.

Here's the math:

a. The Earth's mass is estimated at (5.9722 times 10 to the power 24) kilograms
b. According to goldprice.org, a kilo of gold today costs $53,235.21
c. a*b = $(3.17931 times 10 to the power 29)
d. $1.03434 to the power 2012 = $(3.18127 times 10 to the power 29)
e. d>c.

Yes, you say, but what about tax?

Let's assume that interest over the last two-millenia-and-a-bit was taxed every year at the outrageous rate of 50%. All that does, by reducing the effective interest rate to 1.7% p.a., is defer the date at which the goal is reached; in this case, the year 4030.

The same argument applies to inflation, as long as it's significantly less than the interest rate.

So in the long run, the lender must end up owning everything - provided he can always find borrowers and especially, always have his capital safe.

Our governments, by bailing out the banks, have ensured that capital security.

Better still, under the present arrangement banks hardly need their own capital at all. If the Federal Reserve conjures up a billion dollars and lends it to a bank at zero interest, and the bank uses the money to buy safe government securities (albeit at a low yield), then the bank is being drip-fed free cash. Inflation doesn't matter - there's no bank capital to erode, so all inflation does is reduce the value of the guaranteed profit.

Give the lender complete security of capital, and real interest after expenses, taxes and inflation, and you will in time give him the Earth.

Which is why there must be a reset, or Jubilee.

There is no such thing as a perpetual motion machine, or a safe paper-based solution to a broken economy in which a minority increasingly takes ownership of their fellows. Sooner or later, the gathering of wealth by materially unproductive means must end.

1 comment:

Goose said...

Reset will happen soon. its why the Fed bailed out the doller, and the Germans bailed out the Euro. So much is owed by so many that everyone one owes. Nothing fiscal is real anymore. What are the bankers going to do when they own everything, and everyone? Its like sucking up the last of a milkshake with a straw. Eight billion people being held hostage by a few thousand bankers. We are all bloody stupid...