1/19/21 Rule of 72: How money doubles under various interest rates. #capitalism #finance #math #usury
This is a quick and easy way to see how long it will take your money to double (in nominal terms) at a given rate of return. It demonstrates the power of compound interest.
If you earn 10% on an investment, it will double in 72/10 = 7.2 years.
If you earn 7.2% on an investment, it will double in 72/7.2 = 10 years.
If you earn 3% on an investment, it will double in 72/3 = 24 years.
You can also use this for debt.
If your student loan is at 6.8% and you're not making payments, it will double in size over 72/6.8 = 10.6 years.
A 29% credit card debt will double in 72/29 = 2.5 years.
Question for those interested in personal finance and #usury:
If one's debt grows exponentially, but personal or business productivity only grows linearly, consider it as a ratio:
(1) (d^r) / (k*p)
where debt is raised to the power r (rate), divided by productivity times a constant. The exponential growth of the numerator tends to overwhelm the linear growth of the denominator.
This suggests that for a young person whose personal productivity only doubles in ten years, the maximum repayable loan during that period should have a 3-5% rate.
In practice most of us simply settle for lower debt amounts at higher (usurious, non-sustainable) rates. It is probably better for young people to avoid debt completely until they have enough experience to gauge their personal productivity growth, giving a reasonable estimate of the denominator in (1) above.
For business, one key measure of good management is a cost/benefit analysis: how much will a given expense or investment increase business productivity? Does it also increase debt? Skilled management can make accurate C/B analyses.
#marx and #marxist analyses often see interest and usury as one way the owner class dominates or exploits the worker class. Class struggle supplants economic cooperation as dialectical materialism unfolds. The labor theory of value implies that real value lies not in markets or finance, but only in contributions of workers' hands and minds.
Actually, marxist analysis does not respect private ownership of property. In one place Marx and Engels claim that 'private property is theft.' Suppose, following the labor theory of value, that the only locus of real value is in products of workers. When do workers let other workers use their products? Are they entitled to profit from others' uses? If not, how is their time and labor respected? Does an 'omnipotent state' know how to ration or allocate all citizens' time and labor?
Logical thinking about workers' rights, plus the perils of a big state, inevitably lead to consideration of private owners' rights. Staying out of debt, as described above, is very helpful when workers want to become owners. Low-debt #capitalism is the best economic system in history to help people start as workers and eventually become owners.
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